Loan modification programs have become a big deal as 2008 closes out and 2009 begins. Predictions are that there will be many more loan modification requests from homeowners to mortgage lenders to prevent foreclosure as the majority of Option Arms and Alt A loans begin to modify in 2009.
If you find yourself behind on your mortgage or facing a payment increase that you won't be able to keep up with, you may be able to get a loan modification program from your lender. To take advantage of this option for preventing foreclosure on your home, you will have to prove to the bank that you have had some sort of financial hardship, or there is a very good reason why they should modify your mortgage to make your payment more affordable to you.
Prove Financial Hardship To Your Lender For Loan Modification
Typically, loan modification programs are reserved for those folks who are at least 3 months behind on their mortgage payments. If you are, you will have to explain to your mortgage company why. Your mortgage lender isn't just going to give you a loan modification because you ask for one. You will have to show them why you need it.
Your mortgage lender will also be looking to make sure that you just didn't stop paying your mortgage when you could have kept paying it in the hopes of getting a loan modification. In other words, if you have money in the bank and you have a good job with good steady income and nothing has really changed with your financial situation you better keep paying your mortgage payment.
Your lender will look very closely at your situation and if they determine that you just stopped paying your mortgage to see if you could get a better payment you may be out of luck. Loan modification programs are for people who really do need some help. Call them first if you face an increasing payment in the near future; you may be surprised what they'll do for you.
Once you request a loan modification and give them what they want they will evaluate your information and let you know what they can do. Keep in mind that they are swamped with a lot of requests for loan mod's from other customers so it will take them a few weeks to review your request.
What Documents Will I Need For Loan Modification?
It is difficult to say exactly what documents you will need for each lender as each lender has their own requirements. However, in general, you will need to provide some of the same documents to support your request for a loan modification.
Here is a brief list of items you'll most likely need to give to your lender:
- A hardship letter - This letter should explain your financial hardship. Make sure that you spell out your situation very clearly, and make sure that your hardship doesn't reflect anything that you did voluntarily - like quit your job because you didn't like your boss anymore.
- A few of your most recent paystubs and perhaps your most recent W2 - They will be looking for some indication of income to base your new payment on. They are generally going to make sure that your new mortgage payment is around 38% or your gross monthly income. They will look at an interest rate reduction, a term extension, or a forgiveness of some of your equity to get your payment in line and more affordable to you.
- Some sort of budget that details your monthly expenses - Your lender will use this to get a sense of your monthly bills, which will help them better understand how to structure your loan modification plan.
What Is The Best Way To Start A Loan Modification Program?
The best way to start a loan mod program is to call your lender as soon as you know you have or will have a problem with paying your mortgage. Even if you are not behind on your mortgage you will want to call your lender if have some sort of Option ARM, or other type of Alt A ARM that will be adjusting in the next 12 months. It is possible that your mortgage has been sold several times since you got it.
The best place to call to find out about a loan mod program is to call the phone number of the servicing company in your mortgage payment coupon book, or on your monthly mortgage statement.
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