What is Loan Modification?
Why would a Bank Offer Loan Modification?
If you stop making payments, the bank has several options.
- Attempt to repossess property (a home foreclosure)
- Attempt to collect, or hire somebody to do so
- Give up hope and accept the loss
- Watch you declare bankruptcy and receive little or nothing
None of these options are attractive to you or the bank. Your credit will suffer, and there’s a financial cost to the bank.
So because of this banks offer loan modifications so that they don’t have to do any of the above. Loan modification can be less expensive and more profitable for banks, but not in every case.
The question now is how do you get a Loan Modification?
To get a loan modification you generally have to ask. Call the bank and let them know about your financial situation. Just be honest and explain whether or not you’ll be able to make your payments. If they agree, you may qualify for a loan modification.
Banks have different criteria, so there is no way to know ahead of time if you’ll qualify for loan modification – you just have to ask.
Banks can change the terms of your loan to make the payments more affordable. These changes may be permanent or temporary. In any case, the result is a more manageable payment.
To make the process smoother, be prepared, and or have an attorney representing you when you request a mortgage modification. The bank will want evidence that you cannot make payments. Gather the following items:
- Monthly income, and detail of where it comes from
- Monthly expenses, broken down by category (mortgage, food, transportation, etc)
- Paystubs
- Bank statements
- Loan statements and agreements
How Long Does it Take?
You should expect to spend several hours of your time requesting a mortgage modification. You’ll wait on hold when you call, you’ll have to present your case, and you’ll have to hunt down documents and forward them to the bank. This is no small task.
After you request a mortgage modification, you should expect to wait several weeks before the bank actually does anything. During that time, do what the bank tells you – for example, they might say that you have to continue making payments to qualify for the mortgage modification.
Should I hire an attorney to help me?
Depending who you ask the answer might very well vary. Example, plenty of businesses want to help you request a mortgage modification. The price you pay for their services can be steep – often as much as a monthly mortgage payment.
Remember you don’t need anybody to help you request a mortgage modification (your bank makes a decision based on your financial situation, not who is asking). However, a qualified attorney might be able to present a better case.
Whether using an attorney or doing it yourself you’ll have to provide the same information to the helper as you will to the bank. If you want to pay an attorney for their time and guidance, that’s fine – just be aware that you don’t have to.
