Frequently Asked Questions

Yes, experiencing a financial hardship is an acceptable reason to be given a loan modification from you bank. Each situation is unique, however some of the more commonly accepted hardships include: divorce/separation, job loss or reduction in pay, medical expenses, illness/injury, military duty, incarceration, job relocation, damage to property from natural causes (fire,flood) interest rate reset (payment shock), death of spouse or co-borrower

Unfortunately, not everyone will qualify for a loan modification. Each lender has implemented their own guidelines that homeowners must meet. That is why it is so important to learn about the loan modification process, know what the requirements are, and complete your paperwork properly so you will increase your chances of success.

Loan Modification Companies are trying to get your business-and your upfront fee-so take their claims with a grain of salt. It is up to the homeowner to make sure that any loan modification company being considered is first completely checked out-are they properly licensed? How long have they been in business? Are they experienced with loss mitigation or just started up to get in on the new demand for loan modifications? There are some competent qualified loan modification companies-the trick is finding one.

A few lenders are offering homeowners a loan modification feature that is called “principal forbearance”. This means that the new loan payment is based on 90% of the current market value of your home, and the overage is deferred until the home is sold or refinanced. Indymac Federal and Citigroup are two such lenders, check with your own bank.

Thousands of homeowners have been able to work successfully with their lenders themselves to obtain a loan modification. Like anything else, the more you know the better the results will be. That is why we encourage you to take the time to research, learn and prepare before contacting your bank. Once you understand the loan modification process you will have a better chance of qualifying for loan modification help.

Homeowners who are in an open Chapter 13 must get the courts approval before any changes can be made to their mortgage loan.

Many lenders are reaching out to homeowners who are not currently delinquent, but are at risk of default in the future due to interest rate resets or anticipated financial hardship. Because of the high volume of borrowers facing eminent foreclosure, most banks have made those loans a priority. However, it is advisable to start the loan modification process as soon as a problem is anticipated.

Borrowers in an open Chapter 7 will not be able to receive loan modification assistance.

Most lenders will require bank statements, however if you can show proof of income and complete financial statements, that may suffice.

Each lenders policies vary, but generally a loan modification is given no more than once in 12 months and the new modification must demonstrate a different hardship situation

Mortgage brokers who are licensed properly are able to help borrowers with a loan modification in most states. However, there are regulations governing how brokers can charge and collect fees from homeowners. Make sure that anyone whom you are considering paying for this service is compliant with local regulations.

Yes, depending on the type of loan you have, the bank can still work with you to find a solution to avoid foreclosure. Keep in mind, that if you have not made payments for 10 months your bank will probably require some kind of good faith deposit to implement the loan modification.

Yes, loan modification can involve quite a bit of negotiation. Very often, your lenders first offer will not be what you need to get the long term, affordable payment that is necessary. Sometimes, lenders will use scare tactics and try bullying techniques, savvy borrowers who are knowledgeable and prepared will have a better chance at achieving their goal of a manageable and sustainable loan payment. Lenders are bill collectors-they do not have your best interest at heart-keep that in mind as you fight for your home.

Loss of home value alone is not a valid reason for loan modification. The bank does not ask to share in your equity in good times, and will shoulder the loss of value during down cycles. However, if you can show a financial hardship, loss of value can be an additional factor in considering loan modification help.

Attorneys who specialize in loss mitigation-loan modifications can bring some additional pressure to reluctant lenders by utilizing the threat of litigation. In difficult cases, it may be necessary to use legal tactics to get the lenders cooperation. However, in most situations, as long as the borrower can meet the lenders guidelines and prove that by submitting a well prepared loan modification application, homeowners can be successful working directly with their bank.

Finding a legitimate loan modification company takes a bit of detective work. Unfortunately, wherever there are vulnerable, desperate people, unscrupulous businesses seem to pop up to try to make a quick buck. Before you pay any money to a loan modification company, make sure to check them out-verify their licensing, experience and physical location.

If you are not currently delinquent, but foresee a problem in the future, you can still apply for a loan modification. Many homeowners are facing an interest rate reset soon that will make the loan payment unaffordable. Perhaps a future layoff or reduction in pay will cause the hardship. Now is the time to get your application in process because banks are trying to head off future defaults too. Loans that in default now will get priority, so get in the system asap.

