Mortgage Loan Modifications: Five Keys to Approval
Whether you're underwater because of fallen home values or are facing foreclosure as a result of financial hardship, modifications to your mortgage rate or mortgage features can provide relief. Mortgage loan modifications can help you in times of financial distress by lowering mortgage rates and monthly payments or by converting adjustable mortgage rates to fixed rates. In short, mortgage loan modification programs offered through mortgage loan servicing companies are designed to help homeowners keep their homes while preventing foreclosure losses to lenders.
Behind Mortgage Modification: The Decision Makers
Homeowners are frequently frustrated with the time and paperwork required for mortgage loan modifications. Mortgage modification typically requires review by a minimum of two entities that can influence approval of your application to modify:
- Mortgage investor or holder. Your original mortgage lender likely sold your mortgage to a mortgage investor (most often Fannie Mae or Freddie Mac).
- Mortgage loan servicer. The mortgage investor hires a mortgage servicer (which could be the original mortgage lender, but not always) to collect payments, pay taxes and insurance, and handle customer care. Mortgage loan modification requests are handled through your loan servicer.
Modifications may require additional approval under certain circumstances. These include:
- Multiple mortgage investors. The modification approval process may depend on whether your loan was sold to a mortgage investor as an individual loan or as part of a group of? mortgage loans used to create mortgage-backed securities. Loan modification is more difficult in the latter case, where there are competing interests among lenders and greater market uncertainty.
- Mortgage insurance. If you made a down payment of less than 20% of your home's value, you have mortgage insurance, which reimburses your lender in the event of foreclosure. In the case of a mortgage modification, the mortgage insurer (MI) must approve your modification.
- Home equity loan. Your mortgage lender will require "subordination" of any home equity financing before it can complete your modification. A modification requires recording documents that jeopardizes your first mortgage's place in the sequence of liens, but your first mortgage holder will want to maintain its place as first lien holder against your home. Mortgage servicers typically ask home equity lenders to sign a subordination agreement or to release their liens. If your home equity lender doesn't cooperate, a modification of your primary mortgage cannot be completed.
Given the number of players involved, there is certainly no guarantee that asking your loan servicer for a modification means you will receive one. Even recent government efforts to encourage mortgage loan modifications have led to fewer modifications than the Obama administration had hoped for. However, though the mortgage modification process can seem daunting and slow, understanding the process and what different players have at stake can make the process less frustrating.
Karen Lawson is a freelance writer with extensive experience in mortgage banking and home loan loss mitigation programs. She holds BA and MA degrees in English from the University of Nevada, Reno.
Related links :
More help from HSH.com
10 metros where a home costs about $1,000/monthHSH.com identifies 10 metro areas where you can afford the principal, interest, taxes and insurance payments on a median-priced home for only around $1,000 per month.
HSH.com on the latest move by the Federal ReserveThe Federal Reserve concluded a meeting today with no change to the federal funds rate and no changes to other monetary policy tools.
Mortgage Rates Radar 09/13/2016: Despite Fed concern, mortgage rates holding steadyHSH.com releases its latest Weekly Mortgage Rates Radar showing a slight increase in popular mortgage rates during the seven-day period ending September 13, as concerns that the Federal Reserve may make a move at next week's meeting have to buffeted the financial markets of late. The Weekly Mortgage Rates Radar reports the average rates and points offered by lenders for the two most popular types of mortgages, the conforming 30-year fixed-rate mortgage and the conforming 5/1 adjustable-rate mortgage (ARM).
Mortgage Rates Radar 09/06/2016: Modest jobs report leaves rates flatHSH.com releases its latest Weekly Mortgage Rates Radar showing almost no change again in popular mortgage rates during the seven-day period ending September 6, as a fair employment report for August failed to provide conclusive evidence that a move by the Federal Reserve is forthcoming. The Weekly Mortgage Rates Radar reports the average rates and points offered by lenders for the two most popular types of mortgages, the conforming 30-year fixed-rate mortgage and the conforming 5/1 adjustable-rate mortgage (ARM).
Mortgage Rates Radar 08/30/2016: Mortgage rates firm up a littleHSH.com releases its latest Weekly Mortgage Rates Radar showing a slight firming in popular mortgage rates during the seven-day period ending August 30, as Federal Reserve Chair Janet Yellen has indicated that a rate hike could happen sooner than later. The Weekly Mortgage Rates Radar reports the average rates and points offered by lenders for the two most popular types of mortgages, the conforming 30-year fixed-rate mortgage and the conforming 5/1 adjustable-rate mortgage (ARM).