What is a Loan Modification?

Recently, we were asked by local morning talk-radio superstar Darrell Ankarlo at KTAR to be on his show and to briefly talk about the most recent proposal by the FDIC to encourage lenders to modify people’s mortgage loans by guaranteeing against some of the losses.

We noticed a theme among those people who called in: many of them were NOT currently late on their mortgage, but were about to be late on their mortgage due to some kind of hardship. Overall, their questions could be summed up as:

“I am not currently late on my mortgage, but I am not going to be able to continue to make it — what do I do?”

My answer in each case was “make sure that you call your lender and speak with them about your situation and start talking to them about a possible loan modification — where they will modify the terms of your loan to make it more affordable. If you called them last week and they told you that they couldn’t help you, try back again this week. And then next week.”

Why would we encourage people who are struggling to make their payment to call their lender after their lender recently told them that they couldn’t help them?

Because the general attitude is changing (sometimes daily) toward loan modifications and what banks are willing to do. This will even change more dramatically if the FDIC passes their proposed plan.

So if you find yourself having trouble making your mortgage payment, be sure to call your lender. And if your lender tells you that they cannot help you?