Common Rate Modification Inquiries

If you are like many American homeowners, you may be pursuing a loan modification. Whether you need a home loan modification because your ARM adjusted, the hours at your work have cut back, or you have received a pay cut, you need to know the answers to some common questions to make sure you will even qualify for a modification. Even more important, you need the answers to these questions long before you make the initial contact with your lender, or even a loan modification company. Though there are many more questions than are addressed here, this will help answer some of the most common questions regarding loan modification success, or failure.

I’ve recently lost my job – Do I need a job for a successful loan modification?

Yes, you will need a job for loan modification success. The reason for this is because your lender will look to see if you can afford a new mortgage under any terms. If you became unemployed and attempt a home loan modification, your lender will turn you down because you simply won’t be able to afford the new mortgage under any terms. The best advice for this situation is to quickly apply for and get a new job as soon as possible.

I want to modify my investment property or 2nd home – Is this possible?

Yes, it is possible to perform a loan modification on a 2nd home or an Investment property. The question that that you need to ask yourself (and the question that the lender will be answering with research) is “where does the financial hardship originate”? If your financial hardship is caused by an excess of mortgage obligation that is not covered by renters, or from another property, then the odds of modification success are slim. Each of these modifications should be reviewed carefully and will be taken on a case by case by the lender, or one of the law firm backed .

Do I need to be late on my home loan?

This is an interesting question. Currently, some lenders are allowing for a modification before any late payments are made, whereas a majority of lenders are not. Though Fannie Mae and Freddie Mac are both implementing policies to hedge default by allowing for modifications pre-late payment, these policies are yet to become the ‘norm’. That said, if you are current on your mortgage payment, but want to pursue a modification, you will need to make a strong case that you are facing imminent default. A hard hitting hardship letter supported by underlying financials will help make the case for a loan modification before you find yourself falling behind on your mortgage.

I am self employed – How do I document my income?

This is a great question. Your lender will want to see a Profit and Loss statement from your most recent Quarter of business activity. Make sure that your Profit and Loss statement matches the financials indicated in your personal and business bank statements. You can calculate your monthly income by taking the average of the income over this period of time. Your lender will want to see this most recent PL because it will help provide a currentfinancial picture of your household income.

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