How the Modification Process Works

Two of the most common types of modifications are the Government Modification and the Traditional Modification also known as the Lender or Internal Modification. Usually an account is reviewed for all available types of modifications.

The modification process may be a lengthy process. It works something like this:

First, you submit a loan modification application with supporting documents to your mortgage company. By supporting documentation, we mean a complete month of pays stubs (proof of income), bank statements, your tax returns, list of monthly expenses, hardship letter and so on.

Once your servicer or Mortgage Company receives the modification application, they will determine if you have submitted a complete package. For this purpose many services assign a person that they call Relationship Manager, Account Manager or Home Preservation Specialist (depends on the institution). But the function of this person assigned to you file is the same, to review the documents and make sure that everything that is normally require in a modification application is there. If this is the case this relationship manager will submit the application to the under writer department and in this department the file will be assigned to an underwriter. The underwriter will do a more complete review of the modification documents submitted with the application. If the Relationship Manager forgot or overlooked something, the underwriter will send the file back to the Relationship Manager stating what is missing. The Relationship Manager is typically the single point of contact with you at the servicer and the intermediate between you and the underwriter. The underwriter will not speak to you directly with some exceptions of course.

The underwriter will analyses your hardship --and here is where a good hardship letter maybe make the difference in the underwriter decision. See more for a good hardship letter. –and your finance situation to determine if with the monthly income that you presented with your loan modification application, you will be able to make the monthly mortgage payments on your property and at the same time cover you living expenses after an affordable mortgage payment has been established for your case.

The underwriter will get other information such as the current tax payments on the property, the payment of the insurance of the property and any other fees such as condominium or home owner association fees in order to determine an affordable mortgage payment for your mortgage, a payment that you can make and cover all your other expenses. The underwriter is the person that approves or denies your application for modification. Once the underwriter has finished his/hers review, if the decision is an approval, the decision is further approved or declined by the investor (the owner of the money on your loan).

If you are approved for a modification in your mortgage, you will receive a trial payment agreement with details on the payments and instructions to follow. This trial period basically consists of you making three consecutive payments (generally). These payments are a good indicator of what will be your modified monthly mortgage payments once the process is finalized. Usually once you are approve to enter into a trial period payment plan, if you have sent all the payments in a timely fashion, at the end you will receive your final modification documents which will contain detailed information such as the interest rate in the mortgage, the new principal amount of the loan, the maturity date, the life of the loan, if there have been any forbearance on part of the principal or deferment. Forbearance is when the lender forgives you part of the debt, the whole debt or part of the principal in your loan or a combination of these. Deferment is when the lender put part of your principal balance or the debt in the back of your loan and no interest is charged to you on this amount but at the end of the loan when the maturity date arrives you will have to pay this amount.

This is basically how a modification process works. However it good to keep in mind that every servicer and lender may work different, for example some servicer will have two underwriters reviewing the same file and the second one may ask for additional information that the first one did not ask. For more information Contact Us.