Mortgage Modification—And Why You Should Care

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Two years ago, in an effort to save homeowners from foreclosure, the Obama Administration came up with the Making Home Affordable program. The idea was to offer homeowners who were struggling with their mortgages a chance to modify them (in other words, to get better loan terms) so that they wouldn’t slip into foreclosure.

The program, which had been meant to help millions, did not. It did, however, help hundreds of thousands, and many of them have seen their mortgage payments cut by 25%, 30%, even 40%.

Real estate data provider LPS Applied Analytics notes that 23%—nearly a quarter—of loans that were more than 90 days delinquent a year ago are actually on-time today.

What You Need to Know to Get a Good Mortgage Modification

1. The Home Must Be Your Primary Residence

So, if you’re lucky enough to have a vacation cabin, you can’t modify the mortgage on it.

2. Job Loss or Medical Problems Are Strong Reasons for a Modification

The bank is looking to see if you are financially responsible, and just had a change in circumstances. If you show a pattern of spending beyond your means—stop now!—realize it will be tougher to get a modification.

3. Your Bank Might Consider Household Income When Deciding

They want to make sure you can pay the mortgage under the new terms, so they might look at your income plus your partner’s income.

4. Do Your Paperwork … and Photocopy It

The bank might want to see pay stubs, tax returns and bank statements. Many people who have applied for modifications have complained that their files get lost, so keep a copy of everything that you hand in.

5. Make Your Trial Payments

Mortgage writer Gina Pogol notes that one-quarter of homeowners don’t make timely payments in their initial, three-month trial periods. But you want the bank to trust you, so pay on time if you’re trying for a permanent modification.

  • http://twitter.com/AceCash Ace Cash Express

    This is a great topic that most people are completely unaware of.  Having worked in  mortgage banking for many years, I am aware that most people do not do their homework regarding loan agreements or modifications. Bottom line: Banks do not want to own your home so it would be very wise to start the modification process with all your documentation and as the article says, show your financial responsibility to make an earnest request.

  • http://twitter.com/AceCash Ace Cash Express

    This is a great topic that most people are completely unaware of.  Having worked in  mortgage banking for many years, I am aware that most people do not do their homework regarding loan agreements or modifications. Bottom line: Banks do not want to own your home so it would be very wise to start the modification process with all your documentation and as the article says, show your financial responsibility to make an earnest request.

  • Tina

    I spoke with many people who tried to complete loan mods. It’s disgusting that the banks won’t consider them until they stop making payments for months. Many friends have been perfect candidates for these and the banks are completely ignoring their applications. They try to make payments as much as possible and nothing is done until they stop for several months. The bank then proceeds to call them and say that they are a great candidate for a loan mod and that they should apply. When they tell them they have several times and never receive a reply they never get a straight answer as to why their application was never reviewed. So be very careful when you do this if you are planning to do so. 

    As the article states several millions should have been helped yet only hundreds of thousands actually where. I know not all banks are being shady but many of them are so be aware. 

  • Tina

    I spoke with many people who tried to complete loan mods. It’s disgusting that the banks won’t consider them until they stop making payments for months. Many friends have been perfect candidates for these and the banks are completely ignoring their applications. They try to make payments as much as possible and nothing is done until they stop for several months. The bank then proceeds to call them and say that they are a great candidate for a loan mod and that they should apply. When they tell them they have several times and never receive a reply they never get a straight answer as to why their application was never reviewed. So be very careful when you do this if you are planning to do so. 

    As the article states several millions should have been helped yet only hundreds of thousands actually where. I know not all banks are being shady but many of them are so be aware. 

  • frustrated

    We tried a loan mod.  My husband lost his job and then was declared disabled.  Our income dropped by a lot!  However, we made enough…because we had been cautious when we initially bought our house and purchased what we thought we could afford…that our home payment did not exceed the 16% of my gross which is required by the government for a load modification.  Never mind that I carry all of our insurance (we have four children – two sons in college).  Never mind that our diet has gone to pot because we can only afford noodles and such and forget a restaurant meal.  We have learned to live very simply because although Chase thinks we can afford our mortgage, we really can’t.  

