If you are behind on your mortgage payments because of loss of income or other adverse economic events and hardships, you may qualify for a mortgage modification through either a federal government program such as the Home Affordable Modification Program (HAMP) or through an internal mortgage modification program offered by your specific lender. However, applying for a mortgage modification can be tricky and frustrating, with many rounds of “lost” paperwork and endless time spent trying to get in touch with a human on the other end of the phone line. Wink & Wink can help you complete your modification paperwork and get it to the correct destination in order to determine if you qualify for this very powerful debt relief.

What is a mortgage modification?

Mortgage modification is a process where the terms of a mortgage are modified outside the original terms of the contract agreed to by the lender and borrower (i.e. mortgagee and mortgagor). In general, any loan can be modified, and the general process is referred to as loan modification or debt rescheduling. Mortgage modifications, however, are very difficult to get on second mortgages.

In the normal progression of a mortgage, payments of interest and principal are made until the mortgage is paid in full (or paid off). Typically, until the mortgage is paid, the lender holds a lien on the property and if the borrower sells the property before the mortgage is paid-off, the unpaid balance of the mortgage is remitted to the lender to release the lien. Generally speaking, any change to the mortgage terms is a modification, but as the term is used it refers to a change in terms based upon either the specific inability of the borrower to remain current on payments as stated in the mortgage. A loan modification will typically result in the change to the loan’s monthly payment, interest rate, term or outstanding principal.

Types of modification

Mortgages are modified to the benefit of the borrower in one or more of the following ways:

  • Reduction in interest rate, or a change from a floating to a fixed rate, or in how the floating rate is computed
  • Reduction in principal
  • Reduction in the monthly payment
  • Reduction in late fees or other penalties
  • Lengthening of the loan term
  • Capping the monthly payment to a percentage of household income
  • Mortgage forbearance program

The borrower can be current, late, in default, in bankruptcy, or in foreclosure at the time the application for modification is made. The programs available will vary accordingly.

There may be modifications made at the discretion of the lender. The lender is motivated to offer better terms to the borrower because of the expectation that the borrower might be able to afford a lower payment, and that a performing loan (i.e. one in which payments are current) will be more valuable ultimately than the proceeds obtained from a foreclosure sale.

Wink & Wink can be retained to handle all the paperwork and lender contact on your mortgage modification and will help with the following:

  • Complete the package.

    Homeowners need to submit paycheck stubs, a hardship letter, a
    budget and any other documents the loan servicer wants. If even one document is missing or outdated, the entire file will drop to the bottom of the pile.

  • Ask questions.

    Make sure you know exactly what to provide to servicers. Servicers often request two paycheck stubs on the assumption that two paychecks represent one month’s income. But a homeowner who is paid weekly, bimonthly or monthly may have to submit more or fewer paycheck documents. Similar misunderstandings about other documents can be equally problematic.

  • Stay in touch.

    Homeowners should call the servicer at least once a week and check on the status of his od her request. Ask whether the file is complete. Review the documents. Explain any special or changed circumstances. A counselor can help, but lenders also want to hear from the homeowner on a consistent basis, says Richard Korn, a foreclosure intervention and default counselor at Apprisen Financial Advocates in Columbus, Ohio.

  • Be persistent.

    Homeowners naturally feel frustrated when they’re asked to resubmit documents. But those who realize they are at the beck and call of the servicer and can hang in there long enough may be rewarded.

Once your mortgage modification is approved, you’ll have a three-month trial period. During this trial period it is imperative to make your new payments on time. After the successful conclusion of the three-month trial, your mortgage will become officially modified.