Whether you choose to work with a loan modification firm, a lawyer, or another expert in the process, or whether you decide to approach things directly with your lender, it is important that you understand and follow the process every step of the way. Keep good records, take notes that include the names and telephone extensions of anyone who speaks with you, and be prepared with documents that illustrate both your current financial situation and the ways in which your plans for a modified loan can improve your financial health as well as the likelihood that your lender will get paid in the end.
The first step in getting a mortgage altered is to critically evaluate your monthly budget. Take all of your expenses into account: groceries, water, gas, electricity, cable, fuel for your vehicle, health or car insurance, phone bills, credit card payments, and anything else that costs you money on a regular basis. Balance that against the amount of money you currently earn each month (assuming that you have a steady income). You are going to be proposing that your lender change things around to make your payments more reasonable, and so you must be able to prove that you can afford the new payments once the modifications have been completed.
After you have taken your budget into consideration, you must be prepared to present your hardship. If things are going along swimmingly for you, your lender is not going to agree to any changes to the terms and conditions of your borrowing. However, various things can qualify you for a hardship loan modification. If you have recently become unemployed or had any other significant changes in your income, you should qualify. Some changes include that your hours may have decreased at work, that you accepted a reduced salary or pay rate in order to keep your job, or that you have changed jobs and are now earning less than you were when you applied for your loan. Other hardships that qualify include a serious illness (either yours or a family member's), a death in the family, or the loss of a partner. Whatever your situation, be ready to make a case for why this is such a problem to your lender.
Next, you need to figure out who to speak to about the changes you want to make to your payments. Start by calling your bank or mortgage company and explaining, in brief, what you are hoping to accomplish. Some companies will be willing to work with you directly, and if that is the case with yours, you have nothing further to worry about. Otherwise, you can find attorneys and specialists who work with borrowers on this by contacting us.
You may or may not get to select what you wish to modify about your loan. What you are eligible for will often be determined on the type of hardship you are facing, the state of your current mortgage (whether you are up to date on payments, just falling behind, in default, or nearing foreclosure), and the options that your lender is legally required to offer you. However, you can certainly propose what you think is best. Some of the most common options include fixing a floating interest rate, combining two loans (a primary and secondary), reducing your overall principal because your property value has decreased below the value of your mortgage, or extending the length of your loan to spread your payments out over a longer period of time.
If you are able to proceed as you wish, make sure to keep careful notes when you speak with anyone, save copies of any forms you must fill out, and be diligent about following up on emails, faxes, and mailings. There are many, many people currently seeking loan modifications, and it is easy to get lost in the crowd!
