The Loan Modification Process
In the $75 billion foreclosure prevention program proposed by US President Barack Obama, loan modification would play a key role. The Homeowner Affordability and Stability Plan (HASP) would assist homeowners to prevent foreclosure by adjusting distressed loans to a monthly mortgage payment that is manageable by the borrower.
The foreclosure prevention program provides bonuses that would reduce payments by the following means:
- Lowering of the principal balance of the loan (at the discretion of the lender)
- Lowering of the interest rates
- Stretching out loan repayment terms (from 30 years to 40 years)
The program permits the lenders to lower the principal balance. However, interest rate modification is the main technique for the borrowers to accomplish reasonable payments.
If you bear two mortgage loans, just the first mortgage loan would qualify for a loan modification program.
The lenders are currently acknowledging applications for the new program.
In spite of the fact that The Homeowner Affordability and Stability Plan is restricted to loans supported or backed by Freddie Mac or Fannie Mae, you could still utilize the sample letter for this program to request for a home loan modification or a mortgage refinancing even though your loan is supported by any other financial institution.
The majority of lenders would be ready to work with you in locating a way out that would enable you to save your house.
You will get sample loan modification letters free of cost from a number of websites. You can send this to your lender and with a bit of luck, receive the loan modification agreement that would help you protect your home from foreclosure. You only have to select the wordings, copy them and paste them to your word processor. Make the changes as required.
Loans are assessed for modification on an individual basis. No expenses are charged from the borrowers for a loan modification as per the Homeowner Affordability and Stability Plan.
A Sample Hardship Letter
Name: (Your Name) Address: (Your Address)
Lender / Servicer Name: (Your Lender) Loan #: (your Loan #)
Gentleman and Madams:
I am writing this letter to explain the hardship that has put (me / us) in such a bad position as to be delinquent on our mortgage payments to you. (We / I) have been truly trying to make (our / my) monthly mortgage payments on time, yet because of (our/my) hardship (we / I) have not been able to keep up with our basic sustenance bills. We have cut every non essential expense and we are at a point where we need help. Please consider (me/us) to be a good candidate for a Home Loan Modification. Please understand that it is (our / my) belief that if (I / we) can work something out that staying in (our / my) home is (our / my) number one priority and that all future payments will be made on time.
The main reason that caused this hardship is because (One paragraph reason for hardship)
Because of this reason, we remained level headed, cut all of our non essential living expenses and are now asking you to assist. Unfortunately, (we / I) can no longer afford to pay the ($ amount of monthly mortgage) each month that is owed to (insert lender name). Although we really want to make good on our end and pay everything that we had signed up for, because of our current financial situation we are going to need you help in doing so.
(Our / My) hardship began on (hardship start date) and ( I / we ) expect it (to be permanent / to only be a temporary situation)
(Our/ My) ability to pay a reduced monthly mortgage payment going forward has got better because (insert why things have changed or are to be expected to change for the better in the coming months) and (I / we) are confident that a loan modification would accomplish the goal of meeting our / my obligation to ( Lender here). Please work with us to eliminate the delinquency somehow and reduce the future monthly mortgage payments with a restructuring of the loan and you will be helping all parties involved. You will be getting paid timely again and (I / we) will be able to keep our home and make ends meet once again. At the very top of the list will be making timely mortgage payments.
We truly appreciate your speedy cooperation in this matter as Time is Of The Essence and (I / we) are looking forward to getting this settled as soon as possible so that all parties involved are happy with the outcome.
Sincerely,
Borrower’s Signature
Date
Co-Borrower’s Signature
Date