How does a loan modification work?
A loan modification is done in 5 simple steps.
Step 1. Borrower provides all needed documentation.
In order to get a loan modification completed, there are certain documents that your lender will require. Some of those documents include:
- Pay Stubs – Stubs for the last 2 months employment for all borrowers on the loan.
- Bank Statements – Bank statements for all borrowers on the loan.
- Original Loan Documents
- Hardship Letter
- Workout Package
- etc.
Step 2. A workout package is submitted to the lender
Once all documentation is gathered, a workout package is submitted to the lender for review. A workout package is basically an overview of your financial situation and a reference for the lender to base it’s negotiations off of.
Step 3. A negotiator is assigned to your file
After your workout package has been reviewed, a negotiator is assigned to your file to determine if, and to what amount, a modification should be assessed. A negotiator will draft an offer letter for the borrower based on their financial ability and the lenders own metrics.
Step 4. An offer is presented
The borrower will receive an offer letter outlining the terms of the modification. It is highly advised that if you haven’t sought the services of a professional, that you at least have your offer letter looked over. Many people have been put into temporary solutions that will come back to haunt them in the future.
Step 5. Offer is reviewed and generally accepted.
Once the offer is accepted, payments at the modified rate will resume the following month (unless specified within the modification agreement). Late payments and any fee’s will be rolled to the back of the loan or deleted entirely (as per the modification agreement).
