Loan Modifications

What is a loan modification? 

A loan modification is an adjustment to your existing loan in order to make it a more affordable loan- the goal is allow you to stay in your home and not lose your home to foreclosure.  It is important to understand that loan modifications are not for everyone and they are not guaranteed.  There are many different programs offered through banks and through the government through the American Recovery Act.

Since the enactment of the American Recovery Act, there have been several different versions, and consequently many different requirements and limitations on loan modifications.  It is important to keep up to date on the changes.  The best way to do that is to either visit with your credit counselor or your attorney.

Your attorney or counselor will be able to assist you with your application process.  There are numerous forms that will need to be filled out and some will feel quite intrusive.  Please keep in mind that you are providing the information (annual income, loss of employment, current value of home, etc.) so that your lender will be able to calculate a new monthly payment on your loan.  Your lender may be able to write down the principal on your home in light of your loss of income and a depreciation in your home’s value as compared to the amount you owe.

Be patient- the application process will take time.  It may take six months or more to finish the process.  Once your loan modification is approved, you will be placed on a temporary payment plan.  YOU MUST comply with the new terms for the required number of months in order to move into a new permanent payment structure.  If you miss a payment during this time, you will lose the ability to have a loan modification.

If you are in a position that making payments is becoming a challenge, I would encourage you to visit with your attorney or counselor now and find out what options may be available to you.  I know that it is difficult to talk about financial problems and most individuals would like to pretend that things will get better, but I encourage you to get guidance in preparation of changes in finances now rather than later.