How to Get a Bank to Modify a Mortgage

While foreclosure activity—default, auction and bank repossession notices—decreased from the previous month, one out of every 389 U.S. households received a foreclosure filing in October 2010, according to RealtyTrac. Struggling homeowners often need a lower mortgage payment to prevent foreclosure. The federal government offers the primary solution—the Home Affordable Modification Program (HAMP). The catch, however, is that not every borrower qualifies and is able to succeed in the program.

Step 1

Contact your bank at the first sign of mortgage trouble. The longer you wait, the fewer the options your lender is likely to offer. You can locate your mortgage banker's contact information on your monthly statement.

Step 2

Ask your lender to see if you qualify for a mortgage modification. As of 2010, most lenders will automatically evaluate your eligibility for HAMP.

Step 3

Provide any documentation your lender requests. As the Making Home Affordable website explains, you don't have to be behind on your mortgage to apply for HAMP, but you must be able to show that your monthly payment exceeds 31 percent of your household income and that you are experiencing financial hardship due to reduced income, unemployment, disability or another issue. Your lender will likely ask for paycheck stubs, tax returns and other documents to assess your eligibility.

Step 4

Show that you can make your modified mortgage payment. Banks only initially approve a trial HAMP modification. You must make three consecutive on-time payments to qualify for a permanent modification through the program. If you cannot show that you have the cash—either from a job, in savings or from another source—your bank may not put the stamp on a trial modification, let alone a permanent one.

Step 5

Make three successful payments if your bank places you on a HAMP trial. If you do, a permanent HAMP modification guarantees that your interest rate, which your bank might lower to achieve a mortgage payment equal to 31 percent of your income, will not exceed the market interest rate on the day you signed your modification agreement for the life of your modified loan.

Tip

  • To qualify for HAMP, you must own and occupy a one- to four-unit property. The remaining principal balance on your loan cannot exceed $729,750 for a one-unit dwelling. That number increases for each unit up to $1,4 million for a four-unit building. Your must have taken out your loan prior to January 2, 2009, according to the Making Home Affordable website.

About the Author

As a writer since 2002, Rocco Pendola has published numerous academic and popular articles in addition to working as a freelance grant writer and researcher. His work has appeared on SFGate and Planetizen and in the journals "Environment & Behavior" and "Health and Place." Pendola has a Bachelor of Arts in urban studies from San Francisco State University.