When loss of income or other financial hardship causes you to fall behind on mortgage payments, the Federal Housing Administration can help you get back on track. The FHA, an agency within the Department of Housing and Urban Development, has long offered financially distressed borrowers options to avoid foreclosure. FHA borrowers can get a loan modification to change one or more of their loan's terms, making the payments affordable. Getting approved for a modification is much like getting approved for a new loan in a purchase or refinance transaction, albeit with key differences and challenges. You must prove you can't afford you current FHA loan, but can afford a modified payment.
Contact your lender by phone or in writing at the first sign of having to miss a payment. You can find the customer service number or address on your mortgage statement or payment remittance coupon. You stand a better chance of receiving a loan modification earlier in delinquent status than later or after the lender has initiated foreclosure proceedings. The loan modification process can take several weeks to several months, depending on the FHA lender's volume of delinquent borrowers in need of assistance.
Complete and return the information your lender requests for the loan modification application process accurately and promptly. Efficient processing of your file largely depends on you meeting tasks by their specified deadlines. Your lender may prescreen you over the phone. Depending on the results of your initial interview, the lender may send you a loan modification package, also known as a hardship package, by mail. The package includes a loan modification application which requires your personal, property, financial and hardship details. You also have to provide a signed and dated letter or affidavit stating the events leading to your financial difficulties, such as job loss, income reduction, medical issues or increased obligations. You must supplement this information with official documents, bills or tangible proof for the lender to review.
Provide access to the lender's appraiser or inspector when scheduled. The appraisal, also known as a broker price opinion, is an event which involves an inspection of your home's interior and exterior to determine its fair market value, whether the home is owner-occupied and in acceptable condition for a loan modification. Your lender must ensure that there is nothing seriously wrong with your home, such as structural damage, safety hazards or other defects that might render it uninhabitable. The FHA typically modifies loans only on homes that are owner-occupied. If you are not living in the home, you must promise to move back in after the modification.
Sign the loan modification agreement with a notary as scheduled by your lender. Once approved for a loan modification, you will have a specified time frame during which you must review and agree to all terms of the new loan.
Karina C. Hernandez is a real estate agent in San Diego. She has covered housing and personal finance topics for multiple internet channels over the past 10 years. Karina has a B.A. in English from UCLA and has written for eHow, sfGate, the nest, Quicken, TurboTax, RE/Max, Zacks and Opposing Views.