August 25, 2019

Mortgage Loan Modifications: Quick Facts

Who is eligible for mortgage loan modifications and how are the mortgage payments lowered?


Homeowners struggling to make mortgage payments have two mortgage loan modification programs available. If you are behind on your mortgage payments, you are eligible to apply for the “loan modification” program. If you have not yet missed a mortgage payment, but your mortgage payments are over 31% of your monthly income, you are eligible to apply for the “refinance” program.

Home buyers that bought investment properties, multimillion dollar homes, or put false information on their mortgage documents will not qualify for the loan modification programs. Applicants are only eligible if they prove that they:

  • have endured serious hardship; declines in income; increases in expenses; and/or high mortgage debt compared to income
  • are facing an interest rate hike
  • owe more than their house is worth


If you are eligible for one of these programs, your mortgage payments will be lowered to no more than 31% of your monthly income through lowered interest rates and government support.

The interest rate on the loan must be lowered to meet this requirement, but it cannot fall below 2 percent. If the mortgage payment cannot be lowered enough by reducing the interest rate, then lenders can extend the term up to 40 years. The new interest rate on your loan will be in place for five years and will then increase by 1% every year after until it is back to the original rate.

Loan servicers must only reduce the total amount of your mortgage payment to 38% of your monthly income and then the government will subsidize loans so you only pay 31% of your monthly income.

If you are interested in mortgage loan modification and would like advice regarding your particular case, we welcome you to contact us.

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