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Five Tips for a Successful Mortgage Loan Modification

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By : Tina Fountain    99 or more times read
You’ve lost your job. You’ve recently gotten a divorce. Your adjustable rate mortgage has adjusted to a monthly payment you can no longer afford. Whatever the reason, you’re struggling to make your mortgage payments and need help. Through a loan modification, your lender can work with you to lower your home loan payments and help you keep your home. Unfortunately, many borrowers apply for a loan modification only to discover that the bank is proceeding with a foreclosure anyway. These tips will help you stay on top of the loan modification process and avoid foreclosure.

1. Start the loan modification process early

Your lender doesn’t want to foreclose on your home, but it will follow standard protocol after you default on your mortgage payments. The U.S. Department of Housing and Urban Development states that borrowers should contact their mortgage lenders and request modification of their home loans as soon as mortgage payments become a problem.

In the past, mortgage lenders would not even discuss loan modification with a borrower unless he was delinquent on his mortgage payments. That no longer holds true. Many banks are agreeing to work with borrowers on a case-by-case basis. If your home loan is serviced through Freddie Mac or Fannie Mae, the U.S. government requires your borrower to discuss loan modification with you and fully evaluate your financial situation to determine your eligibility–even if you’ve never missed a payment.

2. Avoid loan modification scams

Be wary of any company or individual that offers to help “streamline” your mortgage modification process. Although legitimate companies exist that can offer you help, con artists abound that are more than willing to take your money, or worse, your home.

If you opt to work with a loan modification specialist, ask to see credentials and check the company’s standing with the Better Business Bureau. Always read paperwork fully before signing it, as you could be signing away the title to your home. Continue making mortgage payments to your lender rather than to the loan modification specialist. No legitimate loan modification company will ask you to make your mortgage payments to anyone other than your lender.

3. Have proof of your financial situation

You don’t want to fall victim to a scam, but neither does your lender. Thus, it will want proof that your current financial situation does not permit you to continue making your mortgage payment each month. Don’t be hesitant to submit bank statements, tax returns and other sensitive financial information to your lender for review. Your mortgage lender needs this information to verify that your request is valid and not frivolous.

If you aren’t comfortable with strangers seeing your bank account numbers, use a marker to mark through account numbers before sending in your paperwork. The bank only needs to verify your finances, and you retain the right to keep your bank account numbers private.

4. Stay in contact with your lender

If you submit your loan modification application and financial paperwork yet do not hear anything from your lender for several weeks, call the bank and inquire about the status of your application. The average loan modification process takes anywhere from 30 to 90 days, depending on the lender. If you cannot keep up with your mortgage payments, however, simply asking your lender to modify your mortgage won’t prevent a foreclosure from taking place. Some homeowners have believed their loan modification requests were being processed only to receive notice that their property would be included in an upcoming foreclosure auction.

Ask for a forbearance or other form of payment extension if you cannot keep up with your mortgage payments during the loan modification process. Whatever you do, however, don’t sit back and do nothing after applying for a modification. If you don’t hear from your lender in a reasonable about of time, call and request an update on the status of your mortgage modification application.

5. Get it in writing

If a bank representative called to inform you that your loan modification request was approved, hold off on celebrating until you receive the information in writing. Your lender isn’t required to honor any statements made by its representatives over the telephone. Continue making your previous mortgage payment until the bank sends you something in writing notifying you of your new loan terms.

The loan modification process may be daunting, but it doesn’t have to get the best of you. Educating yourself on loan modification and avoiding common mistakes borrowers make when attempting to changes the terms of their home loans will help you reach a successful agreement with your lender and avoid losing your home to foreclosure.
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