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Loan Modification-One Way to Make your Mortgage Affordable

Updated on September 23, 2013

During these difficult financial times many homeowner's are being forced out of their homes or are facing foreclosure due to their rising mortgage costs. The Loan Modification program with your lender is one that might possibly make your mortgage more affordable.  This program changes the terms of your original home mortgage, possibly allowing your mortgage payment to be more affordable. Loan modification can be done after taking appropriate steps with a reputable bank or firms.  This is in no way a sure thing and available to everyone, it takes time and research on your part to protect yourself and to get the best results.  Watch out for scam artists, who take your money as an up-front payment then disappear...more about ways to avoid a scam are in this Hub.

Step by Step for Loan Modification

  1. Seek the advice of a government approved credit counselor. These are professionals in the mortgage loan modification business and can show you ways to avoid foreclosure. Schedule a meeting with the counselor.
  2. Take a copy of your mortgage to the meeting. Request a complete review of your mortgage and ask what term(s) could be modified by your lender, based on your present financial situation. Every detail should be looked at during this meeting.
  3. Research..research..research:  Make sure you inform yourself about Loan Modification procedures, Go on the internet, check the types of government programs your lender may be participating in.  Also, your bank may have their own specific program so check their website too.
  4. Before you meet with your own lender, contact them and request a loan modification packet.  In this you will find information and paperwork that you will need to provide to your lender.  They might tell you that you can't do a Loan Modification untill you are behind in your payments but tell them you want the packet sent anyway.
  5. Gather your documentation needed.  Generally most banks require:
  • A written hardship letter explaining your circumstances
  • A Personal Income and Expense Financial Worksheet-filled out (this will be in your packet).
  • 4506T Letter signed (a request for a Transcript of your tax return)
  • 1021 Program Form (Hardship Affidavit to document your need)
  • 1 Month of Pay Stubs, 2 Months Bank Statements, 2 Years Tax Returns & W-2's
  • Social Security Award letter, if you are on that program

Last, once you decide that a Loan Modification is what you want to do, contact the holder of your mortgage, your lender. Keep in mind that your lender is in no way obligated to offer you a Loan Modification; however, once your financial situation is taken into account, you might be able to work together to make your payment affordable to you at this time. The bank does not want your house back so they might work with you to keep you in your house and their payments coming in.  You want to present yourself as a hard working dependable person who just needs a bit of help to keep paying your mortgage.

Be patient, with the banks having an overload of foreclosure proceedings you might have to wait.  If approved your Loan Modification might consist of lower payments, a write off of late fees, lower interest rate, or an extended term, along with other changes.  Your Modification might be put in a trial status, just make sure your make payments during that time on time so as not to jeopardize future dealings.

How to Avoid being Scammed

Watch out for scammers during this process. Here are a few way to see the warning signs and avoid loosing money.

  • Never, with Loan Modification or any financial dealings, give your personal information out on the phone to an unknown caller. Always initiate the call yourself.
  • Never make a payment or fee before doing anything. Legally Loan Modification companies are not allowed to ask for up front fees.
  • Check the US Department of Housing and Urban Development for certified companies. The government has put their seal of approval on the practices and programs offered by a company.
  • Never Wire Transfer or send payment using a Cashier's Check. There is no way to get a refund once money is transferred this way.
  • Don't stop making payments to your lender directly. Some scammers will ask you to make payments directly to them.
  • Inspect your documents carefully, do not sign any areas where spaces are blank or that you do not understand. Consult a lawyer if need be.
  • Never sign over the deed of your hour to a Loan Modification company. You could be evicted by the scammer who had promised to make the payments for you.


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