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Feb 19, 2009 
Stop Foreclosure with Loan Modification
If you’re unable to afford a refinance or an alternative repayment plan in order to pay off your mortgage dues and avoid foreclosure, you may be able to stop foreclosure with a Loan Modification. Stopping foreclosure with a mortgage loan modification involves extending the loan period and adding the missed payments to the loan balance. This may reduce your monthly payment and help you pay off the dues in order to get current on the loan. The monthly payments can also be lowered by rate reduction.
Do you qualify for a mortgage loan modification?
- The lender hasn’t declared a foreclosure yet and even if he has done so, he should have removed the loan from the foreclosure status.
- You’re delinquent on the loan - but lender guidelines vary!
- The loan has been originated for more than 12 months.
- You can afford modified rate/terms.
- The property is in good physical condition
How can I get accepted for a mortgage loan modification?
- A Monthly Expense Worksheet including a detailed list of your expenses (food, gas, credit cards and other financial obligations) in a spreadsheet and calculate the average costs on each item for the past 3 months or so.
- A Hardship Letter of not more than 2 pages wherein you’ll put down why you aren’t able to carry on with the usual payments and why need a loan modification. Know how to write Hardship letter.
- You need to make sure that you have 1-2 hours at hand every day from your daily routine so that you can meet the the representatives at the lender’s Loss Mitigation Department and discuss on your loan modification.
- Gather your paystubs and bank statements for past 2 months as the lender would like to check them along with your Hardship letter and Financial Statement. The lender may take 15-30 days or even 60 days to review your loan status and Financial Statement depending upon how much you’re behind on payments and whether your loan is very close to foreclosure.
- If you’re denied for mortgage modification, don’t lose hope. Contact a loss mitigation specialist who’ll be able to negotiate on your behalf for getting the modification approved.
What happens when your loan is modified?
- You’ll be able to get current on the loan.
- If you have an ARM, modification may help you convert it into a fixed rate fully amortizing loan.
- The lender may reduce the interest rate below the market rate.
- The entire PITI (principal, interest, escrow items such as tax and insurance payments etc) may or may not be added to the current loan balance.
- Any administrative fees resulting from cancellation of foreclosure may be added to the loan balance.
- The modified principal balance can exceed 100% loan-to-value or the original principal balance.
Loan modification may be offered alone or as a part of forbearance . However, if you’re delinquent even after modification, the lender will consider it as a new default and service the loan accordingly.
Always use a law firm backed loan modification company to help with your mortgage negotiation.
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