Compare Harp Loan and Loan Modification Program Reviews

There are many individual reasons a consumer should apply for loan modification, but the most common is that loan modification can help save money. Load modification can offer homeowners options like lower interest rates or extended pay periods to better fit their budgets.

• Lower interest rate: The primary reason to apply for loan modification is to find a lower loan interest rate. When homeowners apply for either a variable or fixed-rate loan, those interests rates can be renegotiated. A lower interest rate can lower monthly payments for homeowners struggling to make payments.
• Convert from variable to fixed interest rate: A variable-rate or adjustable-rate home loan has an interest rate that can change, but, because interest rates generally increase, a homeowner with a variable rate can eventually be paying more than they are able. Some loan modification options allow homeowners to change their variable-rate loan to a fixed-rate loan that could lower the interest on monthly payments.
• Adjust/extend pay period: Most home loans extend over either 15 or 30 years. If a homeowner with a 15-year loan can no longer keep up with monthly payments, they may be able to extend their pay period.

Loan modification is a complicated process involving consultation with a lender, broker or bank along with the required paperwork. Before applying for a loan modification, homeowners need to make sure they have the proper documentation.

• Paperwork: For loan modification approval, homeowners must provide bank statements, a financial statement (these can be bills, unexpected expenses or other documentation of financial changes), hardship letter, proof of income and tax return information. This paperwork is required from all lenders, but specific banks and lenders may ask for additional information.
• Communicating with lender/broker/bank: Loan modification can only happen after consultation with someone in charge of the loan. Should the homeowner wish to deal directly with a bank or lender or to work through a broker, they need to communicate clearly with their contact to make sure they go through all the right steps of the application process.

Loan modification will not be granted without a convincing letter of hardship from the applicant. This letter explains the applicant’s reasons for needing a loan modification. It should describe the specifics of the applicant’s financial situation and contain a few key elements.

• Identifying information: The first item of the hardship letter should be the applicant’s identifying information: name, address, phone number, email address and loan account number.
• Involuntary reductions of income: Any changes of income outside the applicant’s control—lay-offs, reduction of wages/hours, death of a borrower, disability, serious illness, divorce, etc.—are considered involuntary reductions of income. These should be listed and articulated clearly in the applicant’s hardship letter.
• Unavoidable expense increase: Unexpected medical expenses, damage from natural disasters, increases in property taxes or adjustable interest rates, unavoidable childcare expenses and other expenses that cause financial stress should appear in the hardship letter.
• Repayment plan and budget: Applicants should include a detailed plan for how the loan modification will help them. A proposed budget detailing plans for repayment as well as any mention of money currently set aside to pay to the lender as part of this plan. This information needs to be as comprehensive, specific and reasonable as possible. An accurate and clear payment plan increases the likelihood of approval.

The Home Affordable Refinance Program, or HARP, was instituted by the Federal Housing Finance Agency (FHFA) in 2009 to help homeowners refinance their homes to better match their homes’ worth in the wake of the 2008 market crash. HARP has several requirements that must be met before its loan modification service is granted.

• Loan acquirement date and type: A homeowner is only eligible for HARP if they acquired their loan on or before May 31, 2009—essentially before the market crash. The loan must also be owned by either the Federal Home Loan Mortgage Corporation (Freddie Mac) or the Federal National Mortgage Association (Fannie Mae). Both the Freddie Mac and Fannie Mae websites have loan look-up tools for homeowners looking for HARP eligibility.
• Loan-to-value ratio: The homeowner’s current loan-to-value (LTV) ratio must be greater than 80 percent. LTV is calculated comparing the amount owed on the loan against the house’s actual value. For example, if the homeowner bought a house for $150,000 and post-crash, the house’s value dropped to $125,000, that owner’s first mortgage LTV would be 120 percent, making this homeowner eligible for HARP. LTV calculators can be found on almost any loan website.
• Current standing on applicant’s mortgage: An applicant must be current on their mortgage payments. There must be no late payments in the last six months and no more than one late payment in the last 12 months. The home in question must also be the applicant’s primary residence, a one-unit second home or a one- to four-unit investment/rental property.
• Deadline: The current deadline to apply for HARP is September 2017. The original end date was December 31, 2016, but the FHFA extended this deadline to September 2017.