Home Loan Modification Laws

Knowing your home loan modification laws is vital to ensuring success in your mortgage modification. Beyond the rules and qualifications, one must know how the government and lenders work together in implementing the rules, how the guidelines are set, and what various home loan modification laws can mean for them. Of course, the laws vary from state to state, so it’s important to find local resources to help you stay informed. Here’s a quick guide to help you get familiar with federal home loan modification laws.


State laws

In many states, lenders are required to send foreclosure or default notices at least a month or so prior to the foreclosure date. Often, this is when most homeowners take steps to get a loan modification. However, some states, such as California, have passed new home loan modification laws that require lenders to call the borrower and discuss loan workout options before going into foreclosure. If you’re having trouble keeping up, look up relevant laws in your state so you can take action before your lender does.


Eligibility requirements

Qualifications for the government’s loan modification program, the Home Affordable Modification Plan (HAMP), are the same in every state. However, each lender and state can set its own guidelines. If your mortgage was originated in a state different from where you live, home loan modification laws usually apply from the state where your loan is. Lenders are usually allowed to set requirements regarding your income, balance, and financial hardship.


Working with third parties

Most people hire a loan modification agent or attorney to help them negotiate with their banks. This is certainly useful and is even strongly recommended by experts, but as the borrower, you must understand the home loan modification laws that govern your relationship with any third party. For one thing, in most states, you are given a three-day period to go over your contract and cancel it if necessary. There are also protective laws that help you avoid loan modification scams, such as the ban on upfront fees. Before agreeing to any third-party service, read the contract and check them against home loan modification laws to make sure you’re dealing with legitimate agents.