  • frustrated

    We tried a loan mod.  My husband lost his job and then was declared disabled.  Our income dropped by a lot!  However, we made enough…because we had been cautious when we initially bought our house and purchased what we thought we could afford…that our home payment did not exceed the 16% of my gross which is required by the government for a load modification.  Never mind that I carry all of our insurance (we have four children – two sons in college).  Never mind that our diet has gone to pot because we can only afford noodles and such and forget a restaurant meal.  We have learned to live very simply because although Chase thinks we can afford our mortgage, we really can’t.  

  • http://www.facebook.com/people/Uma-Thorpe/100002563502793 Uma Thorpe

    I’ve gone through the whole process. It was very exhausting and emotionally draining. I was able to get things back on track.

    I would recommend working with a professional who can walk you through the process. That could either be a lawyer or mortgage expert, or a some other sort of personal advocate.

    I would recommend these guys. 1-888-301-9544, but there are others too.

    Because the process is so emotional having somebody who can thing clearly
    and not get caught up in the situation is a big help. Also, working with somebody who knows and understand the whole process makes everything much easier.

  • Antie85

    I too have gone through this process.  It took several years for a complete and full modification.  The banks will have you believe that they are working to help you maintain your home.  This is a complete fabrication.  I went through months and months or being lied to about missing paperwork, paperwork not being signed correctly, all the while, never speaking to the same person twice, etc.  I finally decided to hire a lawyer who, also went through hell trying to get the bank to finalize the modification. So don’t be fooled into thinking that this new modification plan is something great.  It boils down to who is really willing to go through the blood, sweat, and tears to get a modification.  Good luck to those of you who are willing to try.

  • Antie85

    I too have gone through this process.  It took several years for a complete and full modification.  The banks will have you believe that they are working to help you maintain your home.  This is a complete fabrication.  I went through months and months or being lied to about missing paperwork, paperwork not being signed correctly, all the while, never speaking to the same person twice, etc.  I finally decided to hire a lawyer who, also went through hell trying to get the bank to finalize the modification. So don’t be fooled into thinking that this new modification plan is something great.  It boils down to who is really willing to go through the blood, sweat, and tears to get a modification.  Good luck to those of you who are willing to try.

  • Antie85

    I too have gone through this process.  It took several years for a complete and full modification.  The banks will have you believe that they are working to help you maintain your home.  This is a complete fabrication.  I went through months and months or being lied to about missing paperwork, paperwork not being signed correctly, all the while, never speaking to the same person twice, etc.  I finally decided to hire a lawyer who, also went through hell trying to get the bank to finalize the modification. So don’t be fooled into thinking that this new modification plan is something great.  It boils down to who is really willing to go through the blood, sweat, and tears to get a modification.  Good luck to those of you who are willing to try.

  • sadie

    Trying to modify our mortgage through this plan ruined our lives.  My husband lost his job due to the bad economy.  They fail to tell you that while making the modified trial payments the savings is being seen as in default. Your credit score bottoms out the minute that you sign the paper work.  Although we fit all of the criteria, had good prior credit and had never previously been late on payments, we were denied after many trial payments.  Days later we received a hefty bill for the entire difference between the trial payments and our regular payments along with a foreclosure date if the money was not paid on time.  We had to borrow money to hire a lawyer.  It is very scary.      

  • sadie

    Trying to modify our mortgage through this plan ruined our lives.  My husband lost his job due to the bad economy.  They fail to tell you that while making the modified trial payments the savings is being seen as in default. Your credit score bottoms out the minute that you sign the paper work.  Although we fit all of the criteria, had good prior credit and had never previously been late on payments, we were denied after many trial payments.  Days later we received a hefty bill for the entire difference between the trial payments and our regular payments along with a foreclosure date if the money was not paid on time.  We had to borrow money to hire a lawyer.  It is very scary.      

