What is a Loan Modification?

 A mortgage loan modification is a process whereby the terms of the existing mortgage are modified to new terms that are more agreeable to the homeowner and lender.

What’s the basic idea behind loan modifications?  How does this work?  Can a loan modification save my home?

Lenders have been faced with staggering losses due to so many foreclosures.  Typically when a lender forecloses on a home, the house is “under-water”.  When you add the total cost of foreclosure, including legal fees, maintaining the property, Realtor fees, and the overall loss due to the house being upside down, it typically translates to a huge cost to the lender.  Rather than foreclosing on a home, in most cases it makes more sense for a lender to help the homeowner lower their payment on their mortgage and keep their house.  By helping borrowers save their homes, lenders are able to still earn interest on the existing loans, and do not have to face the huge cost of foreclosure up front.

What are the benefits of a loan modification?

There are many possible benefits to successfully modifying your mortgage loan, which include a reduction of your interest rate, changing your loan from an adjustable mortgage to a fixed rate mortgage, reducing the principal balance, or the amount that you owe, reducing or forgiving the amount that you owe in late fees and penalties, changing the duration of the loan – e.g. to a 30 yr. or 40 yr. mortgage, and capping the monthly payment to a percentage of the household income.

Who ultimately decides whether or not to grant a loan modification?

Your lender ultimately makes the decision whether or not to modify your mortgage.

What about Government Programs, such as FDIC’s Mod-in-a-Box, HAMP (Home Affordable Modification Program) under the Loan Modification option of Obama Administration’s Making Home Affordable Program, and the new FHA – HAMP?  Will these force my lender to grant a loan modification?

It is important to remember that lender or bank participation in these programs is voluntary.  Yes, the Government typically provides incentives under these initiatives to lenders to modify mortgages; however, it may not necessarily guarantee that a mortgage loan modification will be completed.  Additionally, even if your lender or servicer participates in Government Loan Modification Programs, your loan may actually be held by a servicer that does not participate in these programs.  The very best thing to do is to speak with a loss mitigation expert that can help you make sure that you qualify under these Government Programs, such as a HUD Counselor or a reputable Attorney.

Do I have to be late on my mortgage to qualify for a loan workout?

You do not necessarily have to be late on your mortgage to qualify for mortgage help, a lower interest rate, and a lower payment.  Many lenders do require that you are late on your payment prior to considering a loan modification, however, under some programs and with certain lenders, you do not have to be late on your mortgage, you merely need to demonstrate that you are experiencing enough financial hardship that warrants a loan modification.

What if I have lost my job and am currently unemployed?

In some cases you may still qualify for assistance.  It is important to speak with your lender, a HUD counselor, or legal representation regarding your qualification and the possibility of getting a mortgage loan modification prior to beginning the loan modification process.  In some cases, the time may be better spent looking for employment, and then contacting your lender’s loss mitigation department.

What if I have completely let my finances go, and the Sheriff is literally knocking on my door?

Speak with an attorney immediately.  You may be able to postpone the foreclosure with an attorney’s help long enough to get a loan modification done.  One stall tactic that is often employed is merely to send a qualified written request to your lender demanding a copy of the original note; without a copy of the note, your lender cannot foreclose.  Filing for bankruptcy can also delay the foreclosure process, however lenders are catching on and almost immediately combating this with requests for release.  The best thing to do is to speak with an attorney.

How long does it take to get a Mortgage Loan Modification?

Typically, mortgage loan modifications take anywhere from 30-90 days to complete.  Make sure that during that time, you make an effort to still make your payments, and that you are prepared to document each and every statement that is made to your lender.

How tough is it to get a Loan Modification?

In most cases it is very difficult to wrestle a loan modification from your lender.  Often, homeowners will have to wait hours on hold, and be transferred from department to department.  Even Congresswoman Maxine Waters could not get anywhere in helping homeowners after over two hours on the phone with Bank of America and Countrywide.  It is a painful, arduous ordeal that takes time, and even after a good deal of time is spent on getting the loan modification, if you do not fit your lender’s guidelines exactly, you will not be granted a loan modification.

Who do you recommend for HELP!?

ModificationZoom can connect you with an attorney that will guarantee a loan modification that will put you in a better financial position.  Contact us at (866) 760-9099, or complete the quick-qual form on our website.  Our attorney’s know loss mitigation, and know the guidelines that will get you a successful mortgage loan modification, and will negotiate the very best terms that they can for you.

Over the duration of the last year, mortgage loan modification has been getting increased attention from both the media, and from homeowners that can no long afford their mortgage payments. There are a good deal of preconceived notions and inaccurate assumptions regarding loan modifications from many self-fashioned experts that simply do not know the slightest bit about loan modifications.

The information propagated by these seemingly well-informed, and completely misinformed experts hurts the very people that many of these so-called “loan modification specialists” claim to want to help.  Here are a couple of articles that I’ve written on these loan modification scammers:

• Crackdown on Loan Modification Scams by Federal Agencies
• FBI: Loan Modification Scammers Impersonate Government Agencies

True, lenders are not being proactive enough in helping the homeowners that need it the most. True, recent Government Initiatives such as the Obama Administration’s Making Home Affordable may be falling short of helping all those that should be helped.

