What a Home Loan Modification Can Do for You

By Dorothy Bunce

If you applied for a home loan modification a while back but gave up in frustration, you may wish to consider applying again. Many mortgage companies, especially Bank of America, are finally getting their act together and are properly processing applications. However, because of past problems, lots of people are unenthusiastic about doing the work necessary to submit an application.

Let me give you some motivation to try the home loan modification process and reasons in dollar amounts. I do not believe you need to hire an attorney such as myself to help you do so. If you are able to read this article, you are smart enough to apply for a loan modification without expensive help from me or any other lawyer. Practicing law has made a comfortable living for me, and I am not so desperate to make money that I would recommend that you hire me to do something you can easily do for yourself.

Is your home loan $150,000 at 7% interest? A loan modification could reduce your payment to 2% interest for 3 years, which would mean a payment of $550.00 per month for principal and interest. Impound or escrow fees for insurance and taxes would, of course, have to be added to this payment amount as it would with the other amounts indicated in this article.

Is your home loan $200,000 at 6% interest? A loan modification could reduce your payment to 2% interest for 3 years, which would mean a payment of $740.00 per month for principal and interest.

Is your home loan $250,000 at 5% interest? A loan modification could reduce your payment to 2% interest for 3 years, which would mean a payment of $925.00 per month.

A loan modification reduction of interest is not going to be permanent. But it is reasonable to expect that you can get an interest rate between 2 to 2.5% for a period of two to three years. After that, expect your interest rate to increase to its original amount or to go down to whatever the market rate is at the end of your loan modification.

So what is it going to take to submit an application? Fill out an application form. Check, you can do this. Submit your last two tax returns. Check, you can do this. Provide wage records, such as your paystubs, or if you have your own business, a simple profit and loss statement. Check, you can do this. And finally, submit your bank records for the last 6 months. If you haven’t kept a copy, you may be able to obtain them online or just walk into any branch of your bank and ask them to print them out for you. This is a no brainer!

Then number the pages you are submitting, put your account number on each page and send the package to your mortgage company. Many mortgage companies are even providing a return envelope by express service. Make and keep a copy of everything just in case. Could anything be more simple? One, two three.

Then call your mortgage company in a week and continue to call them once a week until they confirm that they received your information. Then continue to call to see if they have any additional questions for you or if they need any additional documentation.

If you are nervous about the application process, I urge you to watch my four-part video about home loan modification on my video page at www.afreshstartlaw.com. There is no charge to watch this brief movie explaining how loan modification works.

You don’t need to be intimidated by the process of applying for a home loan modification. And you certainly do not need to pay someone hundreds or even thousands of dollars just to have them fill out some simple paperwork. Good luck, and let me know when you receive your loan modification!

4 Responses to "What a Home Loan Modification Can Do for You"

  1. Jose   June 3, 2012 at 2:26 pm

    I thought the loan modification will also reduce the principle of the loan if the value of the property has fallen below the loan principle?

    • Dorothy Bunce   June 13, 2012 at 8:47 pm

      Jose, I wish that it were true that a loan modification could reduce your principal balance down to the value of the property, but unless the mortgage company broke the law, you will still owe every penny on your mortgage balance, even with a loan modification. All you can expect from a loan modification is to get your interest rate reduced for 3 to 5 years. After the 3 to 5 years have passed, your interest rate will go right back up.


  2. Foreclosure   May 23, 2012 at 12:26 pm

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