March 2009

Applying For A Mortgage Loan Modification

Many people are now facing a lot of trouble with their mortgage payments simply because of the type of loan that they signed for. Those with adjustable rate mortgages have watched their payments go up a good bit and sometimes their payments can be double the amount that they used to be. With so many people living paycheck-to-paycheck, especially in this rough economy, there is no room for increased mortgage payments. Other times people are finding that they are falling behind on their mortgage payments due to other hardships such as a temporary loss of work or an illness.

There are options though and the main one, the most beneficial one, is that of the mortgage loan modification. Many mortgage companies have a hardship department or a customer retention department that is able to assist customers in finding the right program or help that they need. Most of the time, it is found that the loan modification is the best route to take. It is simple and pain free and unlike a refinance, there are no extra fees or charges to pay upfront.  The problem for the past due payments will be looked at closely though.

If your past due payments are simply because of the increased mortgage payment because you had an adjustable rate mortgage you may have no problems getting the help you need. You will though have to prove that your income and other expenses support the fact that you can reasonably afford the payments at the amount they used to be. If you are falling behind on the mortgage because you were out of work or were extremely ill, you are generally going to have to show proof that your hardship is now over. All of this is done through the hardship letter that is written by the person seeking out the loan modification.

The hardship letters are what the bank needs in order to justify why they are extending this help to you. They have to make sure that you have a valid reason for falling behind and that you are now able to make timely payments if you were caught up to date and given an easier to afford monthly payment. A sample hardship letter is generally sent to those customers who are applying for a loan modification so that it can be seen how it should be written. If your loan company does not provide you with that you can very well find a sample hardship letter online.

Just make sure that you are being completely honest in your hardship letter. If your hardship is not completely over then you are just going to find yourself in the same situation all over again within a matter of a few months. Many lenders have a limit on how many times a customer can get a loan modification. A lot of banks set their limit at two for the entire course of the loan. This means that you want to be careful when you use these chances so that you are only taking advantage of them when you really need it and when there is no other way out.

In your hardship letter, you are going to want to state your case and make it clear that your hardship was one that was completely out of your control. Basically, the banks want to make sure that you just were not out there spending all of your paychecks at the mall when you should have been paying them. Explain how you would benefit from being brought current and given a lower interest rate. Adjusting the terms of the mortgage could save you a lot of money in the long run. While a lower interest rate means less extra money for the bank, it is a lot better then you not being able to afford making the payments at all.

Keep in mind that while the bank may not be your friend; it is not out to take your home. Mortgage companies are in the business of making money through servicing mortgages, not through owning and selling real estate. The bank does not want your house but will take it if there is no other way to receive money from you. Just make sure that you are not being too relaxed with that information though. You have to be proactive and get started working on your loan modification application as the entire process could take up to sixty days.

You will also need to be prepared to maintain at least one monthly payment during the application process. These payments will prove that you are serious about your house and that you can afford the property, given the chance that the payments are brought back up to date. While you will explain in your hardship letters that there was a solid and explainable reason why you were not able to make your mortgage payments a while back, you have to prove that you can now. You have to be convincing and willing to work with the bank. They are after all holding the future of your home in their hands. Mortgage companies are not required to give you the modification. It is a case-by-case judgment call that they are in complete control of.

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