In the present economic environment, the government and industry have mandated some of the most liberal loan-modification solutions ever seen. With that said, however, know that not every loan will be modified. Many homeowners, after all their best efforts to work something out with their lenders, still are not able to save their homes.
A successful loan modification is dependent on verifiable income to support the proposed monthly mortgage payment, in addition to taxes, insurance costs, association dues, and other financial obligations, such as car loan and credit card payments. The bottom line is that if you have no stable income to speak of, loan modification will not help and will not be an option.
The remainder of this section explains what you can expect from loan modification.
Your mortgage terms can be modified a number of ways. As indicated earlier, your interest rate could be reduced, the loan term (the time it will take you to pay back the loan) could be extended, or these two modifications could be combined. In other cases, your payment arrearages (what you owe extra for not paying on time) could be financed and added onto your mortgage amount. In this way, you would become current on your mortgage without laying out any cash.
Keep in mind that these are just examples. Your specific loan modification will be based on a number of factors, including the lender’s criteria, whether you have mortgage insurance, the number of open mortgages on the property, and the type of loan
You should know that it can take months for a loan modification to be finalized. In fact, the average is about sixty days from start to finish.
Some loan-modification programs will require you to make the proposed monthly payments for at least three months. This is called a trial streamlined modification.
In most cases, however, all collection and foreclosure efforts will continue until the loan modification is approved by the lender. Therefore, it is important that you attempt to make your mortgage payments based on the original terms of the loan.
Throughout the loan-modification process, plan to call your lender at least weekly to check on the status of your application.
Proceed to Step Four