A mortgage modification is totally different from a loan refinance. When refinancing a loan, you transition from your original loan to a new mortgage (loan), generally with a lower interest rate and lower monthly payments. With a loan modification, your lender adjusts the terms of your current loan to give you a more manageable monthly payment. The Home Affordable Modification Program (HAMP) is the primary tool used by banks and mortgager to accomplish a loan modification.
Eligibility Criteria For Loan Modification
Before asking your lender for a loan modification you need to see if your meet the minimum eligibility criteria. You must own and occupy a one- to four-unit property to be eligible for the Home Affordable Modification Program. The unpaid principal balance on the property cannot exceed $729,750 for a one-unit dwelling, $934,200 for a two-unit property, $1,129,250 for three units and $1,403,400 for a four-unit building. Lastly, you must have taken out the first mortgage on or before Jan. 1, 2009.
Inability to Pay Current Monthly Mortgage Payment
Also, according to the Making Homes Affordable website, in order to qualify for HAMP, your monthly mortgage payment, including interest, taxes and insurance, must exceed 31 percent of your monthly pretax income. You must provide you mortgager with documents showing financial hardship, such as unemployment, that prevents you from making your monthly payment. Under the HAMP program your mortgager will be required to verify your income and expenses before approving you for a modification.
You can be current or past due on your current mortgage when applying for a HAMP modification.
If you meet the criteria then try to get your loan(s) modified, if you desire to stay in your home. But remember that loan modification is a process and you must start early. You do not want to wait a month before your house is scheduled to be auctioned to begin the loan modification process.