Keywords: mortgage loan modification, mortgage modifications
Even if people say the economy is improving, we still get more questions about loan modification programs than any other type of legal question.
Learn more about loan modification programs and whether or not they may be right for you.
A loan modification, as it applies to single family residential real estate, is a blanket term used to describe a variety of measures taken by loan servicers to help a homeowner reinstate their mortgage.
Although the term is often used by lenders and loan servicers to encompass programs where the homeowners mortgage payment increases, a loan modification will generally reduce the homeowner's monthly payment to a more affordable level.
Loan Modification Methods
- Capitalization of Arrears
- Interest Rate Reduction
- Increasing the Loan Term
- Principal Deferral / Reduction / Forgiveness
Types of Loan Modification Programs
Often abbreviated as loan mod or loan mods, a modification may come in few different varieties, including:
Trial Loan Modifications:
These are loan modifications, typically underwritten to HAMP guidelines, where the homeowner makes trial payments at a new lower rate to prove they can afford the newly modified mortgage terms. The trial mod payments are supposed to last for 3 months, however in many cases lenders and loan servicers have caused homeowners to make trial payments for up to 12 months.
Permanent Loan Modifications:
Like it sounds, this is a true loan modification in that the terms of the loan are modified permanently. It's a new contract, and the terms don't change back if you default again. A permanent loan modification is granted typically upon completion of a trial modification, however there are instances where a permanent modification may be granted without completion of a trial period.
Step Loan Modifications
Often abbreviated STEP Mod, these are loan modifications where the payment is reduced in the beginning and gradually increases in a series of steps. For example, one's initially modified payment may be $1000/month for the first 2 years, increasing to $1500/month for the next 3 years and then returning to the original payment amount of $2000 after 5 years and until the home is sold or the mortgage paid off. These are generally not considered permanent loan modifications.
HAMP Loan Modifications
Originally introduced in 2009, HAMP is short for the home affordable modification program, often called the Obama loan mod program. The majority of loan modifications approved in the past few years have been due to the standards set by this program, including a 31% Debt to Income Ratio and a Principal Reduction provision. In 2012, HAMP 2.0 created a Tier 2 qualification standard (in addition to the original HAMP Tier 1). HAMP Tier 2 expanded the program to allow loan modifications on investment properties, second mortgages, and even those who defaulted on HAMP 1 mods.
DOJ Loan Modifications
Named after the Department of Justice, DOJ mods were granted by Ally/GMAC, Bank of America, Citi, JPMorgan Chase and Wells Fargo in connection with the National Mortgage Settlement. These loan modifications were characterized by 25% Debt to Income ratios and Principal Forgiveness. While the servicers have indicated that most of the eligible homeowners have been contacted, this does not seem to be the case. Contact an attorney for more information.
Is a loan modification for me?
If you are struggling to meet your payments, you may want to look into a loan modification program. Determining eligibility is a very scientific process, and you should not take your lender's word for it. Generally speaking, your lender is not in fact the owner of your loan, and actually makes more money foreclosing on you than granting yo a modification. Although this may seem like a conflict of interest, you can use it to your advantage. Contact an attorney and ask them to run a loan disposition analysis to see exactly which loan modification programs you have access to.
Loan Modification services may be available in:
Alabama, Alaska, Arizona, Arkansas, Colorado, Connecticut, Delaware, Florida, Georgia, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire, New Jersey, New York, North Carolina, North Dakota, Ohio, Oklahoma, Pennsylvania, Rhode Island, South Carolina, South Dakota, Tennessee, Texas, Utah, Vermont, Virginia, Washington, Wisconsin
Available in New York, Los Angeles, Chicago, Miami, Atlanta and other major cities…
Kingston, Binghampton, Syracuse, Rochester, Albany-Schenectady-Troy, Buffalo-Niagara Falls, Bangor, Worcester, Springfield, Norwich-New London, Fairbanks, Hot Springs, Atlantic City-Hammonton, Trenton-Ewing, Pine Bluff, Mobile, Kankakee-Bradley, Akron, Dayton, Olympia, Port St. Lucie, Palm Bay, Melbourne, Titusville, Naperville, Joliet, Ocala, Columbus, Tampa, St. Petersburg, Clearwater, Jacksonville, Rockford, Kissimmee, Las Vegas, Miami, Fort Lauderdale, Pompano Beach and more...