Mortgage Loan Modifications
A mortgage loan modification is a way to get back on track with your mortgage company, resume making payments, and avoid a foreclosure. When a mortgage company gives you a mortgage loan modification, they are internally refinancing your mortgage based on the balance remaining on your mortgage loan. This is an option for those who have fallen behind on the mortgage for their primary residence. After the housing crisis in 2010 the Federal Government introduced the Home Affordable Modification Program, “HAMP” for short, to give guideless to lenders on mortgage loan modifications and help consumers. When you speak with your mortgage lender, they may refer to modifications as being part of “Loss Mitigation” or their “Loss Mitigation Department”.
The most important factor in getting a mortgage loan modification approved is showing your mortgage lender you can make reasonable payments. You will be required to fill out an application and make sure they received it with all the necessary supporting paperwork. Most often this is going to be proof of your income, your bank statements, and your tax returns. If you submit a complete application the mortgage lender is required to review it for a mortgage loan modification. Once your complete application is in they may also suspend your loan from foreclosure proceedings during the review.
The second most important factor is a complete and timely submission of your mortgage loan modification application. Choosing to have an experienced lawyer guiding you through this process will ensure that you have the necessary paperwork, and the mortgage lender is doing the necessary review. It is unfortunately all too common for applications to be denied because documents are missing, an application was filled out incorrectly, or the lender has moved the account into foreclosure. Your mortgage modification lawyer will help you complete the mortgage modification application and communicate with the lender to make sure there are doing their required application review.
If you successfully obtain a mortgage loan modification from your mortgage lender, they will give you the option to accept new terms on your mortgage loan. Often, the lender is going to restructure your loan to make it more affordable. The terms often include stretching out the payments terms to a 40-year loan and by lowering the interest rate. In some situations, they may also put a balloon payment at the end of the term and that portion of the loan will not be charged interest. The terms that are offered to you will be determined by looking at the outstanding balance of the loan and your income.
If you accept the terms you will be offered a “trial modification” where you are required to make a certain number of payments, typically three, at the new payment amount. If you successfully make those payment the permanent mortgage loan modification is issued and becomes your new terms. The paperwork will be signed by you and the lender and recorded with your local parish mortgage records office.
The difference between a mortgage loan modification and a refinance is that with a modification you will be working with your current lender to restructure the loan you already have. Often this is your only option because if you have missed payments on your current mortgage you will not be eligible for a refinance with a different lender. The mortgage loan modification process is designed to help those who have fallen behind on a mortgage and do not have the option to refinance.