Frequenlty Asked Questions

About Mortgage Modification

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Does my mortgage modification control future banks or servicing companies if my mortgage changes hands or is sold or assigned?

Many transfers result in payment processing problems between old lenders and replacement lenders. Payments can be misapplied, returned, or late processed, causing improper mortgage defaults, late charges and credit reporting problems. Problems with escrow payments, insurance payments, and proper allocations to principal and interest can occur each time a mortgage changes hands.

What Is Strategic Default?

Strategic default is a process whereby the borrower purposely misses payments in order to get the the bank’s or mortgage servicer’s attention. This is done in hopes that the lender will wake up and alter the terms of the mortgage, usually by lowering the interest rate and the corresponding monthly payment. Thousands of homes lost in America every week started with a so-called strategic default. 

If there is nowhere else to cut in your budget and you’ll lose your home without a modification (1) get the advice of an experienced professional you can meet with face to face; (2) spend the time to fully analyze your budget today and in the future; (3) understand the exact change you need; and (4) save every missed payment. Read our Foreclosure Process article

What Is Obama’s Mortgage Modification Plan?

President Obama’s loan modification plan (the Making Home Affordable Program) is intended to offer a second chance to homeowners facing unaffordable home loans. It is a standardized plan that seeks to offer a way out of foreclosure for qualified homeowners. Participating lenders are given monetary incentives to offer the plan to interested homeowners. The plan seeks to lower the borrower’s mortgage obligation to 31 percent or less of their gross monthly income. Read about other options for Foreclosure

Do I Qualify for Mortgage Modification?

Anyone at risk of default may be eligible for mortgage loan modification. While there are some guidelines for government programs and private loan modifications, anyone can attempt a loan modification. There is no requirement that your loan be in default. The real question is not qualification but success. There are many factors that go into a successful mortgage modification.

Success in mortgage modification requires a well-conceived financial plan, a well-documented hardship and the persistence to obtain a permanent mortgage modification. Read our Foreclosure Process article

What Is Temporary Mortgage Modification?

“Temporary modification” has become a very common and dangerous obstacle to true long-term mortgage solutions. While the government has encouraged banks to offer temporary mortgage modification through the payment of monetary rewards to the bank, the practice has, in fact, led to a false sense of a “solution” and increased home loss. Trial or  temporary modification is the process by which a bank or lender grants an “interim” or temporary solution or forbearance, whereby they take lesser payments on a temporary basis. It is not a permanent solution and can serve to create a false sense of security and a larger balance on missed or reduced back payments. By offering a temporary “peace” the bank reaps significant financial rewards from the U.S. Government, and the homeowner gets temporary relief while often falling further behind. 

What Is Temporary Mortgage Modification?

Ultimately, the bank ends the trail modification, sends a bill for all the reduced payments and catapults the borrower into foreclosure and home loss.

Homeowners in trouble need to be careful of temporary modifications. If a modification isn’t permanent, it’s rescindable at will by the bank, which then follows up with a full demand for all lowered payments due immediately. Don’t get trapped. It’s a problem, not a solution.

  • Thousands of Connecticut families lose their homes as a result of temporary modification every year.
  • Any modification that doesn’t have a clear finish date at the end of the loan is temporary.

What Is Temporary Mortgage Modification?


  • Modifications that are not in writing are temporary and rescindable at the will of the bank. Be careful.
  • Modifications that are not reflected in continuing accurate monthly mortgage statements are usually temporary.
  • Modifications that are not documented by court order are usually temporary and are extremely dangerous to the homeowner.
  • Modifications that require further paperwork, further review, further submission, or additional court orders are usually temporary, and always worrisome.
  • Trail modifications give a false sense of security that leads to increased home loss.

What Is Principal Reduction during Mortgage Modification?

Principal reduction is generally reserved to circumstances that involve government assistance to the lender and a secondary benefit to the borrower.

Most modifications do not come in the form of principal reduction of troubled residential mortgages and an insistence on this type of relief by the borrower is likely to undermine the entire mortgage modification process.

Principal reduction rarely if ever saves homeowners in trouble.

What Is Principal Reduction during Mortgage Modification?

This is the process wherein the lender agrees to take less than the borrower’s full obligation to the lender on a permanent basis. Principal reduction is extremely rare.   It is generally limited to second mortgages or circumstances where the value of the house is far below the size of the mortgage.  Lenders rarely if ever forgive principal on defaulted first mortgages in Connecticut. Principal reduction is most likely to occur where the borrower can make a substantial cash payment in exchange for a release of a second mortgage. Homeowners in trouble rarely have the cash available for this option, nor would they be well-served to utilize such an option.

Does my mortgage modification control future banks or servicing companies if my mortgage changes hands or is sold or assigned?

The simple answer is YES. New holders or servicers are legally bound by the terms and conditions of a properly modified permanent modification. A permanent loan mortgage modification is a legally binding new mortgage with terms that control and override the original mortgage. These terms will always obligate any future holders or servicers of your mortgage. Be careful about your payments when your mortgage changes banks.