  • sadie

    Trying to modify our mortgage through this plan ruined our lives.  My husband lost his job due to the bad economy.  They fail to tell you that while making the modified trial payments the savings is being seen as in default. Your credit score bottoms out the minute that you sign the paper work.  Although we fit all of the criteria, had good prior credit and had never previously been late on payments, we were denied after many trial payments.  Days later we received a hefty bill for the entire difference between the trial payments and our regular payments along with a foreclosure date if the money was not paid on time.  We had to borrow money to hire a lawyer.  It is very scary.      

  • sadie

    Trying to modify our mortgage through this plan ruined our lives.  My husband lost his job due to the bad economy.  They fail to tell you that while making the modified trial payments the savings is being seen as in default. Your credit score bottoms out the minute that you sign the paper work.  Although we fit all of the criteria, had good prior credit and had never previously been late on payments, we were denied after many trial payments.  Days later we received a hefty bill for the entire difference between the trial payments and our regular payments along with a foreclosure date if the money was not paid on time.  We had to borrow money to hire a lawyer.  It is very scary.      

  • sadie

    Trying to modify our mortgage through this plan ruined our lives.  My husband lost his job due to the bad economy.  They fail to tell you that while making the modified trial payments the savings is being seen as in default. Your credit score bottoms out the minute that you sign the paper work.  Although we fit all of the criteria, had good prior credit and had never previously been late on payments, we were denied after many trial payments.  Days later we received a hefty bill for the entire difference between the trial payments and our regular payments along with a foreclosure date if the money was not paid on time.  We had to borrow money to hire a lawyer.  It is very scary.      

  • sadie

    Trying to modify our mortgage through this plan ruined our lives.  My husband lost his job due to the bad economy.  They fail to tell you that while making the modified trial payments the savings is being seen as in default. Your credit score bottoms out the minute that you sign the paper work.  Although we fit all of the criteria, had good prior credit and had never previously been late on payments, we were denied after many trial payments.  Days later we received a hefty bill for the entire difference between the trial payments and our regular payments along with a foreclosure date if the money was not paid on time.  We had to borrow money to hire a lawyer.  It is very scary.      

  • sadie

    Trying to modify our mortgage through this plan ruined our lives.  My husband lost his job due to the bad economy.  They fail to tell you that while making the modified trial payments the savings is being seen as in default. Your credit score bottoms out the minute that you sign the paper work.  Although we fit all of the criteria, had good prior credit and had never previously been late on payments, we were denied after many trial payments.  Days later we received a hefty bill for the entire difference between the trial payments and our regular payments along with a foreclosure date if the money was not paid on time.  We had to borrow money to hire a lawyer.  It is very scary.      

  • sadie

    Trying to modify our mortgage through this plan ruined our lives.  My husband lost his job due to the bad economy.  They fail to tell you that while making the modified trial payments the savings is being seen as in default. Your credit score bottoms out the minute that you sign the paper work.  Although we fit all of the criteria, had good prior credit and had never previously been late on payments, we were denied after many trial payments.  Days later we received a hefty bill for the entire difference between the trial payments and our regular payments along with a foreclosure date if the money was not paid on time.  We had to borrow money to hire a lawyer.  It is very scary.      

  • sadie

    Trying to modify our mortgage through this plan ruined our lives.  My husband lost his job due to the bad economy.  They fail to tell you that while making the modified trial payments the savings is being seen as in default. Your credit score bottoms out the minute that you sign the paper work.  Although we fit all of the criteria, had good prior credit and had never previously been late on payments, we were denied after many trial payments.  Days later we received a hefty bill for the entire difference between the trial payments and our regular payments along with a foreclosure date if the money was not paid on time.  We had to borrow money to hire a lawyer.  It is very scary.      

