Should I Fall Behind on My Mortgage?
No, you don’t need to stop paying your mortgage to qualify for loan modification programs. You only need to show you are in danger of falling behind in your payments.
At one-point lenders would only consider giving you a loan modification if you were in default on the loan. However, this is no longer the case. Now, you can still qualify for most modification programs while you are current on your mortgage payments. Unfortunately, many servicers still tell homeowners they should fall behind on their mortgage payment to help qualify for a loan modification. This advice is outdated and should not be followed. Falling behind on your mortgage payments when you can otherwise still make them can cause a number of problems and should not be done.
What Is a Loan Modification?
A loan modification is a permanent restructuring of the mortgage designed to make the mortgage payment more affordable for the homeowner. This can be done by changing one or more of the loan terms such as extending the repayment period or lowering the interest rate.
Obtaining a Loan Modification While Current on Payments
Most loan modification programs don’t require you to miss payments in order to qualify. Instead, you only need to show that you are in danger of falling behind on your mortgage payments in most instances.
One example of this is the government’s Home Affordable Modification Program (HAMP). Qualifying for a HAMP modification on your primary residence only requires a showing that you are at risk of imminent default, as well as meeting the other requirements.
Often you can even qualify for a lender’s proprietary loan modification programs while you are current on payments. The lender’s goal is to make sure the mortgage remains profitable and this is often accomplished by modifying the terms of the mortgage to ensure you can continue to timely make payments.
What Is Required to Qualify for Loan Modification Programs?
Most modification programs require that you show four main things:
- the home securing the mortgage is your primary residence
- you’ve gone through a financial hardship such as illness, divorce, injury or loss of job
- you are likely to default on your payments absent a loan modification, and
- you can afford payments under the modification.
Risks of Falling Behind and Missing Mortgage Payments
Deliberately missing mortgage payments can have several negative consequences and may even cause you to lose your home.
Missing payments can require that you pay more on the mortgage. In addition to owing the amounts for the missed payments, you will also have to pay interest and fees. In particular, the fees can get out of hand quickly. After missing payments, the bank can charge inspection fees, late fees, attorney fees and other fees which can make bringing the loan current nearly impossible.
Missing payments can ruin your credit score. A lower credit score eliminates some of the options you may have to save the home. Specifically, having a lower credit score due to missed mortgage payments can make it nearly impossible to refinance your mortgage, and any refinancing you can obtain will likely be on worse terms than the original mortgage.
Significantly, even if you do fall behind on your payments the bank can still deny your requests for a loan modification. If you have fallen behind on your mortgage and the bank denies your loan modification request, the combination of the fees and lower credit score make foreclosure inevitable.
If you are still making your mortgage payments on time but think you may soon fall behind, you should immediately contact your servicer and request a loan modification application. If your loan modification is denied, or you think it is being treated unfairly contact one of our foreclosure defense attorneys today and we would be happy to provide a free evaluation of your situation.
