Here are some of the most commonly asked loan modification questions. The answers on this page will make understanding the mortgage modification process easier and more straightforward.

If the answer to your specific loan modification question is not on this page, please contact The John W. Persse Law Group right away. You will get the answers you need in order to move forward with modifying your loan.

Can I apply for a loan modification if my loan is not secured by Fannie Mae or Freddie Mac?

Yes. Regardless of who services your mortgage, you can attempt to apply for a loan modification with your lender. Why? Under the HAMP loan modification program, lenders are provided with financial incentives to approve as many loan workouts as possible. The U.S. Department of the Treasury has a goal to help as many as 5 million households avoid foreclosure. If they only included Fannie Mae and Freddie Mac, they would fall short of achieving that goal.

How can I tell if I can qualify for a loan modification?

If you’re wondering whether you qualify for a mortgage modification you must be able to answer “Yes” to the following questions:

  1. Do you own and live in a one-to-four unit property?
  2. Is the total remaining principal balance on your single family residence equal to or less than $729,750? (See the limits on 2-4 unit properties).
  3. Was your loan originated prior to January 1st, 2009?
  4. Is your current housing payment (including property taxes, hazard insurance, and any HOA dues) more than 31% of your pre-tax gross monthly income?
  5. Is your mortgage no longer affordable due to rising payments? Or…
    • Have you experienced a hardship that has led to you being unable to afford your mortgage?

If “Yes” was the answer to all of these questions, call The John W. Persse Law Group before you contact your lender. We will negotiate terms on your behalf to get the best possible terms.

What can I do if my lender is not participating, or if I don’t qualify for a loan modification?

Nearly every major lender and bank is currently participating in and approving loan modifications. However, there is still the chance that your lender is not partaking in the HAMP program…Contact The John W. Persse Law Group to ensure your lender’s participation.

What if I am not late on my mortgage payments? Can I still be eligible and apply for a loan modification?

For conventional loans, if you are struggling to make your payments, but are still on time, you can still qualify for and attempt to modify your mortgage. Your lender must review your particular circumstance to determine if you are at risk. However, your lender will want to know that defaulting on your loan is imminent and that you need help right away. Proof of imminent default could be due to a spike in your interest rate or a reduction in income that makes your mortgage payment unaffordable. For FHA loans you must be in default by a least one month, and no more than twelve (12) months, in order to be eligible per the HAMP guidelines.

Am I eligible for a loan modification if I’ve already fallen behind on my mortgage payments and haven’t paid in a few months?

Yes, but you must meet the qualifications of the HAMP Program.

Can I apply for a loan modification if I have a second mortgage tied to my home?

Yes. You might also be eligible for the government’s modification program for second mortgages called Second Lien Modification Program (2MP).

How do I find out if my servicer is approving loan modifications?

Contact The John W. Persse Law Group.

Aren’t all lenders and loan services mandated to participate in HAMP and all loan modification efforts?

Any lender that took TARP funds or borrowed from the Treasury Department’s Financial Stability Program is mandated to participate in HAMP. In addition, many other lenders are participating in HAMP. Under the current guidelines of HAMP, the NPV test is currently mandated to be used to determine eligibility. If the NPV test determines a positive result when applying the Standard Waterfall, the servicer is required to offer a home affordable modification to the client.

What will my loan servicer review in order to modify my mortgage?

There are a number of documents and information that your lender will want to review:

  • Do you meet all of the minimum eligibility requirements for HAMP (questions above)?
  • Income and expense documentation to determine if your current mortgage payment exceeds 31% of your pre-tax gross monthly income?

What happens to the modified rate after 5 years?

After the initial five-year period, and starting on the 61st month, the interest rate on your modified mortgage can rise no more than one percentage point. Each subsequent year your rate could increase by 1% until it reaches the cap specified in your loan modification agreement which will equal the prevailing 30-year fixed Freddie Mac rate.

What is the cap rate on a loan modification?

The highest your newly modified mortgage can go is set on the date your loan modification is finalized. The figure itself is determined by the current market interest rate published to the public by Freddie Mac. This is an important point to remember; the interest rate on your modified loan will never be higher than the rate set on the day your loan was finalized.

How low can the interest go?

The floor interest under the HAMP program is 2%.

What if they modify the rate to 2% and the payment is still unaffordable?