  • sadie

    Trying to modify our mortgage through this plan ruined our lives.  My husband lost his job due to the bad economy.  They fail to tell you that while making the modified trial payments the savings is being seen as in default. Your credit score bottoms out the minute that you sign the paper work.  Although we fit all of the criteria, had good prior credit and had never previously been late on payments, we were denied after many trial payments.  Days later we received a hefty bill for the entire difference between the trial payments and our regular payments along with a foreclosure date if the money was not paid on time.  We had to borrow money to hire a lawyer.  It is very scary.      

  • sadie

    Trying to modify our mortgage through this plan ruined our lives.  My husband lost his job due to the bad economy.  They fail to tell you that while making the modified trial payments the savings is being seen as in default. Your credit score bottoms out the minute that you sign the paper work.  Although we fit all of the criteria, had good prior credit and had never previously been late on payments, we were denied after many trial payments.  Days later we received a hefty bill for the entire difference between the trial payments and our regular payments along with a foreclosure date if the money was not paid on time.  We had to borrow money to hire a lawyer.  It is very scary.      

  • sadie

    Trying to modify our mortgage through this plan ruined our lives.  My husband lost his job due to the bad economy.  They fail to tell you that while making the modified trial payments the savings is being seen as in default. Your credit score bottoms out the minute that you sign the paper work.  Although we fit all of the criteria, had good prior credit and had never previously been late on payments, we were denied after many trial payments.  Days later we received a hefty bill for the entire difference between the trial payments and our regular payments along with a foreclosure date if the money was not paid on time.  We had to borrow money to hire a lawyer.  It is very scary.      

  • sadie

    Trying to modify our mortgage through this plan ruined our lives.  My husband lost his job due to the bad economy.  They fail to tell you that while making the modified trial payments the savings is being seen as in default. Your credit score bottoms out the minute that you sign the paper work.  Although we fit all of the criteria, had good prior credit and had never previously been late on payments, we were denied after many trial payments.  Days later we received a hefty bill for the entire difference between the trial payments and our regular payments along with a foreclosure date if the money was not paid on time.  We had to borrow money to hire a lawyer.  It is very scary.      

  • sadie

    Trying to modify our mortgage through this plan ruined our lives.  My husband lost his job due to the bad economy.  They fail to tell you that while making the modified trial payments the savings is being seen as in default. Your credit score bottoms out the minute that you sign the paper work.  Although we fit all of the criteria, had good prior credit and had never previously been late on payments, we were denied after many trial payments.  Days later we received a hefty bill for the entire difference between the trial payments and our regular payments along with a foreclosure date if the money was not paid on time.  We had to borrow money to hire a lawyer.  It is very scary.      

  • sadie

    Trying to modify our mortgage through this plan ruined our lives.  My husband lost his job due to the bad economy.  They fail to tell you that while making the modified trial payments the savings is being seen as in default. Your credit score bottoms out the minute that you sign the paper work.  Although we fit all of the criteria, had good prior credit and had never previously been late on payments, we were denied after many trial payments.  Days later we received a hefty bill for the entire difference between the trial payments and our regular payments along with a foreclosure date if the money was not paid on time.  We had to borrow money to hire a lawyer.  It is very scary.      

  • sadie

    Trying to modify our mortgage through this plan ruined our lives.  My husband lost his job due to the bad economy.  They fail to tell you that while making the modified trial payments the savings is being seen as in default. Your credit score bottoms out the minute that you sign the paper work.  Although we fit all of the criteria, had good prior credit and had never previously been late on payments, we were denied after many trial payments.  Days later we received a hefty bill for the entire difference between the trial payments and our regular payments along with a foreclosure date if the money was not paid on time.  We had to borrow money to hire a lawyer.  It is very scary.      

  • sadie

    Trying to modify our mortgage through this plan ruined our lives.  My husband lost his job due to the bad economy.  They fail to tell you that while making the modified trial payments the savings is being seen as in default. Your credit score bottoms out the minute that you sign the paper work.  Although we fit all of the criteria, had good prior credit and had never previously been late on payments, we were denied after many trial payments.  Days later we received a hefty bill for the entire difference between the trial payments and our regular payments along with a foreclosure date if the money was not paid on time.  We had to borrow money to hire a lawyer.  It is very scary.      

