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Budgeting & Finance Guide

11 Things to Know Before Attempting a Home Loan Modification

home loan modification

1. Decide what you are asking for; a forbearance, a deed in lieu, an actual modification, etc. Go to the following website to see if your lender is participating in the Federal HAMP program.

If so, download an application from the website. If not, call your lender to find out if they have an in house loan modification dept.

2. Call your lender. Be ready for the person you are talking to tell you that you don’t qualify for any programs. Then apply anyway. I was asked the initial screening questions by my lender (just someone answering the phone in the loss mitigation dept) and told I would not qualify. I subsequently applied for and got the modification!

3. Be creative with the solutions you think will help your situation. Your lender is limited to what they can offer, but it doesn’t hurt to ask. For example, I asked for a lower interest rate, a principal reduction, a term extension from 30 years to 50 years, and asked them to bring my property taxes current. I got the lower rate, extended-term and they wrapped my overdue taxes into my total loan.

4. Find out who the head of the dept is, then try to get their direct ext and email. They may still farm your package to one of the underlings, but you will have someone to follow up with if you don’t get timely responses.

5. Be nice, even if they aren’t. It makes all the difference. Make them want to help you. They have many files on their desk. If you are a jerk, guess what, your file never seems to reach the top of the pile. They are frustrated too.

6. Be persistent. Treat this as a second job. You must follow up regularly. Make the calls and respond to requests for information. This is a reason that many modifications are turned down. The lender simply did not receive (or lost) the requested information from the borrower and /or the borrower won’t respond.

7. Supply requested information whenever it is requested no matter how many times you have already submitted it. Submit it in the manner they request, whether it be the fax, email, certified snail mail, whatever. I always made sure to fax in the info AND sent a set of the requested items certified mail, return receipt requested so I had a date received and a signature. This may seem over the top, but I had to submit the same set of tax returns three times because the lender said they didn’t receive it! I then followed up with a phone call to make sure the person requesting the items received them.

8. Take care to thoughtfully compose your hardship letter. It is a human being that will be reading it, and sometimes an entire committee that evaluates your situation. Make it compelling.

9. If you are turned down, consider reapplying. I was turned down twice before getting the loan modification.

10. Do not freak out if you are getting different information from various depts. Many times, the left hand does not know what the right hand is doing. You may be working on a modification with one dept, and getting threats of foreclosure from another. I did not succumb to any pressure for payments until I had an agreement in writing from my lender. If I was going to be foreclosed on, those payments would have done me no good anyway.

11. If you are not able to work out a solution for staying in the home, don’t just move out. Find out if you qualify for the many “cash for keys” programs many lenders offer. You agree to be out by an agreed-on date, leaving the property tidy and they give you cash to help with relocation and moving expenses. This can be between 3k and 5k depending on the lender and the state.