Are you behind on your mortgage and struggling to keep up with payments? Home loan modification could provide a solution by extending your loan term, lowering the interest rate and/or forgiving late fees and penalties.

If you cannot afford a mortgage and are unable to refinance your home loan, consider the benefits and drawbacks of modification programs.

Types of loan modifications                                                         

The federal home loan modification program, Making Home Affordable, expired at the end of 2016. However, homeowners can directly request a modification from their mortgage lender. Available programs vary by loan company, but your options may include the following:

  • Converting an adjustable rate mortgage with a rising payment to a more affordable fixed rate loan
  • Forbearance, which means you can postpone several payments until the end of your loan term
  • Extending the loan term, which is also called reamortization
  • A lower interest rate either temporarily or for the life of the loan
  • Reduction of the loan principal

Mortgage modification eligibility

Eligibility requirements also vary by lender. Your mortgage company may have an online application for modification programs or you may need to call and speak with a representative.

Usually, you must be at least 60 days late with payments before your lender will consider modification. During the application process, you must provide details about your taxes, income and expenses, including copies of your pay stubs, tax returns, bills and other documentation. The lender may require a hardship letter, which explains why you are no longer able to afford your mortgage payments.

In most cases, the lender will make a decision within a few weeks or months. They may ask you to provide additional documentation before finalizing approval or denial.

Approval for a loan modification is at the discretion of your lender. If you receive a denial of your modification request, you may be able to modify your mortgage by filing for bankruptcy. You can declare your home exempt and arrange new payment terms with the bankruptcy trustee assigned to your case.