  • sadie

    Trying to modify our mortgage through this plan ruined our lives.  My husband lost his job due to the bad economy.  They fail to tell you that while making the modified trial payments the savings is being seen as in default. Your credit score bottoms out the minute that you sign the paper work.  Although we fit all of the criteria, had good prior credit and had never previously been late on payments, we were denied after many trial payments.  Days later we received a hefty bill for the entire difference between the trial payments and our regular payments along with a foreclosure date if the money was not paid on time.  We had to borrow money to hire a lawyer.  It is very scary.      

  • sadie

    Trying to modify our mortgage through this plan ruined our lives.  My husband lost his job due to the bad economy.  They fail to tell you that while making the modified trial payments the savings is being seen as in default. Your credit score bottoms out the minute that you sign the paper work.  Although we fit all of the criteria, had good prior credit and had never previously been late on payments, we were denied after many trial payments.  Days later we received a hefty bill for the entire difference between the trial payments and our regular payments along with a foreclosure date if the money was not paid on time.  We had to borrow money to hire a lawyer.  It is very scary.      

  • sadie

    Trying to modify our mortgage through this plan ruined our lives.  My husband lost his job due to the bad economy.  They fail to tell you that while making the modified trial payments the savings is being seen as in default. Your credit score bottoms out the minute that you sign the paper work.  Although we fit all of the criteria, had good prior credit and had never previously been late on payments, we were denied after many trial payments.  Days later we received a hefty bill for the entire difference between the trial payments and our regular payments along with a foreclosure date if the money was not paid on time.  We had to borrow money to hire a lawyer.  It is very scary.      

  • sadie

    Trying to modify our mortgage through this plan ruined our lives.  My husband lost his job due to the bad economy.  They fail to tell you that while making the modified trial payments the savings is being seen as in default. Your credit score bottoms out the minute that you sign the paper work.  Although we fit all of the criteria, had good prior credit and had never previously been late on payments, we were denied after many trial payments.  Days later we received a hefty bill for the entire difference between the trial payments and our regular payments along with a foreclosure date if the money was not paid on time.  We had to borrow money to hire a lawyer.  It is very scary.      

  • sadie

    Trying to modify our mortgage through this plan ruined our lives.  My husband lost his job due to the bad economy.  They fail to tell you that while making the modified trial payments the savings is being seen as in default. Your credit score bottoms out the minute that you sign the paper work.  Although we fit all of the criteria, had good prior credit and had never previously been late on payments, we were denied after many trial payments.  Days later we received a hefty bill for the entire difference between the trial payments and our regular payments along with a foreclosure date if the money was not paid on time.  We had to borrow money to hire a lawyer.  It is very scary.      

  • sadie

    Trying to modify our mortgage through this plan ruined our lives.  My husband lost his job due to the bad economy.  They fail to tell you that while making the modified trial payments the savings is being seen as in default. Your credit score bottoms out the minute that you sign the paper work.  Although we fit all of the criteria, had good prior credit and had never previously been late on payments, we were denied after many trial payments.  Days later we received a hefty bill for the entire difference between the trial payments and our regular payments along with a foreclosure date if the money was not paid on time.  We had to borrow money to hire a lawyer.  It is very scary.      

  • sadie

    Trying to modify our mortgage through this plan ruined our lives.  My husband lost his job due to the bad economy.  They fail to tell you that while making the modified trial payments the savings is being seen as in default. Your credit score bottoms out the minute that you sign the paper work.  Although we fit all of the criteria, had good prior credit and had never previously been late on payments, we were denied after many trial payments.  Days later we received a hefty bill for the entire difference between the trial payments and our regular payments along with a foreclosure date if the money was not paid on time.  We had to borrow money to hire a lawyer.  It is very scary.