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While Experian Consumer Services uses reasonable efforts to present the most accurate information, all offer information is presented without warranty. Experian websites have been designed to support modern, up-to-date internet browsers. What if you got behind on your mortgage due to a job loss, but have since found another job and you just need help to bring the loan current? Or, what if you've suffered a reduction in income, but you could afford to make your payments in the future if they were reduced?
In these situations, you may be eligible for a modification under either an internal plan through your mortgage company, or through a government-sponsored program. So what exactly is a mortgage modification? A mortgage modification is exactly as it sounds.
The terms of your mortgage, such as your interest rate, monthly payment, repayment term, or outstanding principle, are changed modified to help you remain or become current on the loan. Depending on the program, there will be certain criteria that must be met in order to be approved for a modification.
Since there are many different programs, we'll focus on the most common plan, which is the government-sponsored Home Affordable Modification Program HAMP. HAMP is part of the federal government's Making Home Affordable program, an initiative designed to help struggling homeowners who were affected by the recent economic recession. Click here to visit the government's HAMP page for more information. There are a variety of other criteria that have to be met in order to qualify for a modification through HAMP, and it's important to note that not all lenders participate, although most have at least an internal plan that you may qualify for.
Through HAMP, you'll need to be able to document that you have enough income to afford the new payment if it was approved. You'll also need to have a documented hardship to show that the reason you are in trouble is due to factors beyond your control, such as unemployment or income reduction, and that the hardship was only temporary.
If you're thinking about applying for a mortgage modification, it's important to bear in mind that it's not a quick and easy process. It often takes as long as 12 months, or more in some instances. It can be a frustrating process, too. You'll have to provide documents proving your income, an affidavit attesting to your hardship, a current record of your household expenses, recent tax returns, bank statements, and a variety of other documents that your lender may require. The timing involved in getting these documents to your lender is crucial.
Typically, you'll be providing these documents to your loan service provider, not directly to the actual lender. If this is the case, your servicer will need to review a "complete package" before sending it to the underwriting department. If there is a high volume of modification requests, which is almost always the case, your application may sit "complete" for weeks or even months.
If the time comes for your case to be reviewed and your documents are then more than three months old, you'll have to provide updated documents and, sometimes, start the document-collection process all over again. For example, when you start the process, you'll have to provide three months' worth of paystubs, and you'll need to do this every three months while your modification is being reviewed.
And don't ever assume that you'll receive a call from your servicer telling you that you need to send updated documents. Many servicers are overwhelmed by the volume of modification requests and simply lack the resources to provide the level of attention each account needs.
You'll need to be proactive if you want to have the best chance of success through this process. For these and a variety of other reasons, it is always recommended that you seek the help of a HUD-approved housing counseling agency to guide you throughout the entire process.
They'll act as a liaison between you and your mortgage provider, ensuring that you've provided all of the appropriate documents to your mortgage company and that those documents are always up to date. However, some of these processes are out of your control and involve other people. When you apply for a loan modification, there are many people at the bank that get involved.
Some of which extend beyond the bank depending on how your mortgage was initially set up. The loan modification process can typically go between 30 to 90 days sometimes longer if it's a complicated situation.
The bank is going to look at your hardship letter and determine the severity of your current financial situation. They're going to look into whether you are dealing with a temporary circumstance or something ongoing and permanent. Before starting the process, you will want to be familiar with your Banks guidelines and how they internally work for loan modifications.
Some banks have made the process more difficult than it actually needs to be. For example, the bank may not initiate the process to Borrowers unless they're two or even three months behind on their payments. Speak with a bankruptcy attorney to find out whether filing bankruptcy would be a better choice. Lenders rarely put a stop on the foreclosure process until a workout solution is fully in place. You should ask your lender if your attempts to negotiate a solution will stop or at least postpone other collection actions.
If they do not, you should find out what that means for you. Push to have all default and foreclosure actions put on hold while your workout attempts are underway. By doing your part to keep the process on track, remain informed, and explore other options, you not only improve your chances of achieving a positive outcome, but you can also reduce the stress that commonly accompanies the waiting process.
Ralph R. Roberts is a consumer advocate, host of KeepMyHouse. Ralph is based in Sterling Heights, Michigan and can be reached at ralphroberts ralphroberts. Taking the reins this year is association veteran Leslie Rouda Smith. Here, Rouda Smith tells us about her plans for Read more.
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