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Find the Best Loan Modification Companies

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by Clark Kendall Personal Finance Expert

A loan modification company can change the terms of your loan to lower the monthly payment. If you’re having trouble keeping up with a mortgage, read this guide to find the best loan modification companies for you. We compared mortgage loan services that specialize in modifications, forbearance plans, short sales, deed-in-lieu and foreclosure avoidance.

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    AUTHORIZED PARTNER
    Quicken Loans
    Read 5,547 Reviews

    Offers conventional mortgages and FHA, VA and jumbo loans. Refinancing options available to lower payments, change terms or take cash out. Fast online application through Rocket Mortgage. Closing costs of 3% to 6%.

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      LendingTree
      Read 1,540 Reviews

      Compares rates and quotes from multiple lenders for a variety of loan types. Free services. Use of the site doesn’t affect credit score. Provides a list of loan options tailored to the user’s situation.

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        AUTHORIZED PARTNER
        Community Loan Servicing
        Read 449 Reviews

        Mortgage servicer approved by Fannie Mae and Freddie Mac. Available nationwide and in Puerto Rico and Guam. Provides online account management and educational resources. Supports an education-focused nonprofit.

        Select Portfolio Servicing
        Read 723 Reviews

        Founded in Salt Lake City in 1989, Select Portfolio Servicing, Inc. (SPS) is a mortgage servicer that specializes in single-family residential mortgages. SPS offers assistance with HAMP, HARP and other loan modification services.

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        Carrington Mortgage Services
        Read 871 Reviews

        Offers wholesale lending and mortgage services directly to consumers. Available services include refinance and loan modification options, conventional loans, FHA loans and VA loans.

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        Specialized Loan Servicing
        Read 469 Reviews

        This third-party mortgage servicer offers mortgage assistance programs including loan modification, forbearance plans, short sale, short pay and temporary payment suspension.

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        Midland Mortgage
        Read 144 Reviews

        This division of a federally chartered savings association offers mortgage assistance and loan modification.

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        iFreedom Direct
        Read 31 Reviews

        iFreedomDirect has been helping borrowers finance their homes since 1996. Specializing in FHA loans and loans for veterans, iFreedom Direct has headquarters in Salt Lake City with licensed loan officers operating nationwide.

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        Trinity Debt Management
        Read 11 Reviews

        The Trinity Debt Management Program (DMP) helps consumers make informed financial decisions to take control of their repayment plans. The Trinity DMP reduces debts to one monthly payment, decreases interest rates and more.

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        New American Funding
        Read 7 Reviews

        Offers mortgages and reverse mortgages for a wide range of credit scores. Serves 49 states and has physical branches in 32 states. Seller and servicer of Fannie Mae, Freddie Mac and Ginnie Mae. APRs range from 2.606% to 3.487%.

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        About loan modifications

        What is a loan modification?

        A loan modification is anything that changes the original terms of your loan. Unlike mortgage refinancing, which replaces your loan with a new mortgage, a loan modification simply changes the terms of your existing mortgage. Some ways your loan can be modified include:

        • Principal reduction
        • Postponing payments
        • Extending your term’s length
        • Lowering your loan’s interest rate
        • Going from a variable interest rate to a fixed interest rate

        How does a loan modification work?

        A loan modification doesn’t replace your existing loan with a new one, like a mortgage refinance. Instead, it changes the terms for your mortgage to make it more affordable for you. You can either get a lower interest rate, change the payment terms so you spread your payments out for longer, which will result in lower monthly payments, or switch from an adjustable rate to a fixed rate. You’ll need to work with your lender to see what options you qualify for and which one makes the most sense for you to allow you to stay current on your mortgage payments.

        What is a hardship letter?

        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.

        Is loan modification worth it?

        Loan modification helps homeowners lower their monthly mortgage payments. A loan modification can keep homeowners from defaulting on their loan and give them some breathing room to get back on track repaying their mortgage. It’s a more appealing alternative to foreclosure or bankruptcy and lets you stay in your home while you sort out your finances.

        Types of loan modification

        Flex Modification program

        Fannie Mae and Freddie Mac implemented the Flex Modification program in 2017 to replace the HAMP loan modification program that expired at the end of 2018. These programs are designed to help homeowners who are more than 60 days delinquent on their mortgage payments to get some relief and avoid foreclosure or bankruptcy. Find out more about how to apply for Flex Modification if you have a Fannie Mae loan or Freddie Mac loan.

