Loan Modification is the alteration or change in material terms or characteristics of a mortgage loan contract, generally due to the inability for the borrower to make payments according to the terms of the original mortgage contract. If the lender voluntarily agrees to modify the terms of the mortgage contract, the idea is to make it affordable for the borrower so that they can make the modified payment throughout the term of the loan.

What is Obama’s loan modification plan?
President Obama recently announced a $75 billion initiative called the Homeowner Affordability and Stability Plan (HASP). One of the principal tenets of the plan is called the Making Home Affordable initiative. This initiative is comprised of two parts:

1. The Home Affordable Refinance program which will help homeowner’s who’s falling home values have prevented them from refinancing because their current loan-to-value ratios are higher than the normal 80% figure and who’s mortgage is owned by Fannie Mae or Freddie Mac.

2. The Home Affordable Modification program which is designed to reduce monthly mortgage payments for people who are close to foreclosure by modifying their mortgages and lowering the payments on their loans. Their loan does not need to be owned by Fannie Mae or Freddie Mac. Read More

What Loan Terms Can be Modified? Lenders will generally consider recapitalizations (moving back payment onto the principal of the loan) to make the borrower current again, pay rate reductions (lowering the borrower’s interest rate, and accordingly the borrower’s payment) to make the payment more affordable, and in some cases principal reductions. Principal reductions are rare and generally only are an option on junior mortgage loans (2nd’s, 3rd’s, etc.).

If I am Current and Can Afford my Payment, Can I Request a Loan Modification to Get A Lower Payment? If you are current on your mortgage payments, and there is no “problem” with your loan, loan modification is not a good option, and we would advise against it. Generally, loan modification is “Plan B,” if you simply can not afford to make the mortgage payment, had a temporary setback and want to get back on track, or your mortgage is about to adjust to a level where you can not afford it. “Plan A,” if it is an option, is to make monthly mortgage payments and comply with all terms and conditions of the mortgage contract.

Can I Do This Myself? There is a small chance a borrower could pull off a loan modification or pay rate reduction without the assistance of an a professional. As many borrowers know from experience, there is a thick and unintelligible layer of resistance at mortgage lenders’ loss mitigation departments to any suggestion of a workout from the borrower directly. They tend to take notice to contact from an attorney however. Generally, McFarlin & Geurts loan modification attorneys are able to cut through much of the red tape and bureaucracy that permeates the loss mitigation business. We stay current on “lender guidelines” and keep careful records on how to most quickly get our clients loan modification requests before the actual “decision maker” in the lender’s organization. Most consumers who attempt loan modification on their own, end up failing and, worse yet, making matters worse because now they have a previous “turn down” to overcome if they do later hire a loan modification attorney.

How Long Does The Process Take? There is no exact answer, we can only offer you estimates with no guarantees, warranties or predictions. Generally, the process can take only a few weeks, or up to a six months or longer. If a government guaranteed loan is involved (FHA for instance), the process will take longer to work out. Fortunately, most lenders will work quickly to approve a loan modification program once they have received a complete package, this is another reason it is advisable to work with a loan modification attorney, the “waiting” does not even start until the lender receives a complete package, which McFarlin & Geurts loan modification attorneys will, of course, submit only once it is complete under the lender guidelines.

Will the Lender Foreclose on my Property During the Process? Most lenders will postpone the sale of your property, or put the foreclosure “on hold” if they have received a complete package at least two to three weeks before the foreclosure sale date. Obviously, we can not guarantee the lender will stop foreclosure, but generally, a clear indication from the borrower that they are willing and able to complete a loan modification works in your favor.

If Not Approved, How Much Time Do I Have Before They Sell My Home?Every situation is different, typically in California the entire foreclosure process can take as little as four months. The faster we start the loan modification process and the more time we have to work, the greater the likelihood of loan modification success. If you are unsure of the foreclosure laws in your State contact a local real estate professional.

What if my foreclosure sale is very soon? If a foreclosure sale is less than 30 days away, naturally, our chance of success is diminished, but all is not lost. Some lenders actually prioritize loan modification requests based on the time period until any foreclosure sale. We have had some of our fastest loan modification answers (literally within a few days) when a foreclosure sale is immanent. There is no reason to delay, if you are serious about giving yourself the best chance possible to retain the property through a loan modification, our loan modification attorneys need time to work. Remember: maximum success is possible when we receive the client’s information as far in advance as possible before the filing of the notice of sale or other foreclosure documents.

Can I Force the Lender to Approve a Loan Modification? Generally, loan modifications are voluntary. As of yet, there is no government program which forces lenders to modify mortgages or give borrowers principal reductions. Understand a loan modification is a negotiation between you (the borrower) and the mortgage lender, generally through a loan modification attorney. You are presenting them with an offer backed up by your personal financial documents essentially saying..this is what I can afford.. .If you will work with me, I can assure you of a stream of payments going forward, but I can not meet the terms of the original mortgage contract.