Homeowners who start missing monthly mortgage payments should act quickly to avoid foreclosure. The mortgager should start by contacting the servicer and ask for a loan modification. A loan modification makes changes to the terms and conditions of a mortgage so that homeowners can afford to make payments.
For those whose monthly mortgage payments have become too expensive, the federal government’s Home Affordable Modification Program (HAMP) has long been an excellent means of altering the terms of a loan to achieve more affordable payments. However, with the expiration of HAMP looming, many are considering the benefits of applying for a modification with their bank in-house. An experienced Miami foreclosure defense attorney can advise debtors on the process for securing this kind of mortgage alteration.
Applying For Modifications
The process of applying for modifications on mortgage loans applies to both in-house and HAMP modifications. Follow these steps:
- Contact loan servicer
- Complete a request for mortgage assistance (RMA)
- Include documentation regarding income, expenses, assets, debts, and a hardship letter
The Benefits of In-House Modification
Due to the strict guidelines of HAMP, many homeowners will not be able to qualify for a federal modification. In such cases, the debtor can turn to his/her bank. Many lenders have in-house programs through which loan adjustments are offered. In-house options differ from modifications from HAMP in many ways, some of which make them a more favorable option.
- Flexibility: Since in-house modifications are decided entirely by the bank, they usually provide more flexibility than federal modifications. These can be applied to mortgages of not only primary residences, but also second and vacation homes. There is no dollar limit for alterations to a mortgage completed in-house; they can be applied to loans with balances over $729,750. Homeowners with payments that add up to less than 31 percent of their income can still qualify.
- Quicker: A HAMP modification starts with a three-month trial period, and only if the homeowner makes all the payments the change becomes permanent. In-house modifications do not require a three-month trial period. Thus, it is up to the bank when to approve an application and make the amendment permanent.
- Fixed Interest Rate: In-house loan adjustments usually come with fixed interest rates for the term of the mortgage. HAMP modifications start with a reduced interest rate which increases over five years. Therefore, in-house options can offer significant savings especially if the loan is extended.
Getting a loan modification can be a saving grace for homeowners struggling to make monthly payments. However, many who apply for a change to a loan get denied. Working with an experienced Miami foreclosure defense attorney decreases the chances of you getting denied.