subject: What is a loan modification Needful Information? [print this page] What is a loan modification Needful Information?
A loan modification is a change to the loan contract which is agreed to by the lender and the homeowner. The lender modifies the existing loan(s) in order to work with the homeowner because of a hardship. The purpose is to help make the loan(s) more affordable. Usually loan modifications are in the form of a rate reduction and/or fixing the rate for a certain period of time. In the past, loan modifications were only utilized when a borrower was delinquent and suffered a hardship such as a job loss or divorce.
Borrowers can now obtain modifications from their lender for unaffordable rate adjustments on adjustable rate mortgages. The earlier the homeowner addresses the issue, the better the chances are of negotiating a fixed rate and a payment that is manageable.
If the homeowner can afford their home but not their current mortgage, then they may be eligible for a loan modification. A factor that is required in every loan modification submission is the existence of a hardship. The hardship can be temporary in nature or permanent, but the borrower must be able to prove the hardship.
The following are a sample of hardships that get loan modifications approved:
1. Adjustable Rate Mortgage Reset-Payment Shock
2. Illness of the Borrower
3. Illness of a Borrowers Family Member
4. Curtailment of Income
5. Loss of Job
6. Abandonment of Property
7. Property Problem
8. Inability to Sell the Property
9. Inability to Rent the Property
10. Mortgage Servicing Problems
11. Transfer of Ownership Delays
12. Reduced Income
13. Failed Business
14. Job Relocation
15. Death of the Borrower
16. Death of the Spouse or Co-Borrower
17. Death in the Family
18. Incarceration
19. Divorce
20. Marital Separation
21. Military Duty
22. Medical Bills
23. Damage to Property (natural disaster or unnatural)
Notice that "MY Realtor lied to me" and "My loan officer/broker lied to me" are not on this list. Keep this in mind when you write your hardship letter. Documenting the hardship is very important to the lender's or servicer's loss mitigation department and will be verified during the approval process.
Without proper documentation, your file may be flagged as fraudulent (such as misrepresenting your actual income during the loan application process). You definitely do not want this to happen for obvious reasons and it will slow down the process or terminate the process completely. There are two important things to remember about loan modifications:
1. A loan modification should be requested only if no other reasonable options are available and/or the homeowner is experiencing a hardship.
2. Loan modifications are designed for homeowners who can afford their homes but not their loans.
See More Needful Information for Loan Modification!
