DIY Loan Modification Center

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For homeowners who want to prepare and manage their own loan-modification request, this center organizes the process into practical steps: understanding modification basics, preparing the application, reviewing debt-to-income and affordability, writing a hardship letter, communicating with the servicer, and following through to a final decision.


Start with the free educational sections below. The complete DIY Loan Modification Course and $399 kit provide a more structured package of forms, preparation tools, checklists, and step-by-step education for homeowners who decide that format is appropriate for them. Purchase is optional and does not guarantee approval or any particular outcome.


If you have a Notice of Trustee Sale, a near-term sale date, a failed trial modification, a denial, bankruptcy concerns, or a servicing dispute, complete the Homeowner Assessment and consider whether qualified legal review is appropriate.

Step-by-Step Education Begins Here

PT 1 - THE BASICS - DO IT YOURSELF HOME LOAN MODIFICATION

Understanding Loan Modifications
A loan modification is a written agreement between the borrower and the lender that permanently changes the original terms of the promissory note to make the mortgage payments more affordable.

In certain situations, a lender can do one or more of the following things to get your monthly payment down to a level that you can afford:

lower the interest rate

lengthen the repayment term, or

reduce the principal balance.

(Generally, lenders do not like to approve first-mortgage principal reductions as part of a loan modification. However, there are some programs which combine principal reduction assistance with loan modifications. For more information on the various programs available, visit our Loan Modification Resources, Forms, Files & Links page.)
THE BASICS - DO IT YOURSELF HOME LOAN MODIFICATION Continued here

PT 2 - PREPARING YOUR LOAN MODIFICATION APPLICATION

The Loan Modification Application

To obtain a loan modification, you’ll need to submit an application to your mortgage servicer. Often you’ll need to provide:

a completed application (including your personal information, mortgage information, property information, and so forth)

recent paystubs (or a profit and loss statement if self-employed)

bank statements

tax returns

income/expense financial worksheet, and

a hardship letter or hardship affidavit.
PT 2 - PREPARING YOUR LOAN MODIFICATION APPLICATION Continued here

PT 3 - UNDERSTANDING DEBT TO INCOME RATIO (DTI)

Understanding debt to income ratio (DTI)

Debt-to-income (DTI) is the key determinant in most lending situations. In a traditional home loan the DTI plus the loan to value (LTV) play roles; but in a modification it is assumed that the LTV is negative (you are upside down on your home and unable to refinance) so the key decision factor is DTI (along with your credit worthiness as demonstrated by your monthly payment history and credit report).
PT 3 - UNDERSTANDING DEBT TO INCOME RATIO (DTI) Continued Here

PT 4 - WRITING YOUR HARDSHIP LETTER

The main purpose of a loan modification hardship letter is to convince your lender that you will be able to pay your monthly mortgage payment on time in the future if they modify your loan. The first paragraph should focus on the positive; convincing the lender that you can make the modified monthly payment.

Basically, your lender has to make a calculated decision based on your current financial and employment status to determine if you will be a good candidate for a loan modification.

While the “Hardships” that may have contributed to your unique scenario are important to include in this letter, all you're doing is briefly explaining the financial documents provided anyway. You're humanizing the mortgage. You're forcing the underwriter to identify with your plight. But ultimately, the underwriter/reader is concerned with converting your non-performing, imminent default to a performing asset.  
PT 4 - WRITING YOUR HARDSHIP LETTER Continued here