A loan modification is a permanent change in the terms of an existing loan, resulting in a more affordable monthly payment for a borrower in default or in imminent danger of default.
Talk To Us
If you are behind on your loan payments, your first step is to contact your lender. Do not ignore letters and phone calls. Communication is necessary to show that you are interested in working with us on a solution to keep your home. All you have to do is call us at (866) 545-9070 and say that you would like to discuss a loan modification. The information below will help you prepare.
To apply for a modification, you need to complete the PennyMac Modification Checklist.
Borrowers who have trouble paying their mortgage because of financial hardship can request a loan modification. Reasons for hardship can include:
- An increase in mortgage payments due to an increase in interest rate or escrow payments
- A reduction in income
- A hardship that increased monthly bills
- A future hardship that will make payments unaffordable
Typically, the lender can do a combination of the following to help the borrower stay in their home:
- Add any missed payments to the loan balance to bring the loan current
- Reduce the interest rate
- Lengthen the loan term - for example, going from a 30-year loan to a 40-year loan
- Forbearing or deferring payment on a portion of the loan balance until the loan matures or is paid off
- Permanently forgive or cancel a portion of the mortgage debt
In the case of a substantial loss of household income (permanent job loss, rental property vacant for a long period of time, significant reduction in income), the reality is that the lender will likely not be able to modify a loan because you may no longer be able to afford reasonable monthly payments on the loan. But no matter what your financial situation, you should still contact your lender to explore all options to avoid a foreclosure and the damage it can cause to your credit rating.
Should You Hire a Loan Modification Firm?
Most government agencies strongly recommend against hiring a for-profit loan modification company. You run the risk that:
- You pay huge upfront fees for a service that's already available from your lender or an approved housing counselor for free or for little cost.
- You may have little chance of getting your money back from an unbonded company.
- You waste critical time in the middle of a default or foreclosure process.
- Your credit becomes further damaged from delays in resolving your debt.
- Some companies will require you to sign documents that result in you perhaps unknowingly transferring title to your home without any real benefit.
Instead, speak to your lender directly as soon as possible. If you want additional help, a counselor with a housing agency can help you prepare for discussions with your mortgage company.