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Mortgage loan modification, the changing of terms on an existing home loan, is becoming a well-known practice as the US housing market continues to crater. Borrowers who find themselves underwater on their mortgage – owing more than the property is currently worth – and facing a rising monthly mortgage payment are being encouraged to pursue relief through modifying their home loan. But for all the news and hype around loan modifications very few homeowners really understand what goes in to getting their home loan terms changed to a level that they can afford.

In this series of posts we’ll teach you the basics of how the loan modification process works so that if you’re considering a loan modification you’ll understand how to give yourself the best chance of successfully completing the process.

In this series on loan modifications we’ll cover:

• How to start the loan modification process
• Doing your homework
• Determining if you qualify for a loan modification
• Tips for qualifying for a loan modification
• Negotiating new loan terms
• Finalizing your loan modification

A Note on the Loan Modification Process

Because each loan and each lender, mortgage servicer or mortgage investor is different the process may be slightly different in your situation. Use this information as a guideline; but be sure to follow the specific requirements of your lender. Additionally, every loan has to be evaluated on its own merits. That means that a loan modification can take anywhere from 30 days to 90 days to complete. Your organization, persistence and diligence will make the difference in shaving days off the process.

A Note on Loan Modification Companies

Federal housing law makes taking money upfront for a loan modification illegal. Many loan modifications get around this by affiliating themselves with a lawyer, and collect a retainer for legal service. Others collect a processing fee for submitting your loan package. Either way, be warned that paying to have a loan modification company do your modification application for you does not guarantee success. And, there are many unscrupulous characters moving in to this space. The Department of Housing and Urban Development (HUD) urges extreme caution if you choose a company to represent you in the modification process.

You can learn more about doing your own loan modification here. Watch for the next post in this series “How to start the loan modification process”