How Can a Mortgage Loan Modification Help You?


If a loan modification can help you, then there is a procedure to follow that will likely get you one as long as you understand how to follow the process through. Until recently, such modifications were only rarely provided, at least ones that actually helped the applicant.

Sure, some mortgage repayments were rearranged, but for many they were modified upwards! Up to 45% ended up paying more after requesting a loan modification through the mortgage lender adding the unpaid interest and charges onto the loan and then increasing the monthly payment. Very Helpful! Especially to somebody that was struggling with the monthly repayments before making the application! Don't these mortgage people have even a single brain cell between them?

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However, the situation has now changed with the 'Home Affordable Modification' option of the foreclosure prevention program, and the first step is work out how it would help you if your loan was changed to offer you lower mortgage repayments. Do you actually need your monthly repayments reduced? Is that your problem, or is it because you are out of work or in hospital and can't make them at all? In such cases you don't have many options, and a modification might not help you. You should seek other expert help for these circumstances.

If, however, you are struggling because your income has dropped or if you have been unemployed, but are now in work or even if the wage increases you have been banking on have been frozen in the recession but interest rates are rising, as they currently are, then you have a case and mortgage loan modification can definitely help you.

To qualify for one, however, you have to paying more than 31% of your current income before deductions, and it must be your regular home, not a holiday home or one you are renting out. You also have to owe less than $729,750 on it, and have bought it before the beginning of 2009. If that is you, and you can prove that you are in a dire financial situation, then you should make an application through the Home Affordable Modification' program.

What happens under that part of the Foreclosure Prevention program is that the government pays your mortgage lender the difference between 38% and 31% of your monthly gross income, so that they can modify your repayments to 31%. If you are currently paying more than 38%, the lender has to modify your mortgage loan so that you are paying only 38%, and it is reduced to 31% from there.

In order to achieve that 38%, the mortgage lender or bank can choose between reducing the interest rate, reducing the owed capital or increasing your repayment term. These are the main options, but there are others. Once your application has been approved, you sign the new mortgage agreement and start making your new monthly payments.

You start on a three-month trial period first, during which you must make your payments on time, or the arrangement will be canceled and your house liable to be repossessed. Barring that, you are then put on the program and as long as you keep up with your repayments, your home will be safe. You should then make your mortgage your main expense, and take steps to make sure it is paid.

You could arrange a direct debit to be paid on the same date as your salary, for example, or very close to it. Many people fail to make the payments because they are arranged for silly times, like the day before you are paid - of course it is going to be next to impossible to keep that kind of cash in your account all month. So keep that in mind when arranging the payment date - lenders will normally listen to you if you request a date change.

As for the application itself - that as to be done using certain procedures, and you will need to provide a number of documents relating to your earnings, payments, other debts and also your state of hardship. You have forms to fill in correctly, and a letter explaining your hardship that must be worded correctly if your application is to be successful.

It is very easy to get some of these wrong so you should seek help. You could get somebody to carry out the entire process for you, but such experts charge a lot of money, even though it might be on a success or pay nothing arrangement. However, there are also packs available that can walk you through the application procedure, and provide you with a documentation list and details on how to fill in the forms.

These are available online, and cost only a few dollars. They are extremely useful and highly recommended, and without something like that, untrained people are likely to get bogged done by the process and either fail or have their application take far too long to be processed.


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