Loan Modification DIY Guide
In a day and age when mortgage lenders are struggling as badly as homeowners themselves, it's an increasingly difficult time to refinance. Instead, borrowers can look to modify a loan to save money and potentially avoid major problems like a foreclosure. Loan modification is the process of changing one or more terms on a loan, often after a delinquency, to help homeowners keep their homes with more reasonable terms.
The steps for loan modifications are very similar to refinancing:
- You must be at least 60 days behind on your mortgage payments.
- Determine a budget. In order to negotiate with a lender, you have to understand what terms you can afford. Your debt to income ratio is key to determining new terms.
- Know the monthly amount that you CAN afford before calling. Then, make sure you get transferred to the "loss mitigation" department. *There is a list of phone numbers at the bottom of the page to help put you in touch with the correct loss mitigation department.
- Give some proof about how you intend to pay off the loan in the future. Is your income long-term? Are you set to have an influx of income sometime in the future? This will determine your long-term viability.
- If you are facing short-term strain (such as unemployment or other problem) you can negotiate for forbearance, or a postponement of mortgage payments.
- As with refinancing, improving your credit can help you receive better terms on the loan. However, as loan modification often occurs due to delinquency, this is not always possible. The alternative is to enter into loan modification before the delinquency gets too deep. Generally, a loan modification will have a higher interest rate, even if the payments are lower, though it is also possible to modify a loan with a lower interest rate.
- A loan modification can save you thousands of dollars if done properly.
To further expound on the last point: there is some concern that a loan modification can hurt a credit score, as is sometimes the case with other types of modification, such as debt negotiation. For loan modification, the opposite is true – it can improve your credit rating by reducing your debt burden by thousands and ensuring that you are not delinquent in the future.
Video: Loss Mitigation and Home Loan Modification Programs
Important Loan Modification Considerations
Though loan modification is normally employed by people who have had trouble paying their mortgage, it is still available for those borrowers who have yet to default on a loan. TWO MONTHS behind payments seems to be the key for banks to start negotiating with you. However, it is not available to those borrowers in good financial standing who want to restructure a mortgage. For these borrowers, refinancing is the only option. For those homeowners who foresee defaults in the future, it is possible to negotiate a mortgage and in fact this is preferable, as the homeowner's credit rating will not take a hit before negotiation. In short, if you're current on your loan, you can still qualify if you don't expect to be current some time down the line. This is true even if you have a first and second mortgage.
Another important consideration is cost. While it is possible for borrowers to get a mortgage modification with no upfront costs, there are lenders and services that do charge a variety of fees upfront. It's important to keep in mind that charging fees upfront for loan modification is illegal so this should be avoided. A reputable loan modification company should be able to provide a free consultation with no upfront costs.
Video: Loan modification case studies
Loan Modification and the Bailout
The number of foreclosures is on the rise and is primarily responsible for the financial crisis of 2008. As a result, loan modification requests are unsurprisingly on the rise, as homeowners are looking for ways to save their homes, rather than foreclose. The $700 billion bailout provides explicit incentives for loan modifications. The thinking is: it is better for homeowners to pay a part of the mortgage than nothing at all (as is the case with a foreclosure) so the bailout offered extra incentives for mortgage providers to modify existing loans. As such, you can expect the number of loan modifications to go up significantly in the coming years.
Loss Mitigation Department Phone Numbers
Below is a list of loss mitigation department phone numbers so you don't have to get transferred
all over the place before speaking to the correct department.
ABM AMRO Mortgage
(800) 783-8900
Accredited Home Lenders
(877) 683-4466
AMC Mortgage Services (Also Ameriquest and Argent)
(800) 211-6926
American Home Mortgage Corp.
(877) 304-3100
Ameriquest Mortgage
(800) 211-6926
Aurora Loan Services
(800) 550-0508
Avelo Mortgage LLC
(866) 992-8356
Bank of America
(800) 846-2222
BB&T; Mortgage
(800) 827-3722
AmTrust Bank (Also Ohio Savings Bank)
(888) 696-4444
Beneficial
(800) 333-5848
Central Pacific Bank
(800) 342-8422
Charter One
(800) 234-6002
Chase
(800) 446-8939
Chase Home Finance
(858) 605-2181
Chase Home Finance-New Jersey
(800) 446-8939
Chevy Chase Bank
(800) 933-9100
Chase Manhattan Mortgage
(800) 446-8939 (Ohio Servicing Center)
(800) 526-0072 (Florida Servicing Center)
(800) 527-3040 x533 (Florida Servicing Center)
Chevy Chase Bank
(800) 933-9100
Citi Financial Mortgage
(800) 753-3673
Citimortgage
(800) 283-7918
Countrywide
(800) 262-4218
Ditech
(800) 852-0656
Downey Financial Corp.
(800) 824-6902, ext. 6696
Deutsche Bank National
Call Number on Mortgage Statement
EMC
800-723-3004
EverBank
(800) 669-7724 ext. 4730
Equity One
(866) 361-3460
First Horizon Home Loans
(800) 489-2966*
Fifth Third Bank
(800) 375-1745 Option 3
First Merit Bank
(888) 728-9931
Flagstar Bank
(800) 968-7700, ext. 9780
Fremont Investment & Loan
(866) 484-0291
GMAC Mortgage
(800) 850-4622
GreenPoint Mortgage Funding
(800) 784-5566, ext. 5383*
Green Tree
(877) 816-9125
Homecomings Financial
(800) 850-4622*
HomeEq Mortgage Servicing
(866) 822-1471
Household Finance (A HSBC Co.)
(800) 333-5848
Household Mortgage
(800) 333-4489
Household Mortgage
(800) 365-6730
HSBC Mortgage Corp.
(888) 648-3124
Huntington National Bank
(800) 323-4695
Indymac Bank
(877) 736-5556
Irwin Mortgage
(888) 218-1988
James B. Nutter & Company
(800) 315-7334
Key Bank
(800) 422-2442
LaSalle National Bank
(800) 783-8900
Litton Loan Servicing
(800) 999-8501
Midland Mortgage
(800) 552-3000
Mortgage Lenders Network
(800) 691-0129
Mortgage Electronic Registration Systems
(888) 679-6377
National City
(800) 367-9305, Ext. 53221
Nationwide Advantage Mortgage Company
(800) 356-3442, ext. 6002
NationStar Mortgage
(888) 850-9398
New Century Financial (Now Carrington Mortgage Services)
(800) 790-9502
NovaStar Mortgage Loan Resolution Department
(888) 743-0774 Non-English: (888) 743-0774, ext. 4523
Ocwen Federal Bank
(800) 746-2936
Option One
(866) 711-1962
PHH Mortgage (Formerly Cendant)
(800) 330-0423
ResMae Mortgage Corp.
(877) 473-7623, ext. 5944
Saxon
(800) 665-7367
Select Portfolio Servicing
(888) 818-6032
SkyBank
(800) 290-3359
Sun Trust Mortgage
(800) 634-7928
Third Federal Savings
(888) 844-7333
US Bank
(800) 365-7900
Wachovia Bank of Delaware
(866) 642-8608
Washington Mutual
(866) 926-8937
Waterfirld Mortgage
(800) 957-7245
Wells Fargo
(800) 678-7986
Wendover Financial Services Corporation
(800) 934-1081
Wilshire Credit Corporation
(888) 502-0100