| Loan modification step-by-step process |
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| Getting started |
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The information below is offered and intended for informational purposes only and should not be construed as legal or professional advice. We encourage you to seek legal help for your particular circumstances.
Obtaining a loan modification is one way to avoid foreclosure and stay in your home; however, the process can be challenging. Loan modifications are often available through your lender/servicer, or you can apply for the federal government's Home Affordable Modification Program (HAMP). Whether you apply for a loan modification with the assistance of a counselor or you decide to do it yourself, there are crucial steps you should take to increase your chances of success.
Before you start, know the following:
- Carefully analyze your financial situation to determine if you can realistically afford to keep your house, even after a loan modification.
- No one can guarantee a successful outcome when requesting a loan modification.
- You do not have to be late on your mortgage payments to obtain a loan modification, but must demonstrate you are at imminent risk of not being able to make your house payments, including property taxes, insurances, and homeowner association fees, if applicable.
- You will have a better rate of success if you submit a complete document package and follow instructions carefully.
- All the submitted documentation will be subject to verification. Make sure your documents are recent, legible, and provide clear and sufficient information.
- Make sure each page is numbered and it clearly shows the loan number and the name of the borrower(s).
- If your application is initially approved, you likely will be placed on a trial period before you are permanently approved for a modification. You must comply with all the conditions before you are approved for a permanent modification.
- Understand the timelines (see bottom of this page) and how the foreclosure process works in Oregon.
- You have rights and obligations. Your lender/servicer must also comply with state's laws before it can foreclose.
- Be proactive, have lots of patience, and don't give up.
- If you decide and hire a private company or individual to help you apply for a loan modification, make sure its registered to do business in Oregon.
For more specific information and assistance, see below.
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| Frequently asked questions |
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I am not delinquent or in foreclosure yet but I am foreseeing difficulties in the immediate future in making my mortgage payments. What are my options?
You may qualify for a loan modification if you can demonstrate and document you are at risk of being unable to make your mortgage payments. For example, your interest rate will change (increase), your work hours will be or have been reduced, you or your immediate family have had a medical emergency affecting your finances, your total household income will be less, your business is or has been suffering losses, or you are aware you will lose your job in the near future because of reasons beyond your control. It is likely your servicer will also want to know if you have used all your savings or cash reserves.
If you are unemployed or have no means to make the payments, you likely will not qualify for a loan modification, regardless how significant those changes could or will be. At a minimum, you should have a reliable and verifiable source of income and not have other significant large debts such as credit cards, car payments, and other obligations. However, if you are unemployed, you may qualify for a forbearance plan.
What does it mean when I receive a Trustee's Notice of Sale or a Notice of Trustee's Sale?
This means that your lender or servicer has started the foreclosure process because you are in default.
What are my options once foreclosure has begun?*
You can still apply for a loan modification and stop the foreclosure process. In addition to the notice of sale, you should have received another notice called "You are in Danger of Losing your Property if you do not take action immediately." If you want to apply for a loan modification, you must respond to these notices within 30 days to the address provided in the forms and send all the requested information as instructed by the lender/servicer. The lender/servicer must notify you within 45 days after receiving all the required information to determine if you qualify for a modification. If you are denied for a loan modification, the lender/servicer should provide you with an explanation of why your application was denied.
The above steps, which the lender/servicer must comply with, are particularly important because five days prior to the sale date (auction date), the trustee will file an affidavit (if the lender/servicer did not postpone the sale) with the county where your house is located explaining in detail how the lender/servicer complied with the law and the above requirements. You can obtain a copy of the affidavit from the county records office where your house is located. Compare the information in the affidavit with your notes and records.
If your loan is insured or owned by Fannie Mae or Freddie Mac, your participating lender/servicer must first evaluate your application for a loan modification to see if it qualifies for HAMP. To find out whether Fannie Mae or Freddie Mac owns your loan, click here.
How can I find out if I qualify for a loan modification?
If you are applying for a modification under the Home Affordable Modification Program, you can take a “self test” to determine if you are eligible.
The next step is to estimate your monthly mortgage payments. To evaluate your projected monthly payments, visit http://www.makinghomeaffordable.gov/evaluator.html.
You can also make a self-evaluation by using the HOPE Loan Portal, a website intended to help you submit your application for a loan modification with the assistance of an approved housing counselor.
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| Applying for modification |
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Step 1. Organize your personal documents. It would be helpful to collect and make copies of the following:
- Last 60 days of proof of income, but no older than 90 days from all borrowers
- Bank statements (two months, six months if self-employed)
- Most recent tax returns
- If self-employed, current year-to-date profit-and-loss statement
- Most recent utility bills
- Documentation of amount of homeowner association dues, if applicable.
