A loan modification is a process granted by mortgage lenders that results in lowered monthly mortgage payments for eligible homeowners. Many homeowners who originally qualified for their mortgages later find themselves unable to afford their monthly payments. The reasons can vary, but generally involve a financial hardship, such as:
- Reduction or loss of income due to job loss or decreased work hours
- Reduction or elimination of spousal/child support
- Illness/injury resulting in medical bills - self or family member(s)
- Ballooning payments associated with some types of mortgage (such as Adjustable Rate Mortgages) resulting in new, higher payments at set intervals
Who is eligible for a loan modification?
While every mortgage lender has their own policies and processes for modifying mortgages, they all follow this general procedure: The homeowner contacts the lender to ask if he or she is eligible for a loan modification. To determine this, the lender directs the homeowner to provide the circumstances and need for the modification, along with documentation. Once the homeowner submits all the required information, the lender reviews it to determine eligibility. If deemed eligible, the homeowner may be offered a new, lower monthly mortgage payment. These new lower payments may be temporary or permanent, and the lowered payments may also require the length of the loan period to be extended.
How to begin the loan modification process
Whether or not a homeowner qualifies for a loan modification depends on a variety of factors, generally dictated by the mortgage lender. If you are seeking a loan modification, your first step should be contacting your lender directly to see if a loan modification is an option for you. If it is, your lender can instruct you on how the process works and what you need to do to initiate the process. The loan modification process begins with the homeowner gathering the necessary paperwork as directed by the lender (such as tax returns, proof of income, reason for hardship documentation, and other related items.)
After the lender has reviewed this information, they contact the homeowner to either offer them a modified loan payment and the details associated with the payment reduction, or to inform the homeowner the reason(s) why he or she is not eligible for a loan modification.
Want to learn more about how the loan modification process works and find out if you are eligible? Call InCharge Debt Solutions toll-free at 877-251-1882 to speak with a HUD-certified housing counselor or click here for more information.