How to Get Started on the Loan Modification Process

Loan modification may be just what many home owners are looking for. A lot of people are behind on their mortgage payments. Some may only be behind 30 days. But 30 days can become 60 days or 90 days very quickly.

And then the lender starts sending the dreaded notices that if the payments are not brought up to date, they will begin foreclosure proceedings. The home owner begins feeling trapped and has no clue where to go or what to do. Let’s see what loan modification is and how do you start.

What is loan or mortgage modification? Loan modification means that the home loan is going to be changed so that the home owner can afford the payments better. This can involve adjusting the interest rate, the duration of the loan or other factors. Circumstances around each mortgage modification determine what changes to the loan can be made.

If the rate of a mortgage has jumped because it is adjustable, then one option would be to make the rate fixed. If the home owner has been out of work for a long time but now has a job, then the amount that is past due may be absorbed back into the loan.

Now how do you start? The first factor of how to start is when. With the current government programs, it is often best for the home owners to contact their mortgage lender as soon as there is trouble. Some lenders will wait until you are 30 days behind before they want to talk. But it never hurts to try sooner.

Another thing you need to do is find out who actually holds the mortgage on your home. Just because you make your checks out to ABC Company does not mean they actually own the loan. They may only be the mortgage servicer. Call the company and ask for paperwork on who actually owns the loan.

Once you know this, you know who you need to be working with. Be honest with the person you are working with. They will ask for a bunch of paperwork to show your current financial circumstances. Lying or exaggerating can get you into hot water and will end your chances of actually getting a modification of your loan terms.

How do you bring your personal situation home with the mortgage lender? Write a letter explaining how you actually got to this point. Again, be honest. In a brief concise letter, explain the full chain of events that has led you to this point.

And make sure who ever you are talking to is the right person. You need to be speaking with someone in loss mitigation, not collections. Collectors are there to hound people into paying. Loss mitigation is there to help reduce or prevent losses for the company. Be patient. What has taken you months to get into is not going to be reviewed and resolved in a day or two. Maintain contact with the person you are working with, but keep your cool.

And at the end of the day, be realistic. You are in a deep hole before you get to the point of loan modification. The hole may be deeper than the lender is willing to help you out of. But keep asking. If one person says no, another may say yes.