The recession is hitting many Americans hard. There have been job losses, salary cut-backs, and reduced hours. All of these hardships result in tightened budgets, and sometimes making a mortgage payment becomes a challenge. It is possible to convince your lender to modify your mortgage--the government is even paying lenders to modify!--but it will take phone calls, collecting paperwork, and dealing with under-paid and under-trained lender employees. Despite the challenges, it's certainly worth attempting as the money you save can mean the difference between being able to stay where you are or having to sell.
Things You Will Need
~phone ~mortgage statement ~personal documents ~note pad and pen ~persistence and hope
Get a pad of paper and a pen ready before you call your lender. You'll want to take notes of the date, time, who you speak with, and what they tell you. Look at your most recent mortgage statement and find your lender's phone number. You can also find this number on the internet, but you'll need your mortgage statement because the person who picks up the phone on the other end won't talk to you unless you present him with your loan number. You'll also need to give all or part of your social security number and personal information such as address and phone number so that the person answering the phone can verify your identity. Once he's determined that you are who you claim, tell him that you want a loan modification. Chances are that you'll be put on hold and transferred to the Loss Mitigation Department.
When someone in the Loss Mitigation Department picks up, you'll probably have to repeat your personal information so that she can verify that you are who you claim. Once she's satisfied, tell her that you need to modify your loan. If she starts discussing other possibilities such as a forbearance agreement, insist that you need a loan modification. She will tell you to gather several documents: a hardship letter, a budget sheet, pay stubs, bank statements, and taxes. She should then give you a number to fax all these documents to. End the call and put your notes somewhere you'll remember. You'll want to continue on the same note pad the next time you call. Gather all of the documents, write your loan number on all of them, number them so that no pages can be lost (2 of 11), and make a fax cover sheet. Then fax the packet in to the number the Loss Mitigation Department provided.
Wait a couple of days to give your lender time to receive the packet and upload it to your file, then call in to verify that they received the packet. If they didn't receive it--or if they only received part of it--ask them which number you should fax it to, and re-fax it. You might have to play this game several times. Once the packet has been received, you can start calling in regularly to check on the progress of your loan modification. Different lenders have different strategies--some lenders just have whoever receives the call deal with the file; others assign one person in particular to deal with a particular file. You may be requested to submit more documents or updated documents; comply as best as you are able.
Eventually, your lender should get back to you with new terms. There are three aspects of a loan a lender can modify: the interest rate, the term (number of years), and the amount. Most often your lender will leave the amount that you owe alone and only change the interest rate and/or term. The Making Home Affordable program specifies that mortgage payments can be no more than 31% of the borrower's take-home pay; if your lender is working within the confines of that program they might lower your interest rate from 6.275% to 5% and change the term from 30 years to 35. It's your responsibility to make sure you can afford to pay the amount of the modified mortgage or notify your lender that the new terms won't work. You'll then have to make a specified number of payments at the new number, and sign whatever paperwork they request of you. If you make the payments on time and abide by any other requests, your mortgage will be permanently modified!
It can be a lengthy and frustrating process, but the money you save every month will be worth it.
Tips & Warnings
You can have your mortgage modified by someone else, but be wary of companies that ask for an upfront fee. Lenders lie: do your due diligence. For example, you don't have to be behind in payments in order for your loan to be modified. If your lender tells you that you do, keep trying. It may take hanging up and calling so that you get someone more helpful. Know your rights, and you won't be taken advantage of.