Mortgage Loan Modifications: What Every Homeowner Needs to Know

Mortgage Loan Modifications: What Every Homeowner Needs to Know

Richard Fonfrias, J.D.
Chicago’s Financial Rescue & Bankruptcy Lawyer
Fonfrias Law Group, LLC


A loan modification makes your mortgage more affordable; however, it could negatively affect your credit score and the amount of interest charges you’ll pay.

If you’re behind in your monthly mortgage payments, you could be facing foreclosure. If that sounds familiar, you might be a candidate for modifying your loan. A loan modification can make it easier to stay up to date on your payments and avoid losing your home.

Loan Modification: Definition

A loan modification changes the terms of your current loan, which is different from refinancing your home. When you refinance your home, you replace your loan with an entirely new mortgage.

How a Loan Modification Works

A loan modification might include extending the term of your loan, reducing the interest rate, or changing from an adjustable-rate to a fixed-rate loan. The final outcome is a loan with more affordable monthly payments. Lenders often find loan modifications attractive because foreclosures are expensive and a modification is a good way to avoid a foreclosure.

Who Qualifies

To qualify for a loan modification, the homeowner must be either delinquent or facing impending default, which means close to a delinquency. As a result, not everyone who is behind in house payments can qualify for a loan modification.

Someone facing an impending default might have lost a job, lost a spouse, or suffered a disability or illness that affected his ability to make mortgage payments.

Types of Programs

Mortgage lenders and servicers often offer their own loan modification programs. And the terms they offer you may be temporary or permanent. Or, if the lender or servicer doesn’t have its own program, ask if you qualify for any other programs that can help you change or refinance your loan.

Fannie Mae and Freddie Mac have a program to prevent foreclosures called the Flex Modification Program, which took effect October 1, 2017. If your loan is owned or guaranteed by either of these agencies, you may qualify for this program.

How to Get a Loan Modification

Start by contacting your lender or servicer right away and ask about your options. Don’t avoid phone calls or put it off because that will only make matters worse. The loan modification application varies from one lender to the next. Some require proof of your hardship, while others require a letter explaining your situation and why you need the modification.

If you don’t get the modification, you can appeal the decision with your mortgage servicer. Also, you can work with a HUD-approved housing counselor, who can help you appeal the decision and understand your options – all for free.

What You Should Know

One downside to getting a loan modification is that it might be added to your credit report and could hurt your credit score. It won’t hurt your score nearly as much as a foreclosure, but might affect your eligibility for other loans in the future.

If your loan modification is short-term, you’ll probably need to return to your loan’s original terms and repay the amount that was set aside before you can qualify for a new or refinanced loan. After a permanent modification, lenders may want to see proof of 12 or 24 payments made on-time to see if you can repay a new loan.

If your loan is modified by extending the term, it will take longer to pay off and will cost you more in interest. Even so, if you’re close to losing your home, the benefits of a loan modification are far greater than the credit risks and extra interest.

You’re Invited to Call or E-mail.

“If you have questions about bankruptcy, foreclosure, credit card debt, loan modifications,

tax liens or other financial problems, please send your e-mail today to or call 312-969-0730.” — Rich

Richard Fonfrias, J.D.

Chicago’s Financial Rescue & Bankruptcy Lawyer

Money problems solved. Peace of mind protected.

Founder & Managing Partner

Fonfrias Law Group, LLC

First National Plaza v 70 West Madison Street, Suite 1400 v Chicago, Illinois 60602
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