Your servicer must explore the Standard Waterfall guideline which can include:

  • Extending the term of your mortgage to 40 years and/or possible reduction of principal.
  • Principal Forbearance. Lenders have the option take a portion of your principal balance and defer payment to the end of the loan.

Can the lender give me a balloon payment?

Yes. This could occur if your loan’s servicer includes a principal forbearance and sets aside a portion of your principal balance in order to lower your monthly payment. For example, assume that $15,000 was the deferred amount taken from your current principal balance. That $15,000 is still money owed to the lender. When you refinance, sell the home, or pay off your remaining balance, that $15,000 payment would have to be made to pay off all remaining debt.

Do I have to seek housing counseling in order to be approved for a loan modification?

Your lender will stipulate that you see a HUD approved housing counselor if they see that your total monthly expenses are over 55% of your gross monthly income.

The role these counselors play is to help you understand what options are available to you and to aid in creating your new budget. There is no charge for seeing a HUD-approved housing counselor.

Is the government offering a financial incentive for people who get a loan modification?

Yes. Homeowners under a HAMP loan modification will receive a financial incentive. The major stipulation is that this incentive can be received only if the homeowner pays their newly modified mortgage on time. As each payment is made on time, the U.S. Treasury Department will contribute money toward the reduction of the principal balance of the modified mortgage. If 60 payments are made on time, the balance can be reduced by up to $5,000. Not only does this contribution help you build equity, it also helps you save in total interest costs.

Are investment properties and/or second homes eligible for a loan modification?

No. Only primary residences are eligible for HAMP. Your lender will verify that you not only own the property that you are attempting to modify, they will also seek verification that you live in the home as well.

I live in a duplex and live in one unit while renting out the other one; can my mortgage still be eligible for a loan modification?

Yes. You can own a duplex, triplex, or even a four-unit home and be eligible for a loan modification as long as you reside in one of the units.

My home is “underwater” and I owe more than it’s worth. Will my lender reduce my principal balance under the HAMP loan modification program?

The main goal of a loan modification is to help you stay in your home by avoiding foreclosure. The government loan modifications accomplish this by lowering your interest rate and/or extending the term of your mortgage. A lender can, if they choose, reduce your principal. However, principal reductions are not a requirement mandated by the HAMP program currently.

Are all loans eligible for the HAMP loan modification program?

Nearly every kind of loan that is owned by banks, private investors, Fannie Mae and Freddie Mac and those secured into mortgage backed securities are eligible for a HAMP loan modification. This includes prime, Adjustable Rate Mortgages (ARMs), payment option ARMs (negative amortization loans), subprime and interest only loans. Currently, VA loans are not eligible for HAMP.

I have a FHA loan, can I modify my mortgage with HAMP?

Homeowners whose loans are insured by the Federal Housing Administration (FHA) can apply for the FHA-Home Affordable Modification Program. FHA-HAMP is aimed at helping homeowners with a FHA loan avoid foreclosure.

My loan servicer just informed me that the loan’s investor is not offering or reviewing any HAMP loan modification applications? What can I do?

The list of participating servicer’s and loan investors has been growing. You can check www.makinghomeaffordable.gov to see the most updated list of banks, lenders, and investors that are participating in HAMP. If your lender or the loan’s investor is not on the list, contact The John W. Persse Law Group to see what other options are available. The housing crisis is a systemic and country wide problem.

I’d like to apply for HAMP, but have already been in contact with my lender for a different loan modification program; can I still try and modify my mortgage through the HAMP program?

Yes. Contact The John W. Persse Law Group to determine your eligibility.

What documentation is required to apply for a HAMP loan modification?

  • Determine your gross monthly income via;
    • Most recent pay stubs covering at least a 30-day period and including year-to-date earnings.
    • If you are self-employed or paid through other means, a recent profit and loss statement is usually required.
  • Month and year of the origination of your loan, and amount you borrowed.
  • Most recent and previous year tax returns.
  • Asset information including savings and checking accounts, stocks, bonds, 401k, IRAs, and any other liquid assets.
  • Any secondary mortgage information including name of lender, loan #, principal amount, and payment terms.
  • Credit card balances and minimum monthly payments due.
  • Other outstanding debts including car loans, student loans, and personal loans.
  • A hardship letter outlining the events that led to your hardship and why it’s in the lender’s best interest to approve your request for a loan modification.

While many of your loan modification questions might have been answered here, you might still have some more. You can contact The John W. Persse Law Group with your questions and we’ll have our loan modification attorney and mortgage industry experts get you the answer you need.

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