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Loan Modifications can seem complicated to many of us. Especially when we are dealing with the stress of losing our home and we are presented with a seemingly endless list of requirements and forms to cope with. It is easy when writing many articles on a specialized subject to assume that everyone knows what you are talking about, that everybody is familiar with what HAMP, TARP, a servicing company, short sales and foreclosures are.

If you are an expert in loan modifications what on earth are you doing reading an article titled Back To Basics, if not this article is for you. This article will explain the big picture loan modifications are currently set in and the basic terms you must be comfortable with.

Who is the owner of your mortgage? Knowing who owns your mortgage is vital. This is not as easy as it sounds. Often the bank or institution you bought your mortgage from is just a handler, a servicing company that sells mortgages and collects payments on behalf of an investor. We will not go into detail with how mortgages are bundled and sold but it is enough to say that it is probably more complicated than you expect so it pays to approach your lender or mortgage servicer with large amounts of patience and an open mind. It is also a good idea to become somewhat of an expert on the subject so you can at least ask the right questions and know when you are being taken for a ride.

The Programs.
Facing mixed feelings and responses from the public the American administration has started many programs and measures to modify loans and make them more affordable for troubled homeowners. There are two main programs, the HARP program (Home Affordable Refinance Program) and HAMP (Home Affordable Modification Program).

HARP is for homeowners that are current on their payments but have not been able to take advantage of the current lower interest rates because the value of their home has dropped and they are not able to refinance their mortgage. In order to qualify for HARP applicants must have mortgages owned or insured by Fannie Mae or Freddie Mac.

HAMP is by far the most widely used program. Any servicing company is eligible. The government provides incentives to investors and borrowers if a loan modification is successful. The purpose of HAMP is to bring mortgage payments down to 31% or less of a family’s monthly income. This program requires homeowners to have a job and be able to pay for a reasonable mortgage payment. The first step you must make with HAMP is to qualify for a three month trial loan modification. Once you have gone throught the three months without missing a payment you can qualify for a full loan modification.

HAMP reduces loan payments with three main methods: 1) Reducing interest, 2) Extending the mortgage term up to a maximum of 40 years and 3) Forbearance of principal and allowing for a ballon payment at the end of the mortgage.

Don’t pay for help, it is free!
It is importance not to fall for loan modification scammers no matter how much you hate paperwork. The best advice comes from the government and they have a vested interest in your success. You can call HUD for approved housing counseling at 239 434-2397 or visit www.hud.gov.

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Finding a loan modification you can live with and getting your bank to accept it is no easy task. It requires a lot of time, large amounts of patience and determination.

 Banks are swamped with more loan modifications than they have ever had to handle and the dilemma of some loan modifications costing them more money than they are worth. Bringing all kinds of issues, like why would a bank provide help to a borrower through a loan modification if it is more cost effective to foreclose the mortgage?

The complexities behind a loan modification can be scary and frustrating but if you jump through the hoops and stick to your guns you have a good chance of reducing your monthly bills and even saving some money.

To get us started lets answer some basic questions most borrowers that are looking for a loan modification ask?

Do I need to have a job to get a loan modification?
Not necessarily. You can apply for a loan modification even if you don´t have a job as long as you can prove you can pay for the modified mortgage payments in some way or are likely to be able to do so soon. The details of your case will condition what response you get. For instance if you have recently been sacked or laid off from a well paid job and have the skills to get one soon you are more likely to get a loan modification than if you have been unemployed for a year.

Do you have to pay someone to manage your loan modification application?
Not at all. The government is backing a variety of loan modification programs that are designed to incentivize banks and service providers to supply sustainable loan modifications. Government websites and helplines are in place to guide you through the mortgage modification process.
It is true that loan modification consultants can provide you specialized advice on how to fill in applications to maximize your chances of being approved but you can do just as well with a little patience and by reading the instructions carefully.
If you do decide to hire someone make sure they are not one of the many con artists and scammers that are so common now. Stay clear from companies that guarantee successful applications and ask for upfront fees. There is no way to guarantee a bank will accept a loan modification and it is illegal to pay for services that have not been provided.

How do you get the ball rolling?
Call your bank and ask to be put through to the mitigation department. You will then be asked to jump through a few hundred loops and explain your situation. It is a good idea to find out first what paperwork you need and make sure it is all correct before starting your application process.
What kind of information do you need?
You will need W-2s from your employer, a pay sub and details on your savings and investments. You will then be asked to provide an income to expenses ratio and basic paperwork to support your claims. Don´t forget to be honest, any discrepancy that is picked up by the service provider will cause your application to be dropped.

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