Loan Modification: Understanding the Process

If you’re struggling to make your mortgage payments and you want to save your home from foreclosure then a loan modification is your best chance for a fresh start.

What is Loan Modification?
A Loan Modification is a permanent change in one or more of the terms of a mortgagor’s loan, which allows the loan to be reinstated, and results in a payment the mortgagor can afford. Simply put, if you’re a homeowner who has experienced a financial hardship Loan Modification is a way of resetting the clock on your mortgage to you catch up.

What is a financial hardship and how do we document it?
The homeowner must be able to identify and document the hardship that caused them to fall behind on the mortgage. For example, unemployment, unexpected medical bills, or family emergencies are hardships that jeopardize your mortgage payments. If you can document these hardships with paystubs, bills, unemployment benefits paperwork, etc. you may be eligible for a loan modification.

What kinds of information will I need to submit?
A hardship letter to explain the circumstances that are causing you to fall behind. , The last two years of income tax returns, A list of your expenses and compare those to your income to identify whether you have sufficient income to support your mortgage.
Depending on your situation, there may be additional information or documents required to complete the application. Your housing counselor will let you know what those documents are.

What else will my housing counselor help with?
Your housing counselor may recommend a loan modification through a reduction in your mortgage interest rate on your mortgage, or an extension of the terms – whatever means to make your mortgage affordable. They will also help you package your documents, and submit them to your mortgage servicer for consideration.

What happens when my loan modification is approved?
When your mortgage company approves your application, you will receive a written modification agreement outlining the new mortgage rate, payment amount, terms, etc. At this point, all you need to do is close the deal. You’ll sign the documents (usually with a notary) and return the forms (and sometimes the first payment under the new terms) to the lender.

I’m interested. How do I get started?
Fill out our confidential intake form or call (718) 636-7596 ext. 214. You’ll be assigned a counselor who will help you figure out your situation, your options and your next steps – free of charge.

The process of applying for a loan modification can seem just as involved as when you first purchased your home. But if you’re struggling to make payments and you want to save your home from foreclosure then a loan modification is your best chance for a fresh start.