Want to modify mortgage? Get a trial run

  • Mortgage modifications may start with a required three-month trial period.
  • A loan may be reported as delinquent during a trial period.
  • Loan servicers typically will suspend foreclosure during a trial period.

As if a borrower didn't face enough hurdles in the quest for a mortgage modification, now there is another. It's the required "trial period" of the federal government's Home Affordable Modification program, and it may be a feature of other mortgage modifications as well. The typical trial period lasts three months and allows the loan servicer to test the borrower's ability to make the modified loan payment before finalizing the modification.

Loan servicers have sent out more than 300,000 letters to homeowners who might qualify for a lower mortgage payment through the government's program, according to the U.S. Treasury Department. If you received such a letter or expect to participate in a mortgage modification program, you may be curious about the trial period requirement. Here are 10 questions and answers:

1. Is a trial period required to get a mortgage modification?
If your mortgage modification is part of the government's program, then yes, a trial period is required. Fannie Mae's guidelines specify a three-month trial period if your loan is already in default when the trial period starts, or a four-month trial period if your loan is current but default is imminent when the trial period starts. Freddie Mac's guidelines call for a three-month trial period. If your mortgage modification isn't part of the government's program, your loan servicer's own guidelines may still require a trial period.

2. What's the purpose of the trial period?
The trial period is intended to test your commitment to make the modified loan payment because the servicer will not want to complete the modification if the new payment doesn't help your situation. The trial period also allows you to make the modified payment while the lender finalizes the paperwork you'll have to sign to complete the modification.

3. Will the trial period stop a foreclosure?
Loan servicers generally won't push ahead with a foreclosure during a trial period. But if you don't complete the trial period, all bets will be off. Foreclosures are subject to state laws that may dictate whether a foreclosure can be delayed during the trial period and how quickly the process may be resumed if the trial period is unsuccessful.


4. Does the trial period have any requirements other than the loan payment?
The loan payment is the primary requirement. However, you also may need to submit other documents, such as proof of homeowners insurance, and you'll need to sign a mortgage modification agreement.

5. Can the loan servicer change the terms of the mortgage modification during the trial period?
Technically, the final modified payment or the terms of the final mortgage modification agreement could be changed at the end of the trial period if the loan servicer discovered major discrepancies between the borrower's initial verbal conversations about his or her income and debts and the borrower's documentation of that information. For practical purposes, this situation is unlikely to occur because most servicers review the borrower's documentation prior to the start of the trial period.

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