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How to Modify Your Mortgage

You can modify your mortgage loan by your self. Read below for some tips on how to do it.

You can hire an attorney to help you modify your mortgage. You can go to a third-party negotiating company. Or you can do it yourself.

I have seen mixed results from all three approaches, and the advantage to doing it yourself is that you can save a bunch of money.

Before we get started, a quick warning: There are a lot of scammers out there when it comes to loan modifications. A good rule of thumb is that anyone who is not an attorney and asks for a fee up front is likely to be a scammer.

So if you want to go the do-it-yourself route, your first step is to contact your mortgage lender. Let them know you are having trouble making your mortgage payments, and that you want to modify your loan. They will most likely give you a list of documents they will need to consider your modification.

These documents will likely include:

  • Tax returns (usually the past 2 years)
  • Pay stubs
  • Bank statements
  • A financial worksheet (most lenders have their own specific form).
  • Hardship letter

Most of the documents are pretty straightforward, but there is one that you will have to spend a little extra time on, and that is the hardship letter. Your bank is not going to modify your loan just because rates are lower now than when you got your mortgage. You will need to demonstrate some sort of hardship.

What is an acceptable hardship? Here is a list:

1. Adjustable Rate Mortgage Reset
2. An illness in the family
3. Job loss
4. Income reduction
5. Business failure
6. Job relocation
7. Death of spouse or contributing family member
8. Death
9. Incarceration
10. A divorce
11. Military duty
12. Income reduction
13. Medical bills
14. Damage due to natural disaster or fire

This is by no means every possible hardship that would qualify you for a loan modification, but it is a good starting point. If you have a different hardship that is not on this list, put it in your letter.

You see, a hardship letter is basically a biography of the chain of events that molded your financial situation. You want to paint the picture of “how did I get here” for the person reading it, so they will approve your loan modification.

Once you put the modification package together, go over it again to make sure that every single document that the bank asked for is included. If they asked for two recent bank statements, make sure you include two and make sure they are not from six months ago. Any missing documents will only delay the process.

Now, send the package to your lender in the manner they asked you to send it. If they send you an overnight express envelope, use it. If they asked you to fax it, fax it. If they asked you to upload it to a website, upload it.

After you sent the modification package, wait three or four business days and call your lender to make sure they received it and it is complete. Then you should call them once a week until your modification is approved or rejected.

If your modification is approved, read the terms carefully. Make sure the new payment is something you can afford. If everything looks good, sign the agreement and send it back to your lender.

The key to getting your modification approved in a timely fashion is your follow up. Make sure you call your lender weekly (not more often or you’ll become a nuisance) to check on the progress. If your lender needs to send an appraiser or real estate broker to evaluate your property, make sure you make it as easy as possible for them to access your home.

If you are looking for a mortgage modification, most likely you are having some financial difficulties. So saving some money by doing it yourself might just be the best thing for you. Follow the steps above, and more importantly — follow your lender’s specific instructions, and you can get the job done.

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