Step 2. Compile your application package. If you apply for a loan modification under the Home Affordable Modification Program (HAMP), you can print the forms from the HAMP website. Fill in the information completely and accurately. Do not leave blank spaces or boxes unmarked. The initial package you send to your lender or servicer will include the following documents:
- Request for Modification and Affidavit Form (PMA)
- 4506T-EZ form
- Proof of income (no older than 90 days)
Depending on your situation, your initial package may also include the following:
- Last three months of bank statements; more (often six months) if self-employed
- Last 60 days of paystubs
- Tax returns; past two years if self-employed
- Current Profit and Loss statement, if self-employed
- Copy of property tax bill if you were paying directly
- Copy and proof of hazard insurance policy if you are paying directly
- Most recent utility bills
- Proof of payment of Homeowners Association dues or CCRs, if applicable
If you are self-employed, submit a current and properly documented profit-and-loss statement and your most recent six bank statements to reflect a steady source of income.
Ten days after you send the above information, the lender/servicer will acknowledge receipt of your initial package and may request more information.
If applying for HAMP, you also must include a certification you were not convicted of certain crimes within the past 10 years.
Step 3. Find some assistance. If you cannot get the help of an approved counselor, seek help from or discuss your situation with a family member or trusted friend. It is better to start the process with another trusted person who may have experience or at least be able to discuss your process. You can also contact state staff who may be able to give the information you are looking for or refer you to a trusted source.
Staying organized is important. Make sure your information is complete and you provide any additional information the lender/servicer requests. For example, if the lender/servicer needs an additional paystub or other document, it may be a good idea to send the complete package again either by certified mail or fax. Each page of the documentation needs to be numbered and include the borrowers' last names and the loan number. Make a copy of all the documents and information you send and keep careful records of your communication with the bank or servicer’s representative.
If you successfully submitted and received approval for a trial period under the HAMP, the foreclosure process should be postponed.
Note: If you were denied a loan modification under HAMP, read this FAQ.
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| Foreclosure process in Oregon |
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It is important to understand the process for foreclosures. Below is vital information and dates that you need to know to help you avoid foreclosure.*
- After consecutive unpaid loan payments or other default under the note, a Notice of Default (NOD) will be filed by trustee or lender/servicer or an authorized representative in the county or counties where the house is located.
- Immediately after the filing of the NOD, a Trustee’s Notice of Sale or Notice of Trustee’s Notice of Sale will be sent by both; first-class and certified mail, the homeowner should also receive the following notice: NOTICE: YOU ARE IN DANGER OF LOSING YOUR PROPERTY IF YOU DO NOT TAKE ACTION IMMEDIATELY. This form will be often accompanied by a list of documents needed for an evaluation of a loan modification or other possible solution
- The homeowner(s) have 30 days to respond to the above notices to be considered for a possible solution.
- The lender/servicer will respond with a decision within 45 days after receiving the complete and required information.
- The sale date and all related information should be publicized at least four consecutive times in a local newspaper. The last publication must be no later than 20 days prior to the sale date.
- At least five days prior to the scheduled sale date, the trustee or the lender/servicer authorized representative should file in the county records an affidavit documenting how the lender/servicer complied with all the foreclosure by advertising and sale state laws.
- The title of the property will be transferred to the buyer/new owner or the bank within 10 days. If the homeowner remains in the property, the new owner will have to start the eviction process, also following state laws.
- The foreclosure process from the filing of the Notification of Default until the sale date (auction date) will be at least 120 days.
- At the discretion of the lender/servicer, the sale maybe postponed for up to 180 days. The postponement will be by public proclamation (no notification to the homeowner needed).
* Please note: Effective January 2, 2012, there are substantial changes to the requirements that were required of lenders/servicers. SB 628 (ORS 86.737 Notice to grantor; requirements; additional forms; rules.) was passed by the 2009 Legislature with a sunset on the loan modification request process. On this date, a lender/servicer no longer has to comply with the requirements regarding a loan modification.
The process required by the state will no longer include the option for a homeowner to request a meeting with the lender or to request a loan modification. In addition, the requirement that a lender/servicer file an affidavit of compliance five days prior to the sale date (auction date) will be eliminated. Oregon law still requires that an affidavit of compliance be filed prior to the sale date.
The amended form effective January 2, 2012 is here: foreclosure_warning_form.pdf
Special thanks to the expert counselors who contributed their time and expertise to make this information available.
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