How to Initiate Mortgage Modification

Restructure Your Loan, Keep Your House, and Save Your Credit!

by Raymond Kim

Worried about meeting your monthly mortgage payments? Don’t panic, you have options, including modifying the terms of your loan.

GET STARTED

• It pays to be prepared: Any claims you make to your lender need to be substantiated by paperwork, so make sure to have the following documents on hand:
• Your monthly mortgage statement. If you are an HOA-member, have documentation of your fees/dues.
• Any second mortgages or home equity lines of credit.
• Homeowner’s insurance and property taxes.
• Your most recent tax return, pay stubs, and any other proof of income.
• Other non-housing related debts, such as car loans, student loans, credit card statements, and so on.

Your goal is to demonstrate your difficulty making your current payments, while also showing how you will be able to pay back the mortgage once the terms are modified.

GET SOME HELP

There’s no need to go it alone. In fact, there are a number of valuable resources that can provide guidance and further information:

• HUD-approved housing counselors: These not-for-profit financial counselors can assist you with every step of the modification process. There is a list of HUD-approved counselors at www.HUD.gov.
• HAMP (Home Affordable Modification Program): Through HAMP, you can reduce the interest rate of your loan, lengthen the term of your loan, reduce the principal of your loan, or some combination of these options. If you do not qualify for HAMP, there are other government programs that can still help (Home Affordable Foreclosure Alternatives or HAFA, et al.). An HUD-approved counselor can walk you through these programs in detail.

Note: You are not guaranteed to qualify for HAMP or HAFA, nor is your lender guaranteed to change the terms of your loan. But taking action early and using a counselor will greatly improve your chances.

WRITE IT DOWN

It is worth your time to write a narrative that will help keep your conversations focused and will prevent you from forgetting or leaving out any important details.

Your narrative should explain why you need to modify your mortgage, what led you to this point, and how you plan to successfully manage your finances in the future. Keep it simple, accurate, and brief.

Remember: Be honest. The point of this process is to create a budget that will allow you to pay all your debts and obligations over time. You’re not going to pull a fast one on a lender, and this process exists for your benefit.

MAKE THE CALL

With your documents gathered and your plan of attack vetted by an HUD-approved counselor, you’re ready to call your lender.

One last tip: During phone conversations, take detailed notes. Write down the names of the counselors you talk to and exactly what they say–you may need to refer to these notes later, particularly when discussing the terms of your modification.

Finally, remain patient. You may be on the phone for a while, but the benefits of avoiding foreclosure are well worth it.