Many individuals experience some sort of financial setback at some point in their lives, especially during times of economic recession. Job loss or cutbacks in pay, illness, and other factors may cause a homeowner to fall behind on their home mortgage payments, even to the point where their mortgage holder notifies them of intent to foreclose, or sell the house to recoup their losses. Homeowners can still save their homes from foreclosure and deal with late or missed payments by contacting their mortgage company and applying for a mortgage modification.

What is a mortgage modification?

This is a restructuring of a home mortgage loan through an agreement with the mortgage company. It may offer many benefits to homeowners who are temporarily behind on payments through unforeseen circumstances. Benefits may include:

• Reducing the interest rate of the loan
• Making arrangements for gradual repayment of missed payments
• Adding missed payments to the remaining principal balance so they are repaid throughout the life of the home loan
• Refinancing the loan for a longer period to lower payments

All of these benefits are dependent upon income requirements that show an ability to repay the loan in some form. If you are unemployed or your income is grossly inadequate to meet even reduced mortgage payments, you may still be eligible for a liquidation. 

This requires you to give up possession of the home in return for forgiveness or reduced responsibility for the difference between the sale proceeds of the home and the amount you owe, which may be greater than the proceeds if your home has lost substantial value since you acquired the home loan.

What kind of documentation will you need for a mortgage modification?

Documentation requirements may vary among mortgage lenders, but should expect to need the following items.

Application for mortgage modification

Proof of income. This will include the debtor and anyone else who contributes to household income, whether or not their name is on the mortgage loan or if they pay any amount toward mortgage payments. If check stubs are used, they should be sequential according to pay dates, and the latest stubs available at the time of application.

Statement of monthly expenses. This will include all non- mortgage related expenses, including other debts, utilities, and other expenses.

Application for prior year tax transcripts. This allows the lender to verify changes in your income that may have led to your mortgage arrears.

Your mortgage company wants you to remain in your home. Foreclosures are expensive and often result in loss for the lender as well as the borrower. 

If you begin to fall behind in mortgage payments, from a location like Saginaw Medical Federal Credit Union, contact your mortgage holder as soon as possible to discuss options for getting back on track and staying in your home.