You only have 30 days to respond to a Right to Modify Notice.
You may get a Right to Modify Notice from the bank *. Modification can mean lower payments or adding your missed payments to the principal of the loan.
The Right to Modify notice only means you have the right to ask the bank to look at changing the way you pay off your mortgage. It does not mean everyone has the right to change their loan. If you want the bank to think about changing the way you pay off your mortgage, you need to ask for a review. You have 30 days from the postmark on the Modify Notice to ask for a review.
When the bank reviews your mortgage they look to see if it is worth it to them to offer you a modification. They have to explain to you why they decided to offer you a modification. If they do not offer a modification, they have to explain why not. After they review a mortgage, sometimes the bank finds that they must offer you a modification.
You have 30 days from the date on the postmark to ask for a review. At the same time that you ask for a review you must also send the bank:
- a statement of your household income and
- a complete list of your debts.
If you do not apply for the review within 30 days:
- you may lose the right to have your loan reviewed, and
- the bank can insist that you pay your overdue mortgage payments within 90 days.
After you apply for a loan modification, the bank must look at your mortgage to see if it will change the way you pay off your loan.
If you apply for a modification, the bank must respond within 30 days of your application. They must give you a written “assessment” of your loan. The assessment must include:
- their statement of your and any other borrower's income, debts and obligations;
- their “net present value analysis”1 of the mortgage loan—this is a formula that calculates how much money they will make if they modify your loan;
- the amount of money the bank expects to get if they foreclose;
- their statement of their interests; and
- a modified mortgage loan offer or a notice that they will not offer a modified loan
When the bank looks at your loan they use different formulas to calculate how much money they will make if they modify your loan. If the calculations during the review show that it is more profitable for them to modify your loan than foreclosing, they must offer you a modification.
But if it is more profitable for the bank to foreclose, they are allowed to.
If the bank offers to modify your loan, you have the right to make a reasonable counter-offer within 30 days. Your counter offer must be in writing.
They have another 30 days to reply to your counteroffer.
The entire modification review process should take less than 150 days
If it is more profitable for the bank to modify your loan than to foreclose you have the right to get your loan modified. But if they modify your loan because they have to, you do not have the right to modify your loan again for 3 years. It does not matter if the bank you are dealing with changes.
If you have a “certain mortgage” the bank must send you a Right to Modify Notice.
You may get a Right to Modify Notice even if you do not have a “certain mortgage.” Everybody who gets a Right to Modify Notice has the right to have his or her mortgage reviewed.
If you have a certain mortgage and you did not get a Right to Modify Notice, the bank may be doing something wrong.
You have a certain mortgage if your mortgage is for the property you live in and your mortgage has any one of these features:
- an introductory rate for less than 3 years, and the rate is 2% lower than fully indexed rate;
- any interest-only payments;
- a payment option, where your interest is growing faster than you are paying it off;
- the loan did not require full documentation of your income or assets;
- the pre-payment penalty is more than the law allows.2 For example, a penalty that is more than 3 months’ interest, or there is a prepayment penalty after 36 months;
- when you borrowed the mortgage, you borrowed more than 90% of the value of the property3 and your debts + your mortgage added up to more than 38% of your income4,
- you only put 5% or less down when you bought your home
Also, if the bank cannot figure out if your mortgage has 1 or more of these features, your mortgage is a “certain mortgage.”
The law that gives people the right to get their “certain mortgage” reviewed for a modification only went into effect August 3, 2012. If the bank sent you a Right to Cure Notice before August 2, 2012, this law does not protect you.
* When we use the word 'bank' we mean your lender. This could be a mortgage company a trust or even a person.
1the “net present value” is a legal term with a specific legal meaning. It is a calculation that comes from any of the following: (i) the federal Home Affordable Modification Program base net present value model; (ii) the Federal Deposit Insurance Corporation's Loan Modification Program; (iii) the Massachusetts Housing Finance Agency's loan program used solely by the agency to compare the expected economic outcome of a loan with or without a modified mortgage loan; or (iv) any model approved by the division of banks to consider the total present value of a series of future cash flows relative to a mortgage loan.
2 MGL c 183 § 56, or federal law.
3 the loan to value (LTV) ratio was 90%.
4 debt to income (DTI) was more than 38%.