Why doesn't conventional home loan quailify for modification?

Answer 1

People often get confused about modifications, who offers them, and who qualifies. The modifications that are most frequently mentioned by the media are programs sponsored by the government in some way, but these are just a part of the whole.

Modifications are technically possible on ANY loan or agreement if both parties agree to make the changes. So first you need to find out who the other party is. If a mortgage is non-conventional, then a borrower must approach the government agency that is backing or holding the loan (HUD, VA, etc). If the loan is conventional (non backed by the government) then the borrower must find out who holds the note. Just because BofA did your loan and services it, this does not mean they did not sell your loan to another entity or to a government corporation like Fannie Mae.

Once you know who holds your note you can find out what their requirements are for qualifying. BofA for example, may have one set of criteria for a loan that was not sold, but someone with a BofA loan that was sold to Fannie Mae might have another. Typically, the most commonly advertised government sponsored modification programs offered to loans held by Fannie Mae have restrictions as to how much the borrower can owe versus the home worth (105% for example), how much of their income can be used up by the mortgage payment, and borrowers must usually be current on their mortgages.

Every lender and loan may fall under different criteria. However, they must all show that they can provide a sustainable payment based on actual documentable and reliable income, with a reasonable belief that the modification will perform and benefit both the note holder and homeowner. If you bought a home above your means or can not demonstrate that the modification will actually allow you to keep the home for the duration of the loan, there is not much they can do.