How to Get Your Mortgage Loan Modified

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  The terms of a mortgage are presumed to be “set in stone” once the paperwork is signed. However, sometimes borrowers find themselves behind on their payments or unable to make their payments altogether. To stop foreclosure on the property, a modified mortgage may be the answer.

What Is a Modified Mortgage?

A modified mortgage allows borrowers a chance to “catch up” the mortgage and stop the accumulation of late fees and bank charges, minimize the negative impact on their credit ratings, and avoid foreclosure. With a modified mortgage, the lender (for a fee) agrees to move the missed payments to the end of the note, thus extending the term of the loan (the length of time over which the loan payments are paid). The note then becomes current, meaning the borrower is no longer behind on payments.

Who Modifies the Mortgage?

The lender is the one in charge of accepting the modification or denying it. The lender will base a decision on a variety of considerations, including the borrower’s track record with the lender as well as the borrower’s reasons for requesting the modification. Generally speaking, if a lender sees that the borrower’s struggles will be short-term (for example, the result of unemployment that is likely to be temporary), it may be more likely to grant the modification.

What Are the Time Limitations?

Most lenders will consider modifying a mortgage once the borrower is 90 days behind on payments. With three payments in arrears, it makes good business sense for both the lender and borrower to take advantage of this option. However, if the note is only one month late or more than three months, a modification to the existing mortgage is usually not an option. A borrower who is only one month behind on mortgage payments may be better off simply making the payment late in order to catch up. If payments are more than three months behind, however, the lender will more closely scrutinize the situation that caused the borrower to fall behind. The best course of action is to keep in close contact with the lender as soon as the ability to pay is in jeopardy, for example, after a job loss. If the lender is apprised of the situation from the start, it may be more willing to modify the loan than it would be after several missed payments accumulate.

What Is the Cost?

The lender generally charges a fee equal to one month’s payment for modifying the loan, and that amount is added to the loan as if it were a regular payment. This fee, which is higher than a late payment penalty, makes a modified mortgage a bad choice for borrowers who are only one month in arrears and can otherwise catch up.

What Is the Process?

Prior to making application for a modified mortgage, you should contact the lender and explain that your ability to make your mortgage payment is in jeopardy. The lender can tell you over the phone whether a modified mortgage is an option for you. The lender is going to need several documents to process the modification, including the following:

·       An overview of current financial status: This is a collection of documents that gives the lender a clear picture of your financial situation, including a listing of monthly expenses with statement copies if available, tax returns, proof of income (pay stubs, 1099 forms, or other forms), and bank statements, as well as any other documents like divorce papers or hospital bills that can substantiate the change in financial status that led to the late payments.
·       A hardship letter: You may be asked to write a letter explaining why you fell behind on your mortgage payments, what steps you are taking to correct the problem, and why it won’t happen again.
·       The fee. Nothing can be done without the money. Lenders usually require this in the form of a cashier’s check, a money order, or a debit from your checking account. If the lender declines the modification, the funds are returned or applied to the mortgage as a standard payment.

For Additional Information, Visit These Web sites:

·         Coldwell Banker:                  http://www.coldwellbanker.com
·         Freddie Mac:                       http://www.freddiemac.com/
·         Bankrate:                            http://www.bankrate.com

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