Loan modifications can be a great option to avoid foreclosure if you are struggling to make your payments. Even if you qualify for a loan modification and your application is approved, the loan modification process isn’t over yet.
Before your loan modification can be officially applied to your mortgage, you must complete a trial payment period to demonstrate your ability to make the lower monthly payments. In this article, we’ll cover what a trial modification is, so you know what to expect.
If you’re going through the loan modification process, a loan modification attorney can guide you through the trial loan modification period to give you the best chance at getting your modification approved. Contact Joshua Denbeaux to learn more about how he may be able to help you.
What is a Loan Modification Trial Period?
After your loan modification is approved, lenders will typically require you to go through a trial payment period (TPP) before the modification becomes permanent. This trial period is designed to show the lender that you can consistently afford the lower monthly payments.
Your lender will provide you with a trial period plan for loan modification that explains:
- How long your trial is (typically three months, but can be up to a year)
- The exact amount of each trial payment
- How and where to send trial payments
The trial mortgage payment is typically similar to or the same as what your permanent loan modification will be. This gives both you and your lender a realistic understanding of whether the new payment is sustainable.
If you’re worried that the loan modification trial payments are too high, talk to your lender to see if they are willing to lower the payments. You may also want to consult an attorney to explore your options and negotiate on your behalf.
Best Practices for Your Loan Modification Trial Period
The loan modification trial period is your chance to prove to your lender that the new payment plan will work for you. Since permanent loan modification depends on the success of the trial, it’s important to follow the loan modification trial period plan exactly.
Here are a few best practices to help you avoid common mistakes and give you the best chance at having a successful mortgage modification trial period.
Pay Your Loan Modification Trial Payments Individually
Sometimes homeowners want to finish the trial quickly or show their ability to pay, and will try to pay their loan modification trial payments in one lump sum. While this may seem helpful, it can actually cause problems.
Your lender is using the trial to see that you can make on-time payments for a scheduled period. Because paying off the balance in one large payment doesn’t show your ability to make consistent payments over time, it could hurt your chances of getting final approval.
Pay The Exact Amount Owed
When making trial period payments, always pay the exact amount due each month. Paying less than the required amount could hurt your chances of getting the loan modification.
Paying more can also cause problems. Your lender might apply the extra funds to your existing mortgage balance, or may misapply the entire payment. To avoid unnecessary issues, it’s recommended to pay the exact amount owed.
Follow Close Attention to Payment Instructions
Trial payments can be complicated because of how lenders process them. Your lender should tell you exactly how they want you to make your payments.
It’s important to pay attention and follow the instructions closely. If you pay the wrong way, the payment might get applied to your regular mortgage or your outstanding balance instead of your trial plan.
Pay Early in the Month
Even if your trial payment isn’t due until the end of the month, if you can, pay early. Making your payment early will help make sure it is processed on time and provide a buffer in case anything goes wrong.
What Happens If You Have a Missed Trial Modification Payment?
If you have a late payment after your loan modification trial begins, it can have negative consequences. Your loan modification could be denied, foreclosure could resume, your credit score could be negatively impacted, and you may face fees for things like late payments, interest, and past due balances.
If you’re behind on your loan modification trial payments, it’s important to take action quickly. Here are a few steps you can take:
- Contact your lender to ask whether you can reinstate your trial or if you can apply for a new loan modification
- Provide proof of hardship and any relevant documentation that shows why you missed a payment
- Explore other loss mitigation options, such as forbearance or a repayment plan
In some cases, missed trial payments on a loan modification may not be your fault. Lenders can make mistakes or commit violations, such as misapplying payments, charging improper fees, and failing to send proper notice.
If you believe your lender made a mistake or violated your rights, contact an attorney who can review your situation and let you know what options are available.
What Happens After the Trial Period of a Loan Modification?
The outcome after a loan modification trial period will vary depending on whether your trial was accepted or denied. If your loan trial was accepted, your loan modification will become permanent, and your lender will provide you with the official terms of your new loan agreement.
If your loan modification application was denied, you still have options after the trial period loan modification. You can appeal the denial, request a new loan modification, or explore alternative loss mitigation options to help prevent foreclosure.
Contact a Loan Modification Attorney Today
It’s a common misunderstanding that getting your application approved for a loan modification is all it takes to get one. There are important things that happen after approval that need to be handled correctly to finalize your modification. A loan modification attorney can help guide you through the process and what happens after the trial period of loan modification.
If you are denied after your trial, an attorney can help build a defense strategy to appeal the denial and prevent wrongful foreclosure. They can also advise you on applying for a new loan modification application and other loss mitigation options to stop foreclosure.
Contact Denbeaux Law today to learn more about how we may be able to help you through the loan modification process
