How does a Loan Modification Work?

If you have fallen behind on your mortgage payments or if you took advantage of the CARES ACT Mortgage Forbearance, you may be eligible for a Loan Modification. Working with TxLoanMods, we diligently work on reaching an agreement between you and your mortgage company to change the original terms of your mortgage—such as payment amount, length of loan, interest rate, etc. In most cases, when your mortgage is modified, you can reduce your monthly payment to a more affordable amount.A loan modification may involve one or more of the following:

  • Change to a different loan type (i.e., an Adjustable-Rate Mortgage to a Fixed-Rate Mortgage)
  • Reduce the interest rate
  • Extend the term of the mortgage
  • Reconcile all past-due amounts, including interest, escrow, and unpaid principal balance, amortized over the new term of the mortgage

A loan modification offers many benefits including:

  • Resolve your delinquency with your mortgage company
  • May reduce your mortgage payment by as much as 20%* (*Fannie May Flex Modification)
  • Permanent change of your original mortgage, giving you a Fresh Start
  • Preventing a foreclosure on your credit bureaus
  • Allow you to keep your home

Depending on a different factors including what loan type you have (Fannie Mae, Freddie Mac, FHA, VA, USDA, etc.), most lenders will accept a completed Request for Mortgage Assistance with supporting documentation.Once the lender deems the RMA packet complete, it will be sent to underwriting for a final review and approval.When the lender approves the loan modification, the terms of the new loan will be sent to the homeowner to review, sign, and enter into a 3-month trial period.  The homeowner must make all three payments on time and in full to qualify for a permanent loan modification.At the satisfactory end of the trial period, the lender will send the final documents to the homeowner to review and sign. Once returned to the lender, the new mortgage will be recorded in the county where the property resides, and new mortgage statements will be sent to the homeowner reflecting the permanent changes to the loan.

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