Mortgage Loan Modification | Negotiating Your Lender

As foreclosures continue to reach all-time highs, many companies have started offering assistance programs to struggling homeowners. One that you’re probably familiar with is mortgage modification—a change in the terms of your loan that makes it more affordable. If you can no longer afford the monthly payments on your mortgage, a mortgage modification may be your best bet.

Qualifying for a mortgage modification
Every lender has its own mortgage modification standards, but the first thing you need is a valid reason. In your hardship letter—one of the primary requirements—you should explain in detail why you fell behind and justify your reasons for getting a loan modification. Maybe you lost your job, or you couldn’t afford the adjustments, or there was a death in the family. Other acceptable reasons for mortgage modification include military service, divorce or separation, and medical emergencies.

Types of mortgage modification

There are several ways a loan can be modified, and it all depends on what makes financial sense both to you and your lender. The most common mortgage modification plans involve a reduction of interest, since most defaults occur when sub-prime adjustable-rate mortgages revert to normal rates. Some lenders may also change your plan to a 30-year fixed-rate mortgage, which is a lot more stable.

The government’s new housing plan also allows principal reduction, or a reduction of the original loan amount. This is offered specifically to homeowners in bankruptcy, provided they can prove that they have sought other options (such as mortgage modification) before filing. A principal reduction is ideal if your home has dropped in value, or you owe more than your home is worth.

Mortgage modification attorneys

Getting a mortgage modification often involves negotiations with your lender’s Loss Mitigation department. But not all of them will be easy to talk to. After all, they’re dealing with borrowers in default who have already caused some losses. That’s why it’s best to work with a Mortgage Modification attorney—a professional who has connections within the company and can push your paper to the top of the pile.

The main job of a mortgage modification attorney is to do the negotiations on your behalf. They can justify your reasons for falling behind and convince the lender that you deserve a mortgage modification. Studies have repeatedly shown that people who have lawyers on their side are more likely to get good deals from their lender, even with the same circumstances. While it’s certainly possible to do it on your own, a capable attorney can make it a lot faster, safer, and easier—and they’ll let you take the time you need to get back on your feet.