Can a Home Loan Be Modified Without You Missing a Payment?

Published on Jan 03, 2014 06:00 am

If meeting your mortgage’s monthly payment is a burden, you may be able to get help. A government program referred to as the Home Affordable Modification Program (HAMP) helps your lender change the terms of your loan if you’re having trouble meeting your obligations. With a loan that isn’t HAMP-eligible, you may also be able to work out an arrangement with your lender.

To Pay or Not to Pay

When the real estate crisis started, it wasn’t always easy for a homeowner to qualify for home mortgage modification loans. In some cases, the homeowner’s ability to make their monthly payment was evidence that the loan didn’t need modification, regardless of what you had to do to make the payment. HAMP was created to provide a possible solution for homeowners with financial hardship before defaulting or foreclosing on their home loan. It also expanded the number of homeowners eligible for a home mortgage modification and set a standard for guidelines. As such, it’s now possible to get modification without a missed payment, especially with a HAMP-eligible loan.

Eligibility for HAMP

To be eligible, your mortgage needs to have been taken out on or before January 1, 2009, and you need to be experiencing a financial hardship that puts you at risk of falling behind on your payments or that has already caused you to fall behind. While the government doesn’t have an absolute standard for hardships, some of the hardships outlined include reduced household income, higher monthly expenses or running out of cash reserves.  Eligibility requirements also take into account how much you owe on your home and proof of sufficient income, among others. Criteria are based on guidelines set by HAMP and ultimately, the homeowner needs to check with their lender to see if they qualify.

Modifications and Your Credit

When you meet with you lender to review your qualifications, you should ask how they intend to report the loan modification to the three credit bureaus. Furthermore, if you miss payments before you get your modification, those missed payments could have a significant negative impact. If you aren’t able to modify your loan and you go through a foreclosure because of it, your credit will be substantially damaged. As such, getting a modification may not only save you money, it can save your credit.

Interest Rate Reduction

Sometimes, if you have excellent credit and a strong payment history but your loan’s interest rate is above market, your lender may be willing to modify or refinance the loan. If you can save money every month by refinancing to a lower interest rate, you may want to contact your lender. Some lenders will modify the terms of your loan agreement and lower your rate to keep your business.

Whether you decide to enter into a home mortgage modification, choose to refinance or keep the mortgage terms you have, be sure to thoroughly research all your options to make the right choice for you and your situation. A home mortgage lender or financial advisor would be good resources to start with. You can also prepare yourself by checking your own credit report to make sure there are no surprises when you meet with your lender or advisor. Remember, checking your own credit report doesn’t hurt your score.

About the Author
Solomon Poretsky has been a writer since 1996, with experience in the fields of financial services, real estate and technology. Poretsky holds a Bachelor of Arts in political science from Columbia University.

This article is provided for general guidance and information. It is not intended as, nor should it be construed to be, legal, financial or other professional advice. Please consult with your attorney or financial advisor to discuss any legal or financial issues involved with credit decisions.

Published by permission from, Inc.  © 2014, Inc.  All rights reserved.

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