Loan Modification: Five Tips to Increase Your Chances of Success

If you’re looking for ways to reduce your monthly mortgage payments, a loan modification may be the answer. A loan modification makes adjustments to your loan—to the interest rate or duration—to make your monthly payments affordable.

How can you ensure that you get the best possible loan modification? In this blog entry, we’re going to share five important steps – but please be sure to speak to a bankruptcy attorney about your specific situation.

1. Don’t wait.

It used to be that you had to be in default before loan modification was an option. Being in default means the lender has begun foreclosure proceedings. Now some—though not all—lenders will work with homeowners before they’re late on payments. This depends on the lender, but new federal assistance programs don’t require that you be in default before initiating a loan modification. If you know that you’re not going to be able to continue to pay your mortgage, it’s to your advantage to get a modification as soon as possible.

2. Do your research.

If you know who your lender is, that may help you know how to negotiate. In particular, loans owned by a bank may be easier to negotiate. You can find out who owns your loan by asking your mortgage servicer. The Making Homes Affordable website also provides important information about mortgage servicers.

3. Write a clear hardship letter.

As part of your loan modification application, you’ll need to write a hardship letter explaining why you’re having trouble paying your mortgage. This letter needs to explain your circumstances clearly. If you’ve lost a job or had unexpected medical bills, the letter needs to make it clear exactly when these things happened and what kind of effect they had on your ability to pay your bills.

4. Know your numbers.

If you’re offered a loan modification you can’t afford, be honest. Have your expenses documented, so that you can present evidence that the offered modification isn’t going to work for you.

5. Document everything.

Keep track of all correspondence and all phone conversations. If you face foreclosure some time in the future, the fact that you made a real effort to get a loan modification will make it obvious you’ve been making a genuine effort to straighten out your finances, and it will help your cause.

If you’re in financial distress and would like to learn more about loan modification, we can help. Please contact us today to learn more!