How It Works
Mortgage modifications are changes in the terms of a mortgage loan designed to make it more affordable to the borrower. Generally, modifications are available only to borrowers in default, or in imminent danger of default from impending rate increases that will make the mortgage payment unaffordable to them. The purpose is to cure or avoid the default, thereby avoiding foreclosure, which will lead to the sale of the home if nothing is done to correct the default.

Homeowners in or faced by default should request a modification. They are very unlikely to get one if they don’t understand how the process works, or at best will get a modification that is not for their best interest, but that of the Lender. The stakes are very high: the borrower could lose their home.

The Default Requirement
Viewed from the investors ( the Lender ) standpoint, the requirement that to be eligible for a modifi- cation a borrower must be in default, or in imminent danger of default, makes good sense. If a loan will pay off on schedule without a modification, there is no reason for the investor ( the Lender ) to bear the cost of a modification. The financial rationale of a modification is that, without it, the loan will go to foreclosure, and this will cost the investor ( the Lender) more than the modification.

The Federal Government moved ahead to moderate the inequity associated with the practice of limiting modifications to borrowers in default. The Making Home Affordable program establishes a “hardship” criteria for eligibility that does not require the borrower to be in default. The guidelines are complicated and should be handled by an experienced negotiator on their behalf.

Examples of Hardships
Hardships under “The Making Home Affordable program “ can come in many forms and every lender that we have negotiated with all share the same acceptability standards. The following are some of the most common hardships that we have come across:

	Loss of a job/income		Mortgage re-setting/ recasting
	This is one of the most effective hardships		Another very effective hardship where the interest rate has increased
	Cut back in hours/income		Divorce/ Separation
	This can come from salaried or self employed hardships		Loss of income as well as increased expense
	Pregnancy		Job Relocation
	This can be in conjunction with loss of income		Cut in income
	Children moving back into home with parents		Damage to property
	Generates unexpected expenses		Natural or un-natural circumstances
	Rental properties		Military service
	Renters not paying rent / vacancies		Loss of income by one or both spouses
	Sickness/Illness/ Death		Incarceration
	All of which can lead to loss of income and /or increase in expenses		Obvious loss of income

Any of the above hardships can allow a modification to happen with the right negotiator handling your case.

The Lender’s Modification Decision
In most cases, the decision on a modification is not made by the firm that owns the loan. It is made by a firm servicing the loan under contract to the owner. The owner could be a single lender, or it could be a group of investors who own pieces of a mortgage-backed security collateralized by a pool of loans.
Whoever the owner, the servicing firm is contractually obligated to find the solution to payment problems that will minimize loss to the owner. If the lowest-cost solution is a contract modification, great, everyone involved prefers a modification to a foreclosure. But if a foreclosure would generate lower costs for the owner, the decision will be to foreclose. The cost of foreclosure to the borrower does not enter into the decision.

Yet the decision is far from cut and dry, and the decision to modify can be materially affected by the experience of the negotiator handling the case. This reason alone causes many home owners to go into foreclosure due to their inexperience as well as the Lenders lack of helpfulness to assist the home owner through the process of a loan modification.

The decision to modify comes after a very lengthy processing period. Usually between 30 and 90 days, the 90 days time period being the most honest. Even with the most experienced negotiator the time frame to get a modification to the offer stage, is predicated upon how overwhelmed the lender is. Therefore let it be known, that promises made to modify your loan under 30 days is most uncommon. In fact most Lenders are out three weeks just to get it the decision maker.