But the fact of the matter is that an increasing number of homeowners are getting successful and aggressive loan modifications, and it is the truly educated homeowner that are receiving the most benefits.

As an expert on loan modification programs, and being on the front lines advocating for homeowners daily, I think it will be helpful to dispel the rumors regarding loan modifications to help educate homeowners and the media on how loan modifications can help those facing financial hardship.

Rumor: I spoke with a loss mitigation specialist; they told me that lenders are offering principal balance reductions on loans that are “upside down”.

Truth: Yes, balance reductions are in some cases offered, but this is incredibly rare.

Typically, the only cases in which balance reductions are approved are cases in which a second lien holder (the bank holding the second mortgage) is holding a lien on a property in which if the property was to go to foreclosure, they would receive absolutely no proceeds from the sale. In these cases, and only if the borrower’s continued ability to make their mortgage payments is hinged upon them receiving a lower balance on their second mortgage, the second lien holder may acquiesce (grant) a request for a balance reduction.

There are many loan modification scam companies out there that promise balance reductions. The very idea that a balance reduction could / would be performed on each and every loan modification is completely preposterous. Take a moment to consider: If lenders started lowering mortgage balances for homeowners on a regular basis, first and foremost the investors that hold these loans would never buy mortgage backed securities form the servicer again. Additionally, homeowners across America would expect similar treatment.

Writing down a mortgage to what the property is currently worth is almost tantamount to taking the loss on the foreclosure!

Rumor: I was told that my Bank or Mortgage Company was doing everything that they can to assist homeowners facing foreclosure.

Fact: Nothing could be further from the truth.

For the second time in the last month, President Obama has summoned top CEO’s of the remaining major mortgage banks to the White House to explain in person why more mortgage loan modifications are not being done for struggling homeowners.

Additionally, Treasury Secretary Tim Geithner and Housing and Urban Development (HUD) Secretary Shaun Donovan have had to continuously put pressure on mortgage Banks to help homeowners modify their loans. Many State Attorney Generals have partnered with the FTC to sue mortgage servicers that are not granting loan modifications, and that have made a business practice out of putting homeowners in toxic mortgages.

Hold times for homeowners are particularly outrageous, as perfectly documented by Congresswoman Maxine Waters’ two-and-a-half hour long ordeal on the phone with Countrywide / Bank of America trying to help her constituents get loan modifications.

Mortgage companies simply do not have the man power to help all of the homeowners that they have screwed over. Recent pressure has been placed on lenders that have received TARP funds to hire more employees, and banks claim to have complied. Why then does it take so darn long to get on the phone with someone, and why, unless you are an attorney, do the lenders continuously claim to be unable to help!

Often times, lenders will place homeowners in loan modification or loan workout plans, or forbearance agreements in which the borrower ends up paying more that their original mortgage payment! How does this make any sense??

“Yes, Mr. Smith, we see that you can no longer make your payment of $2,500 per month, and haven’t been able to afford this payment for the last 6 months. Before we consider granting a loan modification, we’re going to need you to make payments of $3,200 for the next three months.”

Huh? Lenders are not doing all that they can to help homeowners modify their mortgages.

Rumor: Hope Now and 995-HOPE will get you a loan modification and protect your best interests.

Truth: No way.

First and foremost, Hope Now is funded by lenders. Re-read the previous rumor, call your lender, and you’ll get an idea of exactly how much your lender wants to help you. Hope Now helps homeowners get horrible loan modifications. Over 50% of the clients that have received loan modifications have re-defaulted (are late and facing foreclosure again).

They simply do not go the extra mile to help homeowners, and arguably, their sole purpose is to prevent homeowners from engaging attorneys that will dig for RESPA & TILA violations that will expose these lenders to serious violations of Federal Law, and of course lenders want to avoid the inevitable and ensuing lawsuits.

If you speak to a Hope Now representative, state that you were the victim of predatory lending practices and ask if they can connect you to your State Attorney General’s office. When I tried calling, they wouldn’t. Hmm, I wonder why?

Rumor: I was told by my lender that I have to be late on my mortgage to qualify for a mortgage loan modification.

Truth: You do not necessarily have to be late on your mortgage payments.

If your lender participates in Obama’s Home Affordable Modification Program, you do not have to be late on your mortgage payment to qualify for a loan modification, however you do need to exhibit documentation that shows that you will default on your next mortgage payment.

Often times, if you have a forensic audit performed and you can bring a lawsuit to bear against your lender or servicer based on legal violations, and give them the option of avoiding litigation by modifying your loan, guess what, most of the time, lenders will grant a very aggressive loan modification with far better results than possible through non-legal loss mitigation techniques!

I hope this helps clear the air on a couple of the misconceptions regarding mortgage loan modification programs, lenders, 995-Hope, and the likelihood of principal balance reductions. If you could benefit from a lower interest rate and payment on your mortgage, and you want help wrestling a loan modification from your lender, apply for help through the form on the right. ModificationZoom will happily connect you with an attorney that will represent your best interests, and get you the best results possible on your loan modification.

Our attorneys are over 98% successful in getting loan modifications for clients, and are required by ModificationZoom refund 100% of the money spent should a modification not work out. Complete the quick mortgage help application to the right and begin the process to getting the very best, guaranteed loan modification.