Loan Modification FAQ
Top Ten Frequently Asked Questions Regarding Loan Modifications
- What is a loan modification?
- How long does it take to get a loan modification?
- Do I need to be behind on my mortgage payments to qualify for a loan modification?
- What happens to a file once it is submitted?
- How do I know if I’m in foreclosure (CA only)?
- What is a Notice of Trustee’s Sale?
- Can I still apply for a loan modification if I have received a NOD or NOT?
- Can I apply for a loan modification on my investment property?
- What are the requirements to qualify for a loan modification?
- Are there other ways to save my home aside from a loan modification?
A loan modification is an agreement between you and your lender to change the terms of your loan. Loan modifications are usually granted in the form of an interest rate reduction, an extension of the loan term, changing the nature of the loan (from variable to fixed), or a principle reduction.
How long does it take to get a loan modification?
The average loan modification takes between four to six months.
Do I need to be behind on my mortgage payments to qualify for a loan modification?
Not necessarily. However, many lenders will only work with you if you are late or have missed payments.
What happens to a file once it is submitted?
The lender enters the submitted information into their computer systems. All banks vary on the time it takes to process files, whether they assign it immediately to a negotiator or whether the file makes its way through many levels of review before it is actually assigned to a negotiator. The bank may need additional information or documentation prior to making its decision. It’s your responsibility to maintain regular contact and provide additional documentation if necessary.
If the negotiator recommends approval, your file goes to the underwriting department for a final review.
How do I know if I’m in foreclosure (CA only)?
You will receive a document titled “Notice of Default” (NOD). The NOD will be recorded in the County Recorder’s Office, and it will state a period of time that the lender must wait prior to issuing a “Notice of Trustee Sale” (NOT). In California, once a lender issues a NOD it must wait a minimum of 90 days before issuing a NOT.
What is a Notice of Trustee’s Sale?
A NOT records an official auction date on which the subject property may be sold. The NOT will state when and where the property will be sold.
Can I still apply for a loan modification if I have received a NOD or NOT?
Yes, however, you will need to work fast to submit your package to the lender, and you may need to request a postponement if a trustee’s sale date has been scheduled.
Can I apply for a loan modification on my investment property?
This depends on your particular lender, however, most banks have loan modification programs for investment properties.
What are the requirements to qualify for a loan modification?
Lenders look at two primary factors. First, you must show proof of financial hardship. Secondly, you must show proof of your ability to pay if the lender were to modify your loan. Lenders also use a net present value test to determine whether it makes financial sense for them to modify a particular loan.
Are there other ways to save my home aside from a loan modification?
Yes. Some of these alternatives include a short-pay refinance or filing a chapter 13 bankruptcy petition. You should consult an attorney who can analyze your financial situation and recommend a solution which meets your goals and serves your best interests.
