Mortgage Modification Options

Authored By: Iowa Legal Aid LSC Funded


I am having trouble paying my mortgage. Can I get the mortgage company to lower my payments?
Many mortgage companies have programs available to help you. These programs help homeowners who are having trouble making their mortgage payments. You can contact your mortgage company to discuss what options may be available.

Can I get help working with my mortgage company?
Yes. You can contact Iowa Mortgage Help at 1-877-622-4866. Iowa Mortgage Help (IMH) can help you work with your mortgage company. A HUD-certified housing counselor at IMH can help you to work on a housing budget and apply for a loan modification.

Does the mortgage company have to modify my mortgage or consider other options?
Normally, a mortgage company does not have to change the terms of a home loan. However, there are a number of situations when a mortgage company must try to change the terms of your home loan to make it more affordable for you.

Some home loans are subject to special requirements. For example, many government programs that subsidize or insure home loans require special services for those loans before any foreclosure can happen. The most common examples are those that apply to Federal Housing Administration loans (FHA loans). Other government subsidized or insured loan programs have their own requirements. The United States Department of Veterans Affairs (VA) and the United States Department of Agriculture (USDA), for example, has servicing rules for their loans.

What if I don't have a loan that is insured or subsidized by a government agency?
Many national loan servicing companies have also signed contracts to participate in the Home Affordable Modification Program (HAMP). If the servicer of your loan has agreed to participate in HAMP, then you may be eligible for a loan modification under that program. The servicer of your loan is normally the mortgage company that you make your payments to. The servicer of your loan may be different from the owner. If the owner of your loan is Fannie Mae or Freddie Mac, then you are also eligible to apply for HAMP. If Fannie Mae or Freddie Mac owns your loan, then it does not matter who your loan servicer is. All Fannie Mae and Freddie Mac loans are eligible for HAMP.

How do I find out if Fannie Mae or Freddie Mac owns my loan?
You can use the online lookup tools:

My loan is not owned by Fannie Mae or Freddie Mac. How do I find out if my servicer participates in the Home Affordable Modification Program?
You can go to the MakingHomeAffordable.Gov website to find contact information for all mortgage servicers who participate in HAMP.

How can I apply for the Home Affordable Modification Program?
There are at least three ways to apply for HAMP.

  1. You may ask your mortgage company for the form to apply. Your mortgage company should ask you if you want to apply if you fall behind on your mortgage. However, you can ask your mortgage company for a HAMP application if they have not provided you with one.
  2. You may get a HAMP application at the Making Home Affordable website. The website includes details about program eligibility and about what information to include in your application.
  3. You may contact the Iowa Mortgage Help. IMH will help you apply for HAMP with your mortgage servicer.

Am I eligible for the Home Affordable Modification Program?
HAMP is only available if the mortgage is for the home you live in. HAMP is only available if the mortgage is less than $729,750. The mortgage must have been given prior to January 1, 2009. You are only eligible if you are behind in your mortgage payment or at risk of getting behind in your payments.

HAMP is designed to lower your mortgage payments to less than 31% of your gross monthly income. For HAMP, your mortgage payments include principal, interest, taxes, and insurance. If you do not have an escrow account for insurance and taxes, then one would have to be created for you. If your payments are already less than 31% of your gross monthly income, then you will not be eligible for HAMP.

How does a mortgage payment get lowered under the Home Affordable Modification Program?

  • First, the mortgage company will reduce the interest rate on your loan. The interest rate may be lowered until your payment is 31% of your gross income or until the interest rate is 2%.
  • Second, the mortgage company may extend the term of your loan. The term of your loan may be extended until your payment is 31% of your gross income or until your loan is extended to a 40 year term.
  • Third, the mortgage company will defer principal until the end of your mortgage.
    • The mortgage company may defer enough principal to get your payment down to 31% of your gross income;
    • There are limits to how much principal the mortgage company is required to defer; and
    • You may not qualify for a loan modification if your income is too low when compared to the amount of principal that you owe on your house.

Would my loan be modified immediately?
You must make three trial payments before your modification becomes permanent under HAMP. You will not have to make a down payment or other lump sum payment. The trial payments are normally the same as your projected permanent payments. The trial payments are 31% of your gross income. After you make the trial payments, you should be given a permanent loan modification agreement to sign. After you sign the final HAMP modification agreement, your loan modification will be permanent.

Will my payment increase in the future under the Home Affordable Modification Program?
Your mortgage payment will increase if your taxes or insurance payments increase. However, the principal and interest portion of your payments will remain the same for the first five years after your modification. After five years, your interest rate may go up by as much as 1% per year. However, your interest rate will never be higher than the market rate at the time of your original modification agreement. Normally, your permanent HAMP modification agreement will tell you the timing and amount of any future interest rate increases.

What if I have more questions about the Home Affordable Modification Program or need help?

  • You may consult the Making Home Affordable Program website:
  • You may contact a HUD-certified housing counselor by contacting Iowa Mortgage Help: 1-877-622-4866
  • You may contact Iowa Legal Aid if you need a lawyer but can't afford one. Providing help to Iowans who face housing issues is a priority for Iowa Legal Aid. Call 1-800-532-1275 (se habla español) to find out if free legal help is available for your case.

Last review 9/21/12

This information is not a substitute for legal advice

Last Review and Update: Sep 21, 2012

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