It is natural to feel worried about approaching your lender to alter your mortgage terms due to financial hardships that impair your capacity to make payments. However, if your bank rejects your application for a modification, you should not feel discouraged or dejected. Your journey to securing a loan change is likely far from over.
The truth is that banks frequently turn down mortgage modifications at the initial application stage, and for reasons that you might be able to correct before sending an appeal.
Missing information
An incomplete application can serve as grounds for denial, so it is possible your bank wants information you did not provide. Lenders may require different kinds of information to consider mortgage changes, including the following:
- Your most current tax return
- Documentation of your income and earnings
- Where you are currently employed
- A list of regular expenses, including necessities such as food and clothing
Your bank may also want a satisfactory explanation of the circumstances leading to your financial troubles. Applicants may provide this in a letter.
Disqualification for modified terms
Lenders have their standards for financial hardship, so your bank might turn you down if its management decides your situation is not burdensome enough to stop you from producing payments as per your original agreement. Your income and employment may also seem to be sufficient to continue your loan as it stands.
However, your bank could also decide your situation is too dire to handle the proposed modification. You might not be able to meet the new scheduled payments, or you may have an excessively high debt-to-income ratio.
A loan modification already exists
Be sure that your bank has not changed your loan already. Lenders may turn down a modification if the debtor already received one in the past 12 months. Additionally, banks can reject loan changes if they already granted a trial modification that the debtor could not fulfill, such as missing payments.
Knowing why your lender rejected your application should give you enough information to submit a proper appeal that addresses the concerns of your bank. Even if it seems like an ordeal to try to get your loan changed, it can be worth it if you avoid foreclosure.
