What is a Loan Modification Program

What is a loan modification program? This program is a plan that allows a homeowner to change the structure of a mortgage. This process is typically used when the homeowner is defaulting on a mortgage, or is making timely payments but having difficulty making the amount required on the payments. The program is also commonly known as a modified refinance. Loan modifications are often sought when a conventional refinance is not feasible. If you qualify for a loan modification program, you may be able to have the interest rate on your mortgage lowered, or receive an extension on your payment schedule.

To qualify for a loan modification program, you should contact your lending agency to determine your eligibility. However, as a guideline, you must generally be in the following situations:

- You must owe no more than $729,750 on your home.

- Your home must be your primary residence, meaning you must live in it full-time and cannot use it as a rental or vacation property.

- You are more than 90 days delinquent in payment of your mortgage.

- You have not filed for bankruptcy.

You must also demonstrate a documented difficulty in paying your current mortgage. For example, you must prove that:

- Your mortgage has increased significantly since the time of your purchase.
- You have had a sizeable loss of income since the onset of your mortgage.
- You have experienced an event such as a major medical problem that has severely impacted upon your ability to pay your mortgage.
- You obtained your mortgage before January 1, 2009.
- Your payment on your mortgage, including associated expenses such as principal, interest, homeowner insurance, property taxes, and assessment fees exceeds 31 percent of your current gross income.

To learn about what constitutes a mortgage program, be prepared to work openly with your lender, and respond honestly to any questions presented to you. Your lender should attempt assist you as long as you can demonstrate a genuine need as well as a concerted effort to repay your loan.

Last Modified: 1 March 2010