        Forbearance agreement

        If you don’t qualify for loan modification, or if you just need short-term relief, you might qualify for a mortgage forbearance agreement. This isn’t a loan modification but rather an agreement between you and your lender that allows you to miss payments for an agreed-upon period of time. Because you'll still accrue interest, you should only consider this if you are in a short-term cash crunch and expect to be back on your feet relatively soon.

        Repayment plan

        This also isn’t a loan modification but rather a plan you make with your lender to catch up on your missed payments. Your lender will spread out the amount you owe over a period of time. During that timeframe, the lender will add on the balance due to your existing mortgage payment. Usually repayment plans run around three to six months. At the end of it, you should be current on your mortgage.

        Loan modification FAQ

        Can you be denied a loan modification?
        Yes, you can be denied a loan modification on your mortgage. There are a number of reasons you may be denied, including an incomplete application, inability to afford a modified payment or insufficient demonstration of a hardship. Remember, you can appeal a denied loan modification by contacting your servicer within 14 days of the denial. The servicer then must respond in writing within 30 days.
        Who qualifies for a loan modification?
        Not everyone qualifies for a loan modification. Generally, you need to:
        • Be delinquent on your mortgage payments or in danger of defaulting.
        • Demonstrate a financial hardship (e.g., job loss, illness).
        • Send in all required application materials to your servicer.
        • Complete a trial period to show you can afford a new monthly payment and pay on time.
        If you have questions about whether a loan modification is possible or best for your situation, you can get free assistance from Department of Housing and Urban Development-approved counselors by calling 888-995-HOPE (4673), 24/7, year-round.
        Do you have to pay back a loan modification?
        Yes, you still have a mortgage to pay back — it has just been modified from the original version with different terms that make that loan more affordable.
        How long does a loan modification last?
        Each loan modification is different. A modification may or may not change the loan term in your original mortgage. Some modifications extend the number of years you have to repay the loan, while others may leave the term alone and only reduce your interest rate and/or reduce your principal.
        What documents are needed for a loan modification?
        Your servicer will provide specific instructions on how to fill out a loan modification application. You will likely need to include information about your income, expenses, assets and liabilities. You will also have to include proof of hardship or a letter about your financial circumstances.

        After you send in the application and documents, the mortgage company will contact you to let you know if anything is missing.

        Can I get a second loan modification?
        Yes, it may be possible to get a second loan modification if you are having difficulty making payments on your mortgage. Twice-modified loans are less common than once-modified loans. Contact your servicer to learn how to apply for another loan modification.
        How long is the loan modification process?
        The loan modification process can take anywhere from 30 days to a year or longer. When you first contact your mortgage servicer to ask about a modification, ask how long the process usually lasts. You can do your part to avoid a slowdown by filling out the application correctly and thoroughly and including all requested documents.
        How do you negotiate a mortgage modification with your lender?
        To put yourself in the best position to qualify for a mortgage modification, follow these tips:
        • Communicate honestly with your mortgage company about your situation and desired modification terms.
        • Speak with a Department of Housing and Urban Development-approved housing counselor and/or an attorney.
        • Complete a loan modification application, including proof and/or description of financial hardship and all required documentation.
        • Successfully complete a trial period, making your payments in full and on time.
        If you are denied a mortgage loan modification, you can ask for an appeal within 14 days.
        Is a loan modification bad for your credit?
        It depends on how your modification is reported to the credit bureaus. Before you accept the terms of a loan modification, read over the terms carefully and ask the mortgage company how the loan modification will be reported. Any reporting of late or incomplete payments will have a negative effect on your credit.

        Not sure how to choose?

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          by Clark Kendall Personal Finance Expert

          Clark Kendall has over 30 years of domestic and international investment and wealth management experience, focused on serving Middle-Class Millionaires. He is a Chartered Financial Analyst (CFA), Accredited Estate Planner (AEP) and Certified Financial Planner (CFP). He is the president and CEO of Kendall Capital in Washington, D.C., and a member of the Washington Society of Chartered Financial Analysts.

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