If you've been tempted to skip a few mortgage payments to try to convince your lender to modify your loan, you may want to resist that temptation. Whether your goal is to stave off foreclosure or just make your payments more affordable, experts say deliberate delinquency is not as smart an idea as it may seem.
The bottom line is that:- If you can make your payment, you should do so.
- If you can't, you shouldn't.
- If you're in between, you should get help to assess your situation.
"Back in the day, (lenders) would only provide modifications to people who were significantly behind because that evidenced that they truly needed the loan modified. They were of that mindset, and they didn't realize the enormity of the problem," says Gail Cunningham, a spokeswoman for the National Foundation for Credit Counseling in Silver Spring, Md. "But now they've realized that the logic of making someone become delinquent and dig a deep financial hole before you help them was really not good for anyone."
Loan modifications extended to nondelinquent borrowers
That new thinking can be seen on some, though by no means all, of the lenders' Web sites, which have been updated to suggest, however subtly, that a late payment may no longer be a prerequisite to a loan modification. Here are two examples:
Chase's Web site states: "If you are current on your mortgage, but have had (or are facing) a change in personal circumstances, such as an uncontrollable reduction in income or increase in payment that will create a financial hardship, and feel you are at risk of losing your home, your next step will be to determine if you may qualify for loan modification." Countrywide's Web site states: "If you think you might fall behind on your payments or have already missed a payment, our specialists will work with you to determine your eligibility for one or more of these potential solutions: refinancing, extending the term of the loan, interest rate reductions, temporarily freezing monthly mortgage payments, extended repayment schedules (or) decreasing the principal balance of the loan." Christine Holevas, a spokeswoman for JPMorgan Chase in Chicago, declined to comment on whether homeowners should make a late payment to better their odds of a loan modification. But she reiterated the standard advice that you shouldn't wait until you've missed a payment to contact your loan servicer. Instead, you should pick up the phone as soon as you believe you may be in danger of delinquency."If you think you're in trouble, contact your servicer. You do not have to be late. You do not have to have missed a payment. Contact your servicer so they will know and they can start the process," she says.
Missed payments disqualify borrowersThe federal government's new Making Home Affordable plan may be another reason lenders have tweaked their policies with respect to delinquency and loan modifications. The new plan, which includes a loan modification program and a refinance program, offers lenders new incentives to participate.Next: "... You should be aware that choice will harm your credit score." >Bankrate.com is the Web's leading aggregator of information on financial products including mortgages, credit cards, new and used automobile loans, money market accounts, certificates of deposit, checking and ATM fees, home equity loans and online banking fees. Visit Bankrate.com to get the tools and information that can help you make the best financial decisions.
