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Loans are useful for business ventures, debt consolidation, and investments. Loans are debts incurred by an individual or other entity. It refers to the money given to another party in exchange for repayment of the loan principal amount plus interest. It comes in different forms including secured, unsecured, commercial, and personal loans. It can be secured by collateral such as a mortgage or it may be unsecured such as a credit card.

Generally, both the lender and the borrower must agree with the terms and conditions of the loan. It includes the loan amount, the maximum amount of interest rate, collateral, mortgage payment plan, and length of repayment time before releasing any amount of money.

If you’re struggling to pay off your mortgage according to the original home loan payment agreement, you can consider filing for a loan modification. The goal of a loan modification is to help a homeowner catch up on past-due mortgage payments and avoid foreclosure. The article will answer the following questions to help you understand how loan modification works:

  1. How Do I Get a Mortgage Loan Modification?
  2. What is a Loan Modification?
  3. How Do I Qualify for a Mortgage Loan Modification?
  4. What are the Different Mortgage Modification Programs?
  5. How Do I Apply for a Loan Modification?
  6. How Do I Avoid Loan Modification Scams?

How Do I Get a Mortgage Loan Modification?

Loan Modification in Illinois If you are behind on mortgage payments due to financial problems, loss mitigation can help you stay on top of loan payments and aim for home foreclosure prevention. Loss mitigation refers to the process of trying to protect homeowners and mortgage owners from foreclosure. Both parties can alter loan provisions, work out a refinance plan, extend the length of payment, or undertake a variety of different methods to keep the mortgage intact. It helps you and your mortgage servicer manage delinquent mortgage loans. Here are some of the loss mitigation options that you can choose from:

  • Loan Modification
  • Short Sales
  • Repayment Plan
  • Forbearance Agreement
  • Deed in Lieu of Foreclosure Process

What is a Loan Modification?

A loan modification is considered the most common type of loss mitigation. Although a loan modification may be made for any type of loan, they are most common with secured loans such as mortgages. With this process, a homeowner’s mortgage is modified, with both the lender and homeowner being bound to new loan terms. Loan modification aims to make your mortgage payments more affordable.

When you struggle financially and if you fail to repay your loan according to the original payment agreement, you may request a loan modification. It involves a change to the original terms of your loan. It may involve an extension of time for repayment, reduction of interest rate, or a change in the type of loan. It can be a great option to ease your burden and avoid losing your home.  A loan modification process can be understood with the help of a competent Skokie bankruptcy attorney.

How Do I Qualify for a Mortgage Loan Modification?

The qualifications and requirements for a home loan modification may vary depending on the guidelines of the mortgage lender and the type of loan. These are typically based on the amount that you owe, the property being used for collateral, and specific features of the collateral property. To qualify for a home mortgage modification, you need to prove that:

  • the house or residential property is your primary residence (homeownership)
  • you’ve experienced financial hardship (divorce, job loss, or disability)
  • that your gross monthly income is just enough to make regular monthly payments under a modification

Before the approval of a loan modification, you need to undergo a trial period plan (usually 3 months) to show that you can afford the modified amount under the new mortgage terms.

What are the Different Mortgage Modification Programs?

If you are struggling to make your mortgage payments, contact your mortgage lender or servicer immediately and ask about your options. Nowadays, most lenders and servicers offer various loan modification assistance programs. Moreover, you might qualify for a government loan modification program depending on the circumstance and type of your mortgage. Several options can be offered for borrowers with Fannie Mae or Freddie Mac, VA-guaranteed, FHA-insured, and USDA mortgages. For example, if your mortgage is owned or guaranteed by either Fannie Mae or Freddie Mac, you may be eligible for this program.

How Do I Apply for a Loan Modification?

A mortgage loan modification application will require you to declare your financial information (proof of income, auto loan, or credit card debt), residential mortgage information, and the specifics of the hardship situation. To apply for a mortgage modification, you have to get in touch with your servicer’s home retention department to request loss mitigation. You need to include the following details in your application:

  • personal information
  • property information
  • recent payslips or pay stubs
  • tax returns
  • bank statements
  • a hardship letter or affidavit

How Do I Avoid Loan Modification Scams?

Homeowners who are troubled and financially distressed are the targets of scam artists from different mortgage modification companies. To avoid scams, it is advisable to seek legal help from a credible Skokie bankruptcy attorney to help you better understand the process of loan modification. Be wary of loan modification companies or lending institutions that will promise a bailout that sounds too good to be true. They’ll charge you for various services that you can do on your own. These scammers will simply collect your loan modification application documents from you and submit them to your mortgage or loan servicer.

The Role of a Bankruptcy Attorney in Loan Modification

Applying for a loan modification can be complicated, confusing, and time-consuming especially if you don’t have enough knowledge regarding loss mitigation laws and the loan modification process. Therefore, hiring our experienced Skokie bankruptcy attorneys at Cutler Bankruptcy, LTD can ease your burden. We will be able to go through all the documents you need, make sure that the paperwork is complete and correct to avoid penalties and denial. We will help you understand the different loan modification options, create an action plan, and negotiate loan terms with your lender.