Loan Modification 101: Don’t Lose Your Home


June 20, 2014

The Florida real estate market is starting to show some signs of stability. However, not everyone is out of the woods. Many homeowners remain behind on their mortgage payments, or their home payments are unaffordable and they will not be able to continue making payments. For those who want to hold onto their homes, a home loan modification may offer a possible solution.

The Problem

After a loan has fallen several months behind, lenders generally won’t allow a borrower to restart making their normal payment again until the entire missed balance is caught up. For homeowners who are several months behind on their payment, making such a large payment to catch up is simply not affordable. This problem gets larger as time going on because the lender adds missed real estate taxes, missed homeowner’s insurance, and the bank’s attorney fees into the amount that needs to be caught up.

The alternative is to request the lender modify your loan. There are a variety of different ways that a loan can be modified. One common way to modify a loan is to re-amortize the mortgage, which means, to take the total back amount that is owed and add it into the loan. This can make it much easier to get back on track with payments. Lenders may also change the loan’s interest rate, the length of the loan, and the balance owed. The options vary depending on who the lender is, the borrower’s financial condition, the existence of mortgage insurance, the existing of junior liens, and other factors.

Don’t Wait

In the first few years of the market crash, Homeowners would often call their lenders, who would tell the Homeowners that they couldn’t receive any help because the homeowners were behind on their payments. Many Homeowners, reading between the lines, would take the lenders’ advice and start missing payments in hopes of then receiving a modification. As a result of the missed payments, the Homeowners would then have their credit impaired and be forced into foreclosure. This practice was hugely frustrating for honest people who were just trying to keep up with their bills.

Thankfully, there are new programs which are designed to offer loan modification options before a borrower falls behind. The availability of these options vary. In any event, we do not recommend intentionally falling behind in order to request a loan modification.

Determine Who Owns Your Loan

One of the factors than can influence the availability of a modification is who the “owner” of your loan is. The loan owner is different from the loan “servicer.” Generally, the loan “servicer” is the company you make your payments to, or who you call when you are having a problem. In contrast, the loan owner may be a trust or a large financial institution such as Fannie Mae.

Although there is nothing you can do to change the loan owner, it can influence the outcome of a loan modification. Some loan owners won’t agree to a loan modification that results in a reduction of principle. Other loan owners have settlement agreements with either State or Federal government, and they are required to participate in some modification programs. This step may seem daunting but you should be able to call your lender (the name on your bill) and ask them who owns your loan.

Be Patient, Be Persistent

Even after you have submitted your loan modification documents, you should follow up with your lender routinely. Often, the lenders will find that a document is missing, or it is not filled out completely. It can take days or even weeks before you get a notification, and by that time, a different document may be outdated. Be pro-active and communicate with your lender on a regular basis to see if they have everything they need to consider to you for a modification. If you’re working with a lawyer, he or she will keep you updated.

Get Help

The loan modification process can be tedious. The lenders have a list of documents that they require before they will consider a loan modification. All of the documents must be provided, and they must be recent. If you live in the Pinellas County borders, consider looking for a Clearwater loan modification lawyer. Lawyers in this field are familiar with the paperwork process. They can help you avoid scams and file appropriate documentation.

No Guarantees

Load modifications are possible, but there are no guarantees. Let an experienced loan modification attorney help you though the process. You don’t need to tackle the stress and hardship on your own.

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