As loan paperwork goes through, keep on paying

As loan paperwork goes through, keep on paying

May 1st, 2010 by Ellen Phillips in Business Ellen Phillips

Does any reader facing home foreclosure and last week's possibility of a loan modification see some light at the end of the financial tunnel? If so, perhaps you've started your necessary paperwork and you're ready for some answers about this venture, thanks to

1. Should you stop mortgage payments during the loan modification application? Nope, this isn't a good idea. If you're in default, the lender may turn a blind eye to your need.

2. Can homeowners who aren't employed qualify for this type of loan? Again, no. A person must be able to pay the new mortgage amount, plus any other essential expenses. Remember, too, you won't be approved unless the lender is stone cold certain you're financially able to follow the new payment plan.

3. Must you worry about late charges, just as with a traditional loan? According to the U.S. Department of Housing and Urban Development, lenders should waive late charges. However, relinquishing the late fees really

does depend upon certain lenders' policies.

4. How long must you wait to be approved? Thirty to 90 days is the average. But don't forget you really have to qualify twice. First, you have to be approved for the program itself, and then you have to complete the 30- to 90-day trial period to show you can keep up with the payments while the mortgage company verifies your information. Even if you make all the payments on time, you can still be turned down for final approval if it finds you don't actually meet all the qualifications.

5. Will loan modification hurt your credit? This is a biggie. None of us wants to do anything to jeopardize our credit rating, especially as it appears the economy is on a slow upswing. Not only will loan modification not adversely affect one's credit, but it actually can help to restore credit. As soon as you begin making payments per the modified terms and conditions, your credit begins to stabilize and rise. Just be careful not to get behind in those monthly payments and certainly don't default on the new loan.

Ellen Phillips is a retired English teacher who has written two consumer-oriented books. Her Consumer Watch column appears on Saturdays in the Business section of the paper. An expanded version is at under Local Business. E-mail her at consum