Frequently Asked Questions

Loan modification, can be at times, a confusing and complex process. At GoProLoanModifcation.com we’ve compiled the answers to some frequently asked questions.

What is a loan modification?

A loan modification is when the lender agrees to change the term of the existing mortgage note. Changes may be on the rate, the loan amount, the length of the loan or all of the above. Terms are usually changed based on the borrowers ability to make the agreed upon new terms. If a borrower has no chance to make reasonable payments, the lender will opt to foreclose or may offer other options such as deed in lieu of foreclosure or consider a short sale.

Can anyone qualify for a loan modification?

Generally any one can qualify for a loan modification but lenders usually require a borrower to be late on the mortgage payments and be in a financial hardship position. Medical issues, job interruption or income reduction seem to be the best factors in getting approved for a loan modification. Simply wanting a lower rate because an adjustable rate loan coming due is not a valid reason to be approved for a loan modification. You must have a reason for a lender to re-do the note.

What is in this manual and how much is it?

This manual teaches anyone the information and skills needed to negotiate with the loss mitigation department of all the major lenders. We take you through exactly what this process entails and what you’ll need to get the results your looking for. The cost of the manual is $000.00 Click here to get it.

Do lenders charge to modify loans?

There is no charge to modify a mortgage note. In most cases the lender actually pays property taxes current and some will help with HOA dues. Most lenders ad any payments in arrears to the balance of the note and calculate the new balance with a new lower interest rate. 3rd party companies offer negotiating services and charge fees from $900.00 to as high as $4000.00. We advise every borrower to obtain at least 3 referrals as many companies simply take a deposit and never work on behalf of the client.

Do I have to be approved for a loan modification?

You have to be approved for a loan modification. Generally lenders will require financial information and a hardship letter in order to be considered for a loan modification. The lender assesses the financial information and hardship and takes into account the value of the property. After review, the lender will make a decision to approve or deny the modification.

How long does a loan modification take?

Loan Modification times vary greatly from one lender to the next. Large financial institutions such as countrywide can take up to 3 months to approve a loan mod. This is due to the number of people requesting loan modification and the limited number of personnel to support the current volume. Speed times seem to be increasing due to lenders staffing up. Currently approvals can come as fast as a week with some lenders.

Can I modify my loan if I’m not late on my mortgage?

Some Lenders are allowing modification of mortgage loans if the borrower is not late but only if the borrower has a very good reason. Eminent job loss or a medical issue in the future may be reasons for lenders to consider modifying a note. An adjustable coming due usually does not qualify. A future hardship must be proved in most cases. If an ARM loan is coming due at a substantially higher rate, a lender may simply keep the mortgage rate at the pre adjustment rate for an additional number of months in some cases.

Should I modify my loan even if I owe more than my home is worth?

In most cases the answer is yes. Home values historically rise and eventually home values catch up from losses due to declining markets. Simply put, it is unethical to walk from a home simply because the value has dropped. Business cycles happen and time cures all equity woe's in a housing bubble.

What documentation is required to modify my mortgage?

Typically, most lenders require several items in order to evaluate a request for a loan modification. Hardship letter, financial worksheet, 2 years tax returns, 2-3 months bank statements, asset information and recent pay stubs are the most commonly requested items.

If my property is foreclosing can I still modify my loan?

Yes, some lenders will grant homeowners time to request a loan modification and pull the home out of foreclosure. Not responding to notices and making zero effort to help save the home is what causes lenders to foreclose. Lenders do not want your home.

What rate will I receive after modification?

The rate borrowers receive vary from lender to lender but are mostly established from the financial information obtained. Lenders will determine rate based on what amount is realistic to pay monthly after all other expenses.

Can I reduce the loan balance in addition to lowering my rate?

In some cases the lender is adjusting the rate as well as the loan amount. This however is not typical but can happen if there is s second mortgage and the financials are such that a reduction in the 2nd loan amount is necessary to help the borrower qualify.

How long will the new loan term be if I modify?

The new loan term we are currently seeing is 5 years with an adjustment at that time for the remaining 25 years. Final rate should also be considered in negotiations.

What happens if I modify and then miss payments?

Once a borrower successfully negotiates a loan modification, the loan is completely brought current. If the borrower defaults on the new revised loan then the lender will have to start default and foreclosure proceedings applicable to the laws in the state the home resides.

What happens to the past due balance when I modify?

The past due balance or balance in arrears can be wiped out by the lender but most of the time it is added to the balance of the note and the new rate is calculated at the new balance. Some lenders require a percentage of the amount in arrears to be paid in order to start negotiations for loan modification. This seems to be going away due to the number of people in default at this time.

