A loan modification changes the terms or conditions of your mortgage or loan. You can ask your lender to modify your loan temporarily, while you recover from a financial setback, or you can get a temporary or trial modification under a federal mortgage relief program. Basically, a temporary modification is an agreement from your lender to accept a lower payment for some time.
Decide What You Need
You need to decide what kind of temporary modification you need and for how long. If your mortgage payment now is more than 31 percent of your income, you may qualify for relief under the federal Home Affordable Modification Program. If you just need time to recover from a big medical or other expense you may ask for a change for just a few months.
Go Through a Trial
If you qualify under HAMP, get into a trial modification, which will reduce your payments for three months. If you make all payments in that period, the modification may become permanent and change the terms of your loan by extending the term, reducing interest rates or even cutting the balance owed. You'll have to negotiate the details with your lender.
Consider forbearance if you just need relief temporarily. Ask your lender to temporarily suspend your monthly payments on the loan balance. You'll continue to pay the interest each month, but nothing toward reducing the loan amount. You can ask forbearance for up to a year. After that, you'll resume normal payments. In some cases a lender will even forgo interest during the temporary modification, but will add that to the loan balance when you resume payments.
It's Up to Your Lender
Any temporary modification is a deal between you and your lender. You'll have to explain why you need the temporary change and provide financial information to support your case, such as major medical expenses, a payment you are owed being delayed or an inheritance is coming due. Unless you are applying under HAMP to avoid foreclosure, you'll have to convince your lender that a temporary modification is essential.
- Department of Housing and Urban Renewal: Loan Modification Frequently Asked Questions
- Federal Trade Commission: Facts for Consumers
- Bankrate.com: Mortgage Modification Help
- Making Home Affordable: Frequently Asked Questions
- TRN Law Associates: How a Temporary Loan Modification is Bad for You
- Mass Resources.org: Foreclosure Prevention: Mortgage Loan Modifications