by: Joseph Gonzales
A loan modification is a way that homeowners can lower their monthly mortgage payments and potentially get into more stable loans at today’s low rates. There are many different types of loan modification programs depending on the type of mortgage you have and eligibility criteria. Most lenders also offer their own load modification programs.
A few of the federal loan modification programs offered to homeowners are:
Home Affordable Modification Program (HAMP) is a federal load modification program that is available to borrowers who have sufficient income but are still struggling to make their monthly mortgage payments. The goal of HAMP is to help a homeowner stray in her house and avoid the foreclosure process as lenders and servicers modify homeowners’ loans so that payments become more affordable. For more information about HAMP and its eligibility requirements, visit http://www.makinghomeaffordable.gov/programs/lower-payments/Pages/hamp.aspx.
Principal Reduction Alternative (PRA) is a part of HAMP and is intended to help struggling homeowners with underwater loans (the current loan is for more than the house is worth). With PRA, the mortgage servicer reduces your payments to a more affordable percentage of your income and forgives part of what you owe over time. This results in relief to the borrower by permanently reducing the balance of the loan. For more information about PRA and its eligibility requirements visit http://www.makinghomeaffordable.gov/programs/lower-payments/Pages/pra.aspx.
While it is possible for a borrower to successfully negotiate a loan modification with their lender on their own, having an attorney negotiate on your behalf can help speed up the process and can ensure that the lender does not accelerate the foreclosure process but instead diligently works with the attorney to approve a loan modification. Additionally, an attorney can advise you on any potential foreclosure defenses, whether bankruptcy would be a better option, and work to delay and halt any foreclosures already in progress.
While each program has slight differences and each lender requires different documentation, general documents you will need to provide for a loan modification application are: federal income tax returns, two most recent W-2 forms, six months’ worth of pay stubs, evidence of other income and a letter explaining your predicament, otherwise known as a hardship letter. Providing this information to your attorney as soon as possible is a sure way to speed up the loan modification process and can help your attorney get to work right away on negotiating a successful loan modification with the lender on your behalf.