Should I Stop Paying My Mortgage To Qualify For a Loan Modification?

You don't have to be behind on mortgage payments to get a loan modification. And it's a bad idea to default on purpose.

By , Attorney

Question

Right now, I can afford my monthly mortgage payments on my home, but I probably won't be able to in the near future. I read on the internet that I should stop making payments on my loan so I could qualify for a loan modification and avoid a foreclosure.

Is this information correct? Do I really need to stop paying my mortgage to get a modification?

Answer

No! That advice is really outdated. If you follow it, you could face some very serious negative consequences, covered in more detail below.

Should I Stop Paying My Mortgage to Get a Loan Modification?

Back in the day, it was common for mortgage servicers to recommend you fall behind in payments to get a mortgage modification—even if you could afford to make the payments.

While it's true that, in the past, lenders would only consider giving homeowners a modification if they were in default on their loan, this situation is no longer the case. Now, you can be current on your mortgage payments and still qualify for the vast majority of modification programs.

What Is a Mortgage Modification?

A "modification" is a permanent restructuring of the mortgage where one or more of the terms of the loan are changed so that the payments become more affordable.

For example, the lender might agree to reduce the interest rate or extend the repayment term to achieve this goal.

Getting a Mortgage Modification While You're Current on Payments

Most modification programs require that you show you are in danger of falling behind in payments. But you don't have to actually go into default to qualify.

To qualify for a Flex Modification, for example, you can be behind in payments or show that you're likely to fall behind (you're facing "imminent default") and meet other eligibility criteria. Flex modifications are available to borrowers who have Fannie Mae- and Freddie Mac-owned loans.

To find out if either Fannie Mae or Freddie Mac owns your loan, call your mortgage servicer or use the Fannie Mae and Freddie Mac online loan lookup tools.

What You'll Need to Show to Get a Modification

To be eligible for a mortgage modification if you're up to date on payments, you'll typically need to show that:

  • the home is your primary residence
  • you've gone through a financial hardship (for example, you had to take a lower paying job or you went through a divorce), and
  • that you have enough steady income to make payments under a modification.

Downsides to Deliberately Falling Behind on Mortgage Payments

If you deliberately default on your mortgage payments, you might face one or more of the following negative consequences.

Your credit score will drop. After you miss a payment or multiple payments, your credit score will drop. Once your score falls, it can be difficult to refinance your mortgage, obtain a car loan, or get new credit cards. Even if you subsequently complete a mortgage modification, you'll still have negative marks in your credit file.

Past-due amounts add up fast. If you start skipping payments just to try to get a mortgage modification, keep in mind you'll still owe the amounts you don't pay, plus interest and fees. These amounts can add up quickly. Also, once you fall behind, the lender can charge late fees, inspection fees, and various other charges associated with the delinquency.

The more payments you miss, the more fees and interest will accrue. Being far behind in payments can make it significantly harder to catch up if the lender denies your modification request. Ultimately, it could even lead to a foreclosure.

Contact Your Mortgage Servicer

In general, you should contact your servicer as soon as you think you might be in danger of missing a payment if you want to apply for a modification of your home mortgage.

If you can afford to continue making your monthly payments, you should continue doing so. In all likelihood, you'll be eligible for a mortgage modification even if you're current, so long as you meet all other qualifications and submit all of the required paperwork.

To get help applying for a modification or if you have further questions about the process, consider contacting a HUD-approved housing counselor or a foreclosure attorney.

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