Who Qualifies for a Mortgage Loan Modification? Do You Have To Pay Late?

Q: How do I know if my mortgage loan is held and serviced by my lender or my loan is owned by a pool of investors? Why is it that you have to be in financial trouble with your mortgage loan before you can get any help with a loan modification?

A: You may be able to find out whether your mortgage loan is only serviced by your lender and owned by others by calling your lender. Over the last decade, more loans were given to borrowers but ended up being serviced by one of several loan servicing companies. The actual loans were sold off in bits and pieces to investors in the United States and around the world.

The servicer has the right to receive payments on the loan but does not necessarily have the right to modify the mortgage loan terms. If you call up your lender and are told that they own the loan, you have a better chance of having that lender work with you to refinance or modify that loan.

There are millions of borrowers in trouble today. Many of them have failed to make several payments on their mortgage loans. Others have quit paying their properties, moved out, and have mailed their keys to their lenders in what is now known as “jingle mail.” Still other homeowners are in trouble due to a job loss or medical bills but are current with their payments.

The government has set up various plants to assist homeowners with their mortgage problems. The Making Home Affordable plan that the Obama administration has enacted does not require homeowners to have failed to have missed loan payments to their lenders. The plan is voluntary, which means that while your lender may participate, it may not subscribe to the entire plan.

So many people are in financial trouble right now that many lenders are handling the worst cases first and do not appear to have the manpower to work with borrowers who are not “in trouble” today. In the last several months, readers have consistently said that their lenders won’t work with them unless they are late in their payments. It may be that lenders want to know that they are working only with the most critical cases first and don’t need to work with those cases where borrowers are current in their payments.

Or, perhaps it is that the Making Home Affordable plan in its original inception was designed to help borrowers who were late on their payments. More recently, the plan has been changed to accommodate those who are on-time with their payments but are facing tremendous financial difficulties.

Certainly lenders know they have a problem when a borrower stops paying on his or her loan. But the lender may think everything is fine when the loan is current. Individuals working with troubled borrowers seem to confirm that lenders aren’t yet working with borrowers that are current in their loan payments.

Some borrowers when they hear that they must stop paying on their loans to get lender help, stop making their loan payments. Their credit history takes a big hit, but they feel that is the only way they can get their lender’s attention.

On the other hand, other borrowers are writing in to tell us that even after they stop paying, their lender’s department doesn’t have the staff necessary to work with everyone who is in trouble. If that’s the case, lenders will prioritize their cases and will probably still only work with borrowers that have fallen behind in their payments before tackling borrowers that are current in their loans.

If you can’t get your lender’s attention, the best thing you can do is to keep calling. Let the lender know you want to work things out. Ask what you can do to speed up the process. As is the case so often, the squeaky wheel gets the grease. If you can’t get anyone to respond to you, please call the Hope Now hotline at (888) 995-HOPE. The HUD-certified housing counselors at the other end of the line have backdoor channels that enable them to get through to the right people at your lender’s office.

For more information on loan modifications check out Mortgage Refinance or Loan Modification: Check Web Site for Details.

You can also go to the MakingHomeAffordable.gov website.

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June 10, 2009