If you are paying two mortgage loans on your home -- a larger first mortgage and a much smaller second -- your second mortgage loan most likely comes with a higher interest rate. This rate, along with a financial hardship that you may recently have suffered, might make it difficult for you to make the payments on your second mortgage loan. If this is the case, it's time to ask the servicer of your second mortgage loan for a loan modification or payoff.
Make copies of the paperwork that you'll use to convince the servicer of your second mortgage loan that your gross monthly income has declined and your monthly debt obligations have risen, making it impossible for you to come up with your second mortgage payments. This paperwork includes copies of your two most recent paychecks (if you are still receiving them), your most recent federal income tax return, credit card statements and other loan statements.
Call the servicer of your second mortgage loan. Explain that your employer has recently cut your weekly hours, that you've lost your job or you've suffered a serious illness or injury that is keeping you from working. Tell your servicer that this financial hardship has made it impossible to make your payments on your second mortgage loan. Ask for a reduction in the loan's principal -- which would lower your monthly payments -- or an immediate payoff of your loan, which would erase the loan payment completely.
Compose a financial hardship letter. Basically, this means putting into writing the reasons why you can't afford the payment on your second mortgage loan. Also include in the letter that you are seeking to have the principal balance of your loan reduced or your entire loan paid off.
Send your servicer the paperwork you compiled in Step 1 and your financial hardship letter. Your lender will study this paperwork to determine if you qualify for either a payoff or a reduction.
Agree to the solution suggested by your loan servicer if it determines that your financial hardship does make it impossible for you to make your payments. Only in the rarest and most severe of financial hardships will your servicer approve an immediate payoff of your second loan. More commonly, your lender may reduce the principal balance of your loan, lower your loan's interest rate or lengthen the life of your loan. All of these options will lower your monthly payment.
Don't hesitate to call the servicer of your loan if you are struggling to make your payments. The longer you wait, the more payments you are likely to miss, damaging your credit score.
- HUD: Modification Questions
- Bankrate.com: Mortgage Modification Help
- Consumer Financial Protection Bureau. "What's the Difference Between a Mortgage Lender and a Servicer?" Accessed Dec. 16, 2019.
- Consumer Financial Protection Bureau. "What Happens If the Company That I Send My Mortgage Payments to Changes?" Accessed Dec. 16, 2019.
- Don't hesitate to call the servicer of your loan if you are struggling to make your payments. The longer you wait, the more payments you are likely to miss, damaging your credit score.
Don Rafner has been writing professionally since 1992, with work published in "The Washington Post," "Chicago Tribune," "Phoenix Magazine" and several trade magazines. He is also the managing editor of "Midwest Real Estate News." He specializes in writing about mortgage lending, personal finance, business and real-estate topics. He holds a Bachelor of Arts in journalism from the University of Illinois.