Mortgage Modification Program or Refinancing: Is There a Difference?

With the foreclosure crisis still looming overhead until the recession comes to an upswing, the topic of a mortgage modification program will never get old.  Truthfully, I was a Loan Mitigation Specialist for over 25 years, and there’s nothing new in the way of mortgage modification programs.

The big difference is that the federal government sees borrowers stepping into a mortgage modification program as a win-win situation for everyone–borrowers, lenders, the economy, and yes, even politics.  The confusion among borrowers regarding the difference between a mortgage modification program and refinancing is common.

Mortgage modification programs do operate much the same way as a refinancing.  However, the people signing up for a mortgage modification program, for the most part, are in default of their loan or just about there.

A mortgage modification program’s primary concern is that no one loses money in the deal.  Truthfully, if the market were different and foreclosures meant a $50,000-$60,000 profit instead of loss for the banking and lending institutions, you might not ever be accepted into a mortgage modification program.

For those of you not late or in a financial crunch, refinancing may be the way to go.  If you’re experiencing a financial hardship that prevents you from refinancing, you want to look at a mortgage modification program.

The guidelines are going to be a lot different for your mortgage modification program than for a refinancing program.  First, you’ll have to produce a lot more paperwork.  One of the first steps is what is called a Hardship Letter.  This letter helps move your loan through the proper channels.

Then you’ll have to give a financial statement that kind of acts like the opposite of a refinancing financial statement.  To refinance, you want to show that you have plenty of money to pay it.  To qualify for a mortgage modification program, you want to show that you don’t have enough money right now.  However, if you can show an affordable payment that your lender and you agree upon that doesn’t exceed 40{ef6a2958fe8e96bc49a2b3c1c7204a1bbdb5dac70ce68e07dc54113a68252ca4} of your income, you’re in the green on the financial statement.

Another big difference between a mortgage modification program and a refinancing is that you could go anywhere you please for another refinance on your mortgage.  Your current lender must conduct a mortgage modification program, so they can modify the current loan.

Sometimes, with the current state of Wall Street buying and selling mortgage securities, finding who to go to for the mortgage modification program might be tricky.  Always keep in constant contact with your lender anytime you receive any kind of correspondence and you should be able to avoid this problem easily.

After you decided the mortgage modification program is the right way to go, you’ll need to decide if you need help doing the mortgage modification packet.  In all likelihood, you do.  However, hiring an attorney or specialist costs about $3,000-$4,000.  If you decide to go the DIY (do-it-yourself) route, you may want buy a DIY mortgage modification program kit.  It will be worth the investment.  One mistake could mean months of your application sitting on a Loss Mitigation’s backed up pile of problems.