The best way to get started with a loan modification is first to educate yourself about how the process works so you will have a clear understanding of what the bank needs to see in order to approve your application. Then, you can complete the paperwork properly and submit a professional and acceptable loan modification application. The Complete Loan Modification Guide will provide you with everything you need to get started.

Bank of America, owner of Countrywide, announced plans for a far reaching loan modification program set to start December 1, 2008. Under this new plan, qualified borrowers will receive loan modifications aimed at reducing their loan payment to equal 34% of the gross monthly income.

Borrowers must submit an application that demonstrates they can meet the requirements-first learn how to complete the forms properly and put together a professional and acceptable loan modification application package-you can get all the help you need to complete your application properly in The Complete Loan Modification Guide.

You can request a loan modification by completing an application, providing certain required income and asset documentation, then submitting the complete package to your lender. It is important to know how to complete the forms properly to meet your lenders guidelines and increase your chance for success. Your loan modification request must meet certain qualifications-The Complete Loan Modification Guide will provide you with everything you need to prepare an accurate and acceptable loan modification application.

Each lender has set their own guidelines for an affordable target payment to be accomplished by a loan modification. Most lenders use a formula that uses your debt ratio to arrive at a new payment that is somewhere between 34% and 40% of your gross monthly income. This new payment is arrived at by a combination of interest rate reduction, longer loan term and principal forbearance. You need to sit down and figure your income and expenses to arrive at an affordable payment to present to your lender for consideration-making sure it fits within their acceptable debt ratio percentage.

That depends on your current payment-some borrowers have gotten interest rate reductions to as low as 2%, each situation is unique, but the goal of a loan modification is to lower your monthly payment to equal an acceptable percentage of your gross monthly income-usually 34% to 40%.

If you foresee a financial hardship in the future due to interest rate reset or other situation, your bank will accept an application for loan modification even though you are not yet delinquent.

Lenders are trying to head off any future foreclosures, so borrowers who are at risk for future default due to interest rate reset or other financial hardship will be considered for a loan modification

Yes, thousands of homeowners have been successful by working directly with their lenders to get a loan modification. But, like anything else, the more you learn and prepare the better your chances for success. Once you understand the loan modification process and know how to prepare the required forms properly you will have a good chance to get the help you need and deserve. The Complete Loan Modification Guide will provide you with everything you need to prepare a professional and acceptable application to your lender.

Hope for Homeowners is a government sponsored refinance program whereby the loan balance is reduced to 96.5% of the current market value and features a low fixed interest rate. Borrowers must meet income requirements and the previous lender must agree to write the loan balance down, but being a recipient of a loan modification does not automatically preclude you from participating in this program.

Some government subsidized loan modification programs at present are requiring borrowers to be delinquent on their home loans to receive loan modification help. However, many lenders are proactively reaching out to borrowers who anticipate a future problem due to interest rate reset or other financial hardship. Check with your lender for their policies, but try to get in the system as soon as possible to avoid any future risk of default.

Thousands of homeowners have worked successfully with their lenders directly to obtain a loan modification. The secret is to learn as much as possible about the loan modification process-what is required to qualify, how to complete your financial statements to meet the banks guidelines, negotiating effectively and having the determination and persistence to not give up until you get the desired results. Some homeowners may feel overwhelmed or intimidated to attempt a loan modification themselves. In addition, thousands of loan modification companies are repeating over and over that they can do a better job than the homeowner. Borrowers are told that by paying a large upfront fee they will be assured of getting the professional help that will result in a better loan modification. The truth is that the majority of loan modification companies advertising are new start ups trying to get in on the fast money and huge demand from desperate homeowners. That said, there are some reputable, competent companies who have the experience necessary to offer superior service and are a benefit to a borrower. But the trick is finding those companies and weeding out the others. The best protection a vulnerable homeowner has is knowledge-learn as much as you can about the whole loan modification process before making any decisions affecting your home and family. Once you know who qualifies and why, how to complete the forms to meet lender guidelines, what is an acceptable hardship, know about debt ratio and disposable income, you will be able to either prepare a professional loan modification application yourself or know enough to ask the right questions and find the best loan modification company to help you. The Complete Loan Modification Guide is the most comprehensive and up to date source of information to help homeowners learn everything they need to know about the loan modification process. It will save you hours of frustration and possibly thousands of dollars as you begin the journey to get the help you need to stay in your home. Take the time to research, learn and prepare-a knowledgeable homeowner is a powerful homeowner.