How does the loan modification process work? This question is so commonly asked. The process can be explained in 3 steps.
The loan modification process is for people who have failed to pay their mortgage and are in need of having the mortgage modified so that the monthly payments become affordable again.
The objective of the process is to re-define the mortgage in more agreeable terms and ultimately help the homeowner stay in their home and also have the bank collect the remainder of the mortgage.
A mortgage modification can be a huge help for anyone wishing to save their home from foreclosure.
If you are underwater on your mortgage or have suffered a financial hardship and feel like you are in an impossibly hopeless situation a modification may help you. It can possibly save your piece of the American Dream.
Three Steps in The Loan Modification Process
First Step of The Process
The first step in saving your home through a loan modification is to collect the required documents to help show what financial hardship you have suffered through and how it caused you to fall behind on your payments. Your lender will be looking for exactly what and when the hardship occurred and most importantly what you have done to get through it. Medical records, employment history, bank statements, letters of termination can all be helpful in the first step of the process. The final part of the first step is to create a hardship letter and contact your lender.
Second Step of the Process
Working with your lender can be very tiresome as you will be often given the run around however it is required to successfully receive a mortgage modification. When working with your lender it is a good idea to record who you are talking to and what is agreed upon so that you may refer back to it in the future. Often it will take incredible persistence on your part to keep contacting your lender and getting your application put on the top of the pile. The most important thing to remember here is that any excuse they have to drop your file to the bottom of their pile they will do so…so make sure you always have the right documentation to submit to them.
Third Step in Loan Modification Process
The final step is to negotiate and sign the new mortgage agreement. This modified loan agreement may not be in your best interest so make sure to carefully understand what they are proposing and counter what you think would be more mutually beneficial terms. If you are uncomfortable or feel pressure to sign take a deep breath and maybe you will need to get in touch with a lawyer or not for profit group to get some help.
A successful loan modification can mean anything from an interest reduction, down to under 3% in some cases, to a principle reduction and fee forgiveness.
Once you have received a loan modification it will still be tight and you want be able to go out and celebrate by buying a new car or TV but you can definitely breathe easier that if you can keep up with your new payments your home is safe from foreclosure.
By John Hester