Many are going through the loan modification process right now. Be sure to check out our blog on Loan Modifications – types, description, pros & cons.
Typical Loan Modification Process
Here, we are going to discuss the loan modification process step-by-step. As with so many things in life, the process starts with filling out some forms.
- Fill out forms and collect supporting documents. Forms to apply for a loan modification are often mailed to you or you can obtain from your mortgage servicer’s website. Call your mortgage company if you would like to apply for a loan modification. You will be expected to provide supporting documentation, such as:
- Proof of income;
- Bank statements;
- A signed form to allow your mortgage company to access two years’ tax returns; and
- A letter explaining why and how you will be able to afford your mortgage going forward.
- 30-day review period. One your documents are submitted, your mortgage company has 30 days to review these documents and reach a decision. They may approve your application, deny your application, or request more information.
- Denial. If you are denied your loan modification, you may appeal if the reason for denial is incorrect. You can also accept the denial and look at other avenues to save your home. It is helpful to have a knowledgeable person, such as an attorney experienced in loan modifications, to review the denial and your basis to appeal.
- More information requested. If more information is requested, you need to provide it as quickly as possible. The original paperwork will all need to be updated if it is more than 45 days old. We recommend that if you are required to correct a form or provide more information, you also provide updated proof of income and bank statements so all the information is current when it is reviewed. Once corrected/updated paperwork is submitted, the mortgage company will have another 30 days to review the updated information.
- Trial loan modification. If you are approved, then you will receive a letter with a proposed trial loan modification payment. You will need to make this payment on time for three months. If you make these payments exactly as specified, then the mortgage servicer will offer you a permanent loan modification.
- Permanent loan modification. If you are offered a permanent loan modification, you will be sent a package of papers to sign in front of a notary and return. The paperwork will have important information for you to review, so be sure to read it closely because it will contain specific terms about your modified loan.
Many things can go wrong in this process. Mortgage companies are notoriously inefficient, difficult, and slow at processing loan modification applications. Our office can help you with this process and help you avoid foreclosure. It is important to remember once your house has been foreclosed upon (after the foreclosure sale) your options are limited to none. You can make an appointment to speak with me and ensure your home is protected.
Heather D. McGivern is an attorney at FLPC. Before joining FLPC in 2020, she spent over a dozen years representing mortgage creditors.