Mortgage Modification: Time is Not on Your Side

If you can no longer make your mortgage payments but you don’t want to give up your house, a loan modification may be a viable solution. Under the government’s Home Affordable Modification Program or HAMP, you can request your lender to restructure your loan so you’ll end up paying smaller monthly installments.

When applying for this program, however, time will not be on your side. To begin with, banks drag their feet when it comes to approving a modification request. Though they’re legally mandated to respond within 30 days, they may rule your application incomplete, meaning they can stretch the process further than this limit.

You may also be asked to undergo a three-month “trial payment period” before your application is approved, wherein you will shell out a smaller amount than your usual mortgage payments. There’s no “financial forgiveness” during this phase, though—since you’re paying less than your minimum obligation, you will continue to incur late fees and the late payments will also be reported to credit bureaus.

If you do get approved, the modified interest rate won’t be fixed. In fact, the government is about to raise the rates this October, affecting those who got a mortgage modification back in 2009.

Before taking advantage of this program, homeowners are reminded to take note of the disadvantages it has. To learn more about the intricacies of mortgage modification, be sure to talk to a trusted foreclosure attorney.