Do-It-Yourself Loan Modification - Don't Try This at Home

You live in a home you love but the payment is pretty high. Fortunately, you have your job and if you pull out all the stops, you can still make the payment. At a time when many others are getting relief in the form of refinancing or loan modification, you start to think how much easier your life would be if only your payment was a few hundred dollars less. You find your way to the Making Home Affordable site, and find you don't qualify for a loan modification because you are current on your mortgage. So you think that maybe if you skipped a house payment or two, you too could end up with a lower payment that would make your life much easier.

This approach is like do-it yourself loan modification. Should you deliberately skip your mortgage payment so you can get help? The short answer: Don't try this at home!

In terms of your credit score, deliberately missing a payment is a terrible idea. Missed payments affect your credit score, especially if you already have a pattern of delinquency on other accounts. Your score reflects how recently you have missed a payment, how long overdue it is, and how frequently you have been delinquent. When your credit score is lowered, this can have a snowball effect on your finances. When you want to refinance you home, buy a car, or open a new charge, you might be turned down or offered a loan at a higher rate. Though this practice may be illegal within the next year, your credit card company could increase your rate or make your terms more restrictive even if you have not been late on the payment to them.

In terms of the impact on your cash flow, the idea is not sound either. You may have more money to pay other things in the months you are delinquent, but your obligation to pay the mortgage payments never goes away. When you're late, you rack up additional fees and penalties that you will owe in addition to the amount of the missed payments. Catching up with the combination of payments, fees, and penalties put you in a financial straightjacket for months to come.

Until recently, delinquency was a criterion to qualify for loan modification. Some lenders still hold to this principle, but most have played Follow-the-Leader with federal standards set down in the Making Home Affordable program. The loan modification part of that program is open to people at risk of delinquency as well as to borrowers who are behind by one or more payments. To qualify, a homeowner would have to prove hardship such job loss or other cause of income reduction. If the mortgage reset to an unaffordable level, a homeowner could make a case that they were at risk of default.

Loan refinance, the other part of the program, is only available to those who are current and who have not been more than 30 days late within the last year. Delinquency - whether intentional or out of necessity - makes a person ineligible for the program.

When you are able to pay, the best advice is to resist the temptation to skip the payment in hopes of getting help. If you are in a circumstance where you can't make the payment because you lost all or part of your income, you may have no choice but to skip a payment. Help in the form of payment relief may be available now to you now in either case.

Regardless of your particular circumstance, there is plenty of housing counseling available to offer direction about how to make it in this tough economy. (See Hope is in the Air, Even in Foreclosure.) There are plenty of scammers who promise debt relief and mortgage reduction these days who can make your problem worse instead of better. Seek help from Florida HUD-approved counselors right here in Orlando or call (888) 995-HOPE (www.995hope.org). Even if you have gone to the government site and don't think you qualify, check with these reputable counselors or your lender directly to try to work out something.

If you are interested in selling your home on short sale or in buying bank owned properties in central Florida, Exit Real Estate Results has the experience and patience to work through the process with you.