How does a loan modification affect my credit?

A loan modification does affect credit but only if the borrower has been late. The loan is brought current and is shown as such on the credit report. The new loan amount and payment will be reflected on all 3 bureaus and the loan will show paid as agreed. Successful on-time payments will cause the credit score to rise over time.

If I modify can I still sell my home if I choose?

A home with a loan that has been modified can be sold with no restrictions as long as the proceeds satisfy the new balance of the note and all expenses necessary to close. If the sale price is lower than the amount owed than the borrower must get approval from the lender to accept less than what is owed. This is called a Short Sale.

Why would a lender favor a loan modification as opposed to a short sale?

Asking buyers to wait 30-90 days to get bank approval is a deal-killer - they don’t want to wait, or if they do wait for a while, it’s inevitable that they’ll either see better deals and/or get talked out of buying altogether.

The buyers, and buyers’ agents, are already sick of short sales. The listing agents leave them in the MLS as active listings after the seller has signed a deal, so you don’t know if they’re available for sale, or not. If it is for sale, the buyers don’t know what price will work - did the listing agent put an artificially-low list price on it to generate more action, and can he close the deal at that price? Can I offer less?

The buyers’ agents don’t want to show them either - they want a clean chance at getting paid, and spending time trying to hold together a short sale is nerve-racking. The agents know the deal could fall apart any minute by problems on either side, and then to face the threat of having their commission cut by the bank at the end, is unattractive.

Can a mortgagee qualify an asset for the Loan Modification option when the mortgagor is unemployed, the spouse is employed, but the spouse name is not on the mortgage?

Based upon this scenario, the mortgagee should conduct a financial review of the household income and expenses to determine if surplus income is sufficient to meet the new modified mortgage payment, but insufficient to pay back the arrearage. Once this process has been completed the mortgagee should then consult with their legal counsel to determine if the asset is eligible for a Loan Modification since the spouse is not on the original mortgage.

Are there any pre-pay penalties on the new loan?

Generally there are no pre-pay penalties for modified loans. In most cases the lender has reduced the note to an unprofitable, unsellable level and would like to have that debt satisfied as soon as possible.

Do all lenders have the same modification rules?

All lenders have their own rules for loan modification and because of the current mortgage crisis, lenders are adopting new rules monthly. Lenders are also adding staff to support the increase in mortgage defaults. There are no set rules and lenders are scrambling to help borrowers in a timely manner.

What happens if my request for modification is denied?

If a borrowers request for modification is denied the first thing to do is find out why. Was there incomplete information, was the negotiator overwhelmed or was there miscommunication. Information is key at this point. If there was missing information call and try to resubmit, if denied again, consider deed in lieu of foreclosure or list the property and short sell if the balance is higher than the homes value.

What if I have a first and a second mortgage?

If you have 2 liens on a property you can request a loan modification on both. Often the second lien holder is willing to lower the rate and loan balance to keep a borrower in the home if necessary. The second lien holder is in a bad position at this point and should be motivated to protect their interest. It’s all in the negotiation!

Will the lender pay back taxes and HOA dues with a modification?

Most of the time lenders bring property taxes current in a loan modification. The IRS has the right to sell the property for back taxes owed causing all lien holders to lose their entire interest in the property. HOA dues are another issue and should be part of the negotiations but are not always brought current by the lender.

Is the interest I pay once modified still a tax deduction?

Yes, the note is simply modified and based on the current tax codes interest up to a certain amount is deductable from federal income tax. We advise meeting with your tax professional to verify the deduction and if you qualify.

What happens after the loan modification term is up?

The terms on every loan modification are different but typically the loan resets after the specified term, usually 3-5 years and the balance is amortized over the remaining life of the loan at a specified interest rate. Reset rate and terms need to be considered when negotiating a loan modification.

Can I use 3rd party to negotiate my loan modification?

Some borrowers choose for several reasons to hire a 3rd party to handle their loan modification. Reasons may include time constraints, embarrassment, hate to negotiate and others. There are great companies who will take your information and use their experience and truly provide successful negotiation services. On the other hand there are several unscrupulous companies who will take your money and make no effort to negotiate. Ask for several referrals and question high up front costs.

Is it better to use a professional loan negotiator to modify my loan?

In many cases it is beneficial to use a professional negotiation company to handle loan modifications. Good companies are negotiating several loans at a time and know what lenders need in order to make an informed decision. Good negotiators often know the decision makers and save time by going directly to the person who can approve the loan modification. We offer loan negotiation and have full a processing department dedicated to helping borrowers. Please call us at 888-377-3114