Loan Modification - Top 10 Questions

These ten questions are the most commonly asked loan modification questions. Let’s answer them!

1: Both the government and individual lenders and banks are marketing loan modification as a definite way to prevent foreclosures. Is that correct?
ANSWER: Yes. The truth is that the loan modification program is fundamentally designed as a real and workable alternative to foreclosure, through making your existing loan more manageable.

2: I keep hearing about Loan Modification on the news and the President has been talking about it a lot. But I don’t really know what it is. Explain it, please?

ANSWER: Essentially, loan modification is a process by where your lender and you negotiate the terms of your existing home loan. Those terms are then modified so that your monthly payment is affordable to you. The changes might mean you pay a lower interest rate and that the time you pay the loan over extends. But the aim is changing the terms so that you will pay less each month and thus be able to afford it and avoid foreclosure.

3: How do you qualify for loan modification?

ANSWER: In order to qualify you must meet several qualification criteria. Loan modification only applies to loans where the monthly payment is more than 31% of monthly income (before tax) and on loans on which the unpaid principal is less than $729,750. In addition, your loan must have been taken out before the start of 2009.

4: I’m not actually in arrears on my loan yet. Could I still be eligible?

ANSWER: Contrary to popular belief, you do not have to be in arrears to be able to apply for loan modification. You simple have to be able to prove that you will soon be unable to meet those monthly payments.

5: Do I need someone to represent me in the process regarding loan modification, or can I take care of it myself?

ANSWER: Although there is no requirement stipulated by lenders that you should have legal or professional representation, having it does increase your chances of acceptance as such specialists are often more knowledgeable on the process.

6 : How much do the reasons behind my financial troubles matter to my application?

ANSWER: They are essential. Although loan modification guidelines make no stipulation on what counts and does not count, making sure you include all the reasons in detail in your hardship letter will ensure that you have a great chance of being accepted.

7: How long does the entire process take?

ANSWER: This massively varies case to case. It can take anything from just a few days right up to a month to sort out. It entirely depends upon how much arrears you have, how close you are to foreclosure and the negotiations with the lender.

Q: Are refinancing and loan modification the same thing?

ANSWER: Yes. Loan modification is an entirely different plan from traditional refinancing.

9: I am already in arrears with my loan payments. Should I contact my lender now?

ANSWER: Absolutely! You should make steps towards resolving your situation immediately. The sooner you begin this process, the easier it will be to resolve.

10: What happens if I participate in the program and I cannot meet the new payments?

ANSWER: If you find yourself in this situation, you should consult a specialist who will look over your specific circumstances with you.

These are the most commonly asked questions about loan modification. If you have further questions about mortgage modification and foreclosure or questions about your own personal finances, get in touch with a professional.