Reasons for imminent default include the loss of a job, loss of a spouse, a disability or an illness that has affected your ability to repay your mortgage on the original loan terms. Some lenders and servicers offer their own loan modification programs, and the changes they make to your terms may be either temporary or permanent.
The federal government previously offered the Home Affordable Modification Program, but it expired at the end of Now, Fannie Mae and Freddie Mac have a foreclosure-prevention program, called the Flex Modification program , which went into effect Oct. If your mortgage is owned or guaranteed by either Fannie or Freddie, you may be eligible for this program.
HARP has also expired. If you are struggling to make your mortgage payments, contact your lender or servicer immediately and ask about your options. Avoiding phone calls or procrastinating will only make matters worse. The loan modification application process varies from lender to lender; some require proof of hardship, and others require a hardship letter explaining why you need the modification.
Consider working with a HUD-approved housing counselor , who can assist you for free in challenging the decision and help you understand your options. One potential downside to a loan modification: It may be added to your credit report and could negatively impact your credit score. If your modification is temporary, you'll likely need to return to the original terms of your mortgage and repay the amount that was deferred before you can qualify for a new purchase or refinance loan.
After permanent modifications, lenders may want to see a record of 12 or even 24 on-time payments to determine your ability to repay a new loan. The modification is a type of loss mitigation.
If you are offered a loan modification, be sure you know how it will change your monthly payments and the total amount that you will owe in the short-term and the long-term.
Tip: Carefully consider what kind of modification best addresses your needs. For more information about how to avoid foreclosure, use our checklist. If you are facing imminent foreclosure or have been served with legal papers, you may also need to consult an attorney. Searches are limited to 50 characters. These include:. Some traditional lenders have their own loan modification programs. A mortgage loan modification application will require the details of a borrower's financial information, the mortgage information, and the specifics of the hardship situation.
Each program will have its own qualifications and requirements. These are typically based on the amount the borrower owes, the property being used for collateral, and specific features of the collateral property.
If a borrower is approved, the approval will include an offer with new loan modification terms. Fannie Mae. Department of Housing and Urban Development. Department of Veterans Affairs. Home Equity. Debt Management. Your Privacy Rights.
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