How to Modify an FHA Loan

If your mortgage payments are an unbearable burden and you're worried about possibly losing your home, you may be able to qualify for a modification under a Federal Housing Administration program. The most popular one is the Home Affordable Modification Program, which can be used to reduce interest rates and cut monthly payments to within your income. There are some qualifications. First, you need to make sure your mortgage is an FHA-insured loan and qualifies under FHA rules. You can determine that by looking at your mortgage agreement; most home loans today are FHA loans.

Approach your existing lender or holder of the mortgage; original lenders sometimes sell mortgages to other companies, so look at your last monthly statement to make sure you approach the right party. Talk to your loan officer or ask for the appropriate representative. Explain you are inquiring about loan modification and ask for information on how to proceed.

Make copies of your most recent bank-account statements, your last federal income-tax return, recent pay records and a list of all monthly bills, including utilities, credit-card balances and any other loans, such as for cars. Write the loan officer explaining why you need relief from your loan and enclose the supporting documents.

Explain in the letter what conditions have changed since you took out your loan, such as loss of job, unexpected high medical bills, changed valuations that reduced the home value below the loan. Supply an affidavit of hardship to support your claims. Show that your current payment is more than 31 percent of your total monthly income and be prepared with tax assessments or other records to demonstrate a loss in value.

Ask about other modification programs if you do not qualify for HAMP or want other provisions. Use the Home Affordable Refinance Program, for instance, to modify mortgages into more favorable terms and payments or the Home Affordable Unemployment Program for temporary relief if you have lost a job but are confident of getting another one soon.

Items you will need

  • Financial records

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About the Author

Bob Haring has been a news writer and editor for more than 50 years, mostly with the Associated Press and then as executive editor of the Tulsa, Okla. "World." Since retiring he has written freelance stories and a weekly computer security column. Haring holds a Bachelor of Journalism from the University of Missouri.