When you arrange for a loan modification or remodification, your lender agrees to change the terms of you loan agreement. As with applying for a new loan, no limits exist on the number of times that you can request to have your loan modified. However, making a request and actually reaching an agreement are two different matters, and you may hurt your chances of getting your loan modified if you try to change your loan too frequently.
There are no limits to the number of times you can request a loan modification.
Typical Loan Modification
Typically, loan modifications involve interest rate reduction, principal forgiveness or an extension of the loan term. Most people apply for modifications if their mortgage payment becomes prohibitively expensive due to a change in their financial circumstances such as a job loss. A lender does not have to modify your loan just because you make a modification request.
The federal government partners with several lenders to offer modification programs such as the Making Home Affordable Program, but these plans are limited to people who are current on their mortgage and whose mortgage debt exceeds the property value. Other lenders offer modifications on a case-by-case basis.
Evidence of Income
Generally, lenders only agree to loan modifications if the modification makes more financial sense than foreclosing on the distressed owner. However, lenders do not just change your mortgage term based upon the details of your request. You must provide the lender with documentary evidence of your income and assets. If you cannot provide the lender with evidence of sufficient income to afford even the modified or remodified loan, then the lender will not modify the loan.
You can reapply as frequently as you like, but you will not benefit from doing so unless you can provide further documentary evidence to prove to your lender that you can afford the modified loan. Conversely, if you prove you can modify the loan one month, do not expect the lender to allow you to remodify it in order to get a lower payment during the next month.
Credit Score Changes
Your credit score changes every time that your creditors provide the credit bureaus with updated information about your existing debts. Assuming that you pay most of your bills on a monthly basis, then your credit score changes at least once a month. If you are declined for a loan modification due to your credit, your score may change slightly the following month, in which case you could reapply.
However, your credit score drops every time that you apply for credit, and frequent credit inquiries cause your score to drop a lot. Therefore, the more you reapply, the more harm you do to your credit score and your chances of getting approved. You should wait several months before reapplying if your credit score was the reason for the original declination.
Considerations to Keep in Mind
If your lender agrees to modify your loan, you can apply to have it modified again at any time, but bear in mind that lenders reluctantly agree to modifications in the first instance so your chances of getting a second modification are even slimmer. Your lender may feel that you are simply trying to avoid paying your debt by constantly renegotiating the terms so that you pay less and less towards the loan.
Furthermore, many loan modifications begin on a trial basis, and if you reapply for another modification during the trial term your lender may decide to to scrap the original modification and restore the normal terms of your loan.