APPLYING FOR A LOAN MODIFICATION

HomeOwnershipOC’s HUD Housing Counseling Department works with hundreds of clients each year to successfully apply for a loan modification. With the onset of Covid-19 economic and housing issues, we’d like to provide some successful FAQs and successful tips to help you better your chances of applying for a loan modification.

What do I need to submit to apply and get a modification?

To get a modification, you’ll need to submit an application to your servicer. You'll most likely need to provide:
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A completed application that includes your personal information, mortgage information, property information, and so forth

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Recent pay stubs or a profit and loss statement if self-employed

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Bank statements

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Tax returns

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Income/expense financial worksheet, and;

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A hardship statement or affidavit. (Generally, to get a modification, you must have experienced a financial hardship but be able to make a modified payment going forward.

First, call your mortgage servicer. You can find the telephone number for your mortgage servicer on your monthly mortgage loan statement. If you don’t get a monthly mortgage statement, look in the mortgage loan coupon book your lender gave you. You can also look on your mortgage servicer’s website. If you don’t know the name of your mortgage servicer, contact us at HomeOwnershipOC for help. 

When you call your mortgage servicer, be prepared to explain:
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Why you are unable to make your payment

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Whether the problem is temporary or permanent

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Details about your income, expenses, and other assets like cash in the bank

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If you are a servicemember and have received permanent change of station (PCS) orders. (This is important to mention, because you may qualify for loss mitigation options because of your military move.)

Many mortgage servicers have programs to help people avoid foreclosure. Your mortgage servicer will look at your situation to consider the options that may be available to you and they may ask you to fill out a mortgage assistance application. After they review it, they will let you know what loss mitigation options, if any,  they will offer to you. If you need help or don’t understand the information, contact us for help and our counselor, who is an expert in loan modifications, can:
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Discuss your situation and whether you qualify for any programs

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Help you understand the loss mitigation options your servicer offers and the best options for you

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Guide you through the process of working with your servicer and any other programs and paperwork

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Help you with budgeting, credit card debt, or other financial problems issues

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Help ensure your credit is not effected which an in turn effect your security clearance if you are an active Military Servicemember

Beware of Scammers!

A HUD-approved housing counselor can help you figure out which available options may work best for you. You don’t have to pay anyone to help you avoid foreclosure. The help you need is available at no cost to you from your servicer, or through a HUD-approved housing counseling agency. Foreclosure scammers might tell you they’ll save your home from foreclosure, when they’re really just taking your money.

 

Watch for these scam warning signs:

 

  • You’re asked to pay upfront for help.

  • The company guarantees it will get the terms of your mortgage changed.

  • The company guarantees you won’t lose your home.

  • You’re asked to sign over title to your home or to sign other documents you don’t understand.

  • You’re instructed to send your payment to someone other than your mortgage company or servicer.

  • The company offers to do a “forensic audit.”

  • You’re told to stop paying your mortgage.

  • The company says they’re affiliated with the government or uses a logo that looks like a government seal but is slightly different.

 

Loan Modification FAQ's

If I can't pay my mortgage loan, what are my options?
If you can’t pay your mortgage or are worried about missing a mortgage payment, call your mortgage servicer right away. You should also contact a HUD-approved housing counselor like Thomas Griffin at HomeOwnershipOC to get free, expert assistance on avoiding foreclosure and tips to successfully apply for a loan modification.  
How to Apply for a Loan Modification?
If you want to apply for a modification, the first thing you should do is contact your servicer’s loss mitigation department, sometimes called a "home retention" department. You can usually find contact information on your monthly mortgage statement or on the servicer’s webpage
What is a mortgage loan modification?
A mortgage loan modification is a change in your loan terms. The modification is a type of loss mitigation. It can be a change in the rate, term, or specifications of your loan. The goal of a modification is to reduce your monthly payment to an amount you can afford. Modifications may involve extending the number of years you have to repay the loan, reducing your interest rate, and/or forbearing or reducing your principal balance.  If you are offered a loan modification, be sure you know how it will change your monthly payments and the total amount that you will owe in the short-term and the long-term. If you don’t understand, please get help from a HUD Housing Counselor.
What mortgage options might be available to me to avoid foreclosure?
Some options that your servicer might make available include:
- Refinance
- Get a loan modification
- Work out a repayment plan
- Get forbearance
- Short sell your home
- Give your home back to your lender through a “deed-in-lieu of foreclosure”
How Does a Mortgage Loan Modification Affect Your Credit?
Lenders may report your loan modification to the national credit bureaus, and its appearance on your credit report could adversely affect your credit score. The long-term impact of a mortgage modification typically will be less severe and long-lasting than the damage done by foreclosure.
In the case of mortgage modification programs that require you to be delinquent on your payments to qualify, your credit report will reflect missed payments in addition to the modification itself. Depending on your credit history and the credit score you had before those missed payment(s), your first delinquency could cause a greater drop in credit score than a subsequent mortgage modification would.
If a mortgage modification works as intended and allows you to stay in your house and resume regular on-time mortgage payments, you will be well positioned to rebuild your credit and restore your credit score within a few years—a much better prospect than having a foreclosure on your credit report for seven years from the date of the first delinquency that led to it. (Credit scores can recover significantly within the seven years following foreclosure, but many lenders view a foreclosure on your credit report as grounds for declining a loan application.)
What are my alternatives if I don’t qualify for a Loan Modification?
If you do not qualify for mortgage modification, ask your lender, and discuss with your housing counselor other options available to help you avoid foreclosure. Potential options include:
- Repayment plans: If you've missed a few mortgage payments but are able to resume regular payments, a repayment plan can temporarily increase your monthly payments until you've repaid the amount you missed (plus interest), after which your payments will return to the normal amount.
- Mortgage forbearance: A forbearance plan suspends or reduces your payments for up to 12 months, after which you must resume regular payments and repay the payments excused during the forbearance period. Forbearance programs are designed for borrowers with temporary financial challenges.
- Refinancing: If you have good credit and interest rates are more favorable than they were when you got your original mortgage, it may be possible to refinance your mortgage—that is, replace your original loan with a new one with more affordable payments.
- Short Sale or Regular Sale of your property
How can a Loan Modification Benefit You and Your Family?

Mortgage modification can be a major benefit to families facing income loss and hardships due to Covid-19. If your financial outlook has taken a downturn and you're worried about losing your home to foreclosure, reach out to your lender and HUD Housing Counselor to see how they can help. While your credit may take a hit in the process, you'll come out in better shape in the long term—both financially and emotionally—if you avoid foreclosure and stay in your home.
How can I receive individual housing counseling help?
Call us, go to our contact us page, go to our Programs page to fill out Online Intake form to sign up for individual housing counseling help or check out our Events page our free online workshops.
Carefully consider what kind of modification best addresses your needs. If you receive a loan modification and you still can’t make the payments, you may lose your home. If you’d like to learn more about your options, talk to a HUD housing counselor like the ones offered at HomeOwnershipOC. Visit Our Programs page and complete our online intake form. You can also check out our Events page for our upcoming online educational workshops.
For additional information or assistance with your loan modification, start by filling out our online intake form or call us at 714.204.2314 to set up an appointment today!