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A loan modification is a permanent change in one or more of the terms of a borrower's loan. It is designed to allow a borrower to change the terms of the loan in order to have a better chance to pay it off and avoid default. The terms most often modified are the length of the loan or the interest rate. When modified, the loan is reinstated.

The following property types may be eligible for Modification:
  1. Owner or non-owner occupied properties. (i.e., primary residences, investment properties, or second homes).
  2. Vacant properties, but cannot be condemned.

The following mortgages may be eligible for Modification:
  1. First lien mortgages where the pre modified mark to market loan to value (MTMLTV) ratio (gross unpaid principal balance of the current loan, including any principal forbearance as a result of a prior modification, divided by the property value obtained in accordance with Guide Section B65.16, Property Valuation Requirements) must be greater than or equal to 80 percent.
  2. Mortgages originated at least 12 months prior to the evaluation date for the modification.

The following persons may be eligible for modification if:
  1. The borrower is 60 days or more delinquent; or
  2. Current or less than 60 days delinquent, occupy the property as the primary residence, and determined to be in imminent default;
  3. The borrower must document an eligible hardship that is causing or expected to cause a permanent or long term increase in expenses or decrease in income. (Unemployment and other temporary hardships are not eligible hardships.);
  4. The borrower must have verified income available to make the modified mortgage payment. (Unemployment benefits are not an acceptable source of income.);
  5. The borrower must have been determined to be ineligible for the Home Affordable Modification program (HAMP). In addition, borrowers who received but defaulted on a HAMP Trial Period Plan, a HAMP modification or other modification, or Trial Period Plan are eligible;
  6. The Borrower's surplus income is at least the greater of $300 and 15% of net monthly income;
  7. 85% of the Borrower's surplus income is insufficient to cure arrearages within 6 months; 
  8. The Borrower's monthly mortgage payment can be reduced by the greater of 10% of the original monthly mortgage payment amount and $100, as a result of the Lender setting the interest rate at the Market Rate and amortizing the new loan over 30 years.  
If modified, the Lender must re-amortize the total unpaid amount due over a 360 month period from the due date of the first installment required under the Modified Mortgage. 

As you can see, it is very difficult to secure a loan modification. If it is something you would like to try, we can help you with presenting the information to your lender.