A loan modification allows a borrower to make lower monthly mortgage payments by agreeing to a modification of original loan terms. The idea of a loan modification is to allow homeowners struggling to make their payments every month an opportunity to catch up on their loan and recover from their hardship.
Since a loan modification is typically used to help homeowners who don’t make enough money to cover their mortgage payments every month, many wonder why can you get turned down for a loan modification if you don’t make enough money. The answer to the question is simple: because the lender only modifies loans when they think they can still make a profit.
Lenders are only willing to modify a loan so far and are only willing to lower a monthly payment by so much. If the borrower doesn’t make enough money to make monthly payments at the lowest amount the lender is willing to modify to, then in most cases the borrower is just plain out of luck. If the borrower can’t satisfy the requirements to make a lower monthly payment, the lender sees no point in modifying a loan when foreclosure remains a very real possibility for the borrower.
What does all this mean to the borrower? It means that if they make too little money they lower their chances of being approved for a modification because the lender doesn’t think that the borrower will be able to keep up with payments no matter how the loan is modified. It also means that if the borrower makes too much money they can also be denied a modification on the grounds that they should have no trouble making payments. Unfortunately for many borrowers, there is no scale or grid that lenders make public that explains the amount a borrower must make in relation to the amount of their monthly payments in order to be approved for a loan modification.
A borrower’s best bet would be to hire an experienced foreclosure attorney who can review a person’s entire financial history and current financial standing in order to gain an accurate estimate of a person’s likelihood for modification approval. Even though the borrower may be more than deserving of a modification, the attorney could provide a unique third person perspective and offer insight based on their experience with certain lenders. If the attorney feels that the borrower would have a hard time gaining a loan modification from their lender, the attorney could immediately consider alternatives to loan modification that may better suit their client. This will allow the borrower to cut down on the amount of time that is wasted waiting for a decision that is likely to be negative.
Even though a lender may not be likely to modify a loan if the borrower makes too much money, the attorney may still be able to convince the lender that a modification would be in the best interest of both parties through negotiation. This type of negotiation is delicate in that certain pieces of evidence and information will have to be submitted to the lender for review. If the borrower attempts to act as their own negotiator, they may leave out a vital piece of information and ruin their chances for a modification at all.