Home-Buddies

Loan Modification Basics

Has your financial situation changed due to something beyond your control? Well, your loan should change too, right? Wait a minute. You signed a big, scary stack of papers when you got your loan and now collectors may be calling and threatening you. They may say that you signed legally binding documents so they’re going to sue you if you don’t pay up. The fact is, you did sign legally binding documents and they can sue you, but don’t lose hope.

You can modify or restructure your loan. In today’s current mortgage market, banks are clamoring to collect. They’re almost desperate to keep money rolling in. The last thing they want is to own more real estate and have yet another vacant, foreclosed home on their books. The best thing for both you and the lender is to work out a new payment plan. A loan modification.

What can you hope to achieve with your loan modification? You can get one or more of the terms in your mortgage loan changed, get a better rate, get on a fixed rate instead of that awful ARM, allow your loan to be reinstated, and negotiate for a payment that you can afford.

When you get a loan modification, you’re essentially trying to roll all your missed payments into the back end of the loan. They should roll your total PITI (Principal, Interest, Taxes, and Insurance) payments and even your late fees into the back of the loan. Simply, you’re just extending the number of months you’re going to be paying the mortgage. So be careful if they ask you to pay a substantial amount up front for down payment. But some lenders may require a down payment. Always try to negotiate the down payment or get a repayment plan first (to help reduce the enormous amount you are currently behind on) and then be reviewed for a loan modification.

The first step to creating or restructuring a loan/loan modification is for you to initiate contact with your lender. Call them and ask for a negotiator in the Loss Mitigation department. If they give you a collector, hang up and try again. Keep in mind that these collectors are paid by commission based on what they collect, and your best bet is to not speak to them at all. Always get confirmation of who you are talking to and what department they are in! Tell the negotiator your problem and reason for not paying on time, then ask what your options are. Don’t be afraid to ask for a supervisor. Ask them about things like forbearance agreements, mortgage restructuring, and loan modification. If you’re humble and kind, they’re more likely to help you. Be sure to be positive and tell them what you can afford and don’t focus on what you can’t pay. Always follow up weekly on everything!

Yes, hardships can play a significant role in a loan modification. If you have a hardship situation such as an illness or injury preventing you from working, unforeseeable job loss, unforeseen catastrophe, or something else along those lines, you’re more likely to get your loan restructured and modified. Remember, you’re counting on someone else to take an interest in your case above all the other people that are trying to restructure their loan.

And remember that the negotiator still works for the lender. Your lender may be counting on you to be afraid that you’re going to lose your home, hurt your credit, or that you’ll just plain feel bad about not making your payments. However, if you don’t talk to your lender at all, things will get bad pretty fast. A loan modification can give you a new fresh start and bring you up to date immediately.

Sign up for our free step by step help guide.

Good luck.

Barbara Partaka
Home-Buddies