Loan Modifications and Mortgage Relief
If your mortgage payments have fallen behind but you want to keep your home, the best option is usually a loan modification. A loan modification is simply a change, or modification, to one or more of the terms of your loan. Most loan modifications reduce your monthly payment by changing the interest rate, principal, or the term of your mortgage. Your monthly mortgage payment becomes more affordable, and any mortgage arrears are usually added back on to the principal balance so that you can pay them later, a process called recapitalization. The two questions most people ask are whether they are eligible for a loan modification, and, if so, what the basic loan modification programs are.
Culik Law PC has more than ten years of experience negotiating with mortgage servicers and banks on behalf of homeowners for mortgage loan modifications and mortgage relief.
Are You Eligible for a Loan Modification?
The first question you are probably asking is whether you are eligible for a loan modification. Though different lenders have different criteria, the criteria are broadly the same.
You have suffered a temporary or permanent reduction in income. Though in rare cases a loan modification may be offered if you have not lost income, most of the time your mortgage servicer will require that there be a financial hardship. Sometimes you can qualify if you suffered a medical hardship that you know will soon result in a financial hardship.
Your mortgage payments have fallen behind. Most lenders will not agree to consider you for a loan modification if your payments are still current. There are rare exceptions to this rule.
You do not have sufficient assets to reinstate your past-due mortgage. The purpose of a loan modification is to help you get back on track with your mortgage if you have no other financial means to do so. Mortgage servicers will look at your financial situation to determine the solution that will be affordable to you.
You occupy the property as your principal residence. Most loan modification programs require you to reside in the property and to provide proof, such as utility bills in your name. There are fewer options for non-owner-occupied properties.
These are the basic criteria that most banks and mortgage servicers use to evaluate whether you will be eligible for a loan modification. They then review this information under the guidelines of any available loan modification.
What Loan Modification Programs Are Available?
The next question is what loan modification programs are available. The loan modification program you are evaluated for usually depends on who owns your mortgage. For many people the company who sends them their monthly statement is not the actual owner of their mortgage and is only the servicer, acting like a debt collector on behalf of the owner. Most mortgages are owned by one of the following and are eligible for the loan modification programs specific to that owner.
Fannie Mae Loan Modifications. Fannie May offers a forbearance (temporary suspensions of payments), an Extend Mod, a Cap and Extend Modification for Disaster Relief, and a Flex Modification. These all adjust the term or payment amount of your monthly payment.
FHA Loan Modifications. The primary FHA program is the Home Affordable Modification Program (HAMP). This was phased out a few years ago for other lenders, but the FHA still uses HAMP.
VA Loan Modifications. VA insured loans offer a combination of mortgage relief options forbearances, repayment plans, and loan modifications to veterans with VA-backed loans.
Almost all of these lenders are in the process of offering temporary forbearances to homeowners affected by the novel coronavirus (COVID-19), but are requiring that homeowners provide documentation of financial hardship. The National Consumer Law Center is providing a master list of consumer protection options for people affected by COVID-19.
How Can I Find Out Who Owns My Mortgage So I Can Get a Loan Modification?
It’s important to find out who owns your mortgage so you know which programs you would be eligible to apply for. You can see if Fannie Mae or Freddie Mac owns your loan by clicking on these links:
If your loan is insured by the Federal Housing Administration (FHA), look at your mortgage document. It will have an “FHA Case Number.”
If your loan is backed by the Veterans Administration, it will have language in the note and mortgage identifying it as a VA loan.
Obtaining a loan modification can be complex and is dependent on a number of crucial factors. If you need help with a loan modification, contact our office to discuss how we can help.
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