What Is a Streamlined Loan Modification?

by Janet Hunt ; Updated July 27, 2017
Read any loan paperwork carefully before signing.

The number of delinquent mortgages skyrocketed during the economic recession that began in 2008. The same year, the Federal Housing Finance Agency (FHFA) implemented a simplified loan modification program. The FHFA's aim is to reduce the number of foreclosures and get homeowners financed with mortgages they can afford.

Significance

The streamlined loan modification program changes existing terms to the original mortgage such as interest rate, maturity date or unpaid balance, helping homeowners refinance with terms that will help avoid foreclosure.

Features

Less documentation is required for processing a streamlined loan modification, thereby reducing the time required for approval of loans.

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Beneifits

With a streamlined loan modification, an affordable monthly payment plan is defined as that which does not exceed 38 percent of the monthly gross income for the household. If the homeowners are still unable to afford their monthly payment, their case can be reviewed and their payment may be lowered.

Eligibility

To be eligible for a streamlined loan modification, homeowners must have missed three consecutive payments.

Considerations

A streamlined loan modification can help homeowners avoid foreclosure and remain in their homes. Homeowners must be able to afford the payment decided upon in the loan modification agreement.

About the Author

Janet Hunt has worked in the insurance industry for more than 15 years. Now serving in online marketing, she also has expertise in business and finance topics. Hunt received her Bachelor of Business Administration from the University of Phoenix. Hunt has also worked as a food services manager for a high school cafeteria and received her school nutrition certification in 2002.

Photo Credits

  • Image by Flickr.com, courtesy of Dwonderwall
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