Permanent modification of a homeowner’s mortgage to more affordable payment terms or principal reduction through HAMP and non-HAMP private programs from mortgage servicers such as Bank of America, Chase, Citibank, GMAC, Wells Fargo and OneWest are achieved on a daily basis, albeit at a much slower rate than homeowners and investors want.
One of the assumed intents of these payment or principal reduction modifications is to avoid the need for future modification of payment terms referred to as re-modification.
Its less clear why certain non-HAMP modified mortgages are allowed to be re-modified why others are denied, but it is possible to get your mortgage loan re-modified if it has been previously permanently modified under HAMP or non-HAMP private programs.
The reasons why a mortgage servicer should or should not grant a modification are well documented since HAMP guidelines are available to the public on the HAMP administration website.
If a homeowner has a new hardship after making several payments on a permanently modified mortgage, the homeowner may be able to work out a new lower payment after previously being modified.
The homeowner must perform an economic analysis by putting themselves in the position of the mortgage servicer and investor of the loan.
The goal is to show how another loan modification to a lower payment or the same payment when the homeowner is behind, is less costly than choosing a foreclosure or short sale.
For example, if you already have a 2% rate that is fixed for between 1 to 5 years, then you may already be at the lowest that you can go if this payment is already below 38% of your gross monthly income.
However, if you are finding yourself in a position where you can’t make your mortgage payments after your mortgage payment terms have been modified, there are a couple key questions you can ask yourself when you go to decide what to do.
First, take a look at the bigger overall financial picture. See what you can afford to spend each day, each week, each month so that you have 1% to 10% left over of your net monthly income for savings.
This is a critical step for those who don’t have access to the safety net of a credit card by showing the servicer that you can budget monthly expenses and live within your means by not spending more than you earn.
If you do your own analysis and see you are running a deficit in your own budget, then you must isolate how to become balanced and solvent to avoid becoming bankrupt or homeless.
If you are unemployed, look into becoming self-employed, and doing whatever you can to break the grip of a 9-5 employee mindset by trying to create your own income generating business and try something new.
Ask yourself what your mortgage payment would be if it were 31% of your gross household monthly income, knowing that what is considered affordable is 31% to 38% of your gross monthly income to cover your mortgage payment, property taxes, hazard insurance, or home owner’s association dues on a monthly basis.
If your answer is something less than 31% of your gross income is affordable, then you may have difficulty getting re-modified unless you can show other reasonable factors why you should be re-modified.
The economic impact of a re-modification of a permanently modified loan is paramount to the decision maker at your mortgage servicer and investor who decide to re-modify or not.
If you are not late on your modified mortgage payments and you approach your mortgage servicer without knowing what monthly mortgage payments are affordable yet financially profitable to them from their perspective, you are fighting an uphill battle.
Another reason your mortgage payment can be modified after it has been previously modified is because of a servicer’s mistake.
If you can show the servicer made a serious mistake in issuing you your mortgage modification, because they made a payment increasing modification that was higher than 31 to 38% of your gross monthly income, then you have a good chance of getting re-modified just because the assumed intent is to make sure you make your payments on time again.
A homeowner seeking to re-modify, must show the mortgage servicer why it makes sense to re-modify a loan that has already been modified for economic or erroneous reasons as described above.
Having a payment history of at least 3-6 months or 12 months of “on time” payments establishes trust and credit with the mortgage servicer and investor of your mortgage, and is required by investors to show good faith and stability of payments to pay back the loan.
In summary, the most important question a homeowner can ask themselves is if it is worth it from the investor’s perspective to re-modify a mortgage that had already been modified before.
The most important factors are payment history of the loan since the previous modification and any new hardship or defect in the loan that would make it economically profitable or less costly to re-modify versus foreclosure when the investor of the loan and the mortgage servicer are deciding what to do.