How Many Loan Modifications Are You Allowed? Everything You Need To Know

If you have fallen behind on your mortgage payments and are at risk of foreclosure, a loan modification can be a lifeline A loan modification adjusts the terms of your mortgage to make your payments more affordable This allows you to avoid foreclosure and stay in your home.

But what if you already had a loan modification in the past and are in need of help again? How many loan modifications are you allowed to receive?

The short answer is there is no set legal limit on the number of loan modifications you can obtain The number of loan mods allowed depends on your individual lender and investor guidelines

While there is no hard cap, lenders generally prefer first-time loan modification requests. Successive loan mods become harder to obtain.

Let’s take a closer look at how many times you can modify your mortgage and what factors determine your eligibility.

Government-Backed Loans Have Loose Limits

If you have a government-backed mortgage, loan modification limits are fairly flexible:

• FHA loans – Allows 2-3 loan mods, one every 24 months
• VA loans – Permits 2-3 loan mods total
• Fannie Mae/Freddie Mac – May approve 3-5 loan mods

Fannie Mae and Freddie Mac sometimes restrict modifications through their Flex Modification program:

• If you get a Flex Mod but default within 12 months, you may be denied another Flex Mod for 12 months
• Defaulting during a Flex Mod trial period can also lead to denial

The government seeks to help as many borrowers as possible avoid foreclosure. So modification limits are more of a loose guideline than a hard rule.

Private Lenders Set Their Own Rules

For private lenders, loan modification limits are left to their discretion. Most private lenders take a more restrictive stance:

• Many only allow 1-2 mods total
• Some refuse any repeated modifications
• Each case is reviewed independently

Since private lenders are not bound by government guidelines, it is much harder to obtain multiple loan mods. You may need to negotiate with lenders or get legal assistance.

Check With Your Lender and Investor

To understand the loan mod limits for your specific mortgage, check with both your:

• Servicer – The company you make payments to
• Investor – The owner of your mortgage debt

The servicer works on behalf of the investor, so investor guidelines dictate what mods they can approve.

Ask your servicer who the investor is and what their loan mod policies are. Then you will know what to expect.

Strategies For Multiple Modification Requests

While repeat modifications are possible, it does get more difficult. Here are some tips to improve your chances:

• Show change in circumstances – Lenders want to see your situation has genuinely changed since your last mod. Provide evidence of new hardship events.

• Highlight positive payment history – If you successfully made payments on your past modification for a period, point this out. It shows you are able to sustain a modified mortgage.

• Get legal guidance – Consult with a lawyer experienced in loan modifications. They can review your case and appeal to the lender/investor on your behalf.

• Apply anyway to delay foreclosure – Even if denied a mod, applying can sometimes pause the foreclosure process. This may buy you some extra time.

• Ask lender to re-evaluate – If denied, you can request an appeal or re-evaluation. Persistence and follow up can sometimes lead to reconsideration.

With preparation and persistence, multiple loan modifications are possible in many cases.

Special COVID-19 Flexibility

During the COVID-19 pandemic, extra flexibility was provided for homeowners who entered mortgage forbearance:

• If you entered COVID forbearance but were current on your mortgage before March 1, 2020, you may qualify for a COVID-19 related loan modification from your lender, even if you already had the maximum modifications in the past.

• This applies only for mortgages backed by Fannie Mae, Freddie Mac, FHA, USDA, or VA.

• COVID-related financial hardship counts as a changed circumstance warranting another mod.

This special exception was created because so many homeowners were financially impacted by the pandemic through no fault of their own. Take advantage of this if you qualify.

Mod Requests As A Foreclosure Delay Tactic

While repeat mods get harder to obtain, applying can sometimes help delay foreclosure. Here’s how:

• When you apply for a modification, lenders/servicers are required to complete a full review before denying your request. This takes them time.

• Many will not start or continue foreclosure proceedings during the review period. Applying forces them to pause foreclosure, buying you extra time.

• Even if denied a mod, the review period alone delayed the foreclosure. Then you can apply again, triggering another review period and delay.

This strategy works best if foreclosure proceedings have not progressed too far. Use it carefully and seek legal advice beforehand.

Alternatives To Loan Modification

If you have exhausted your opportunities for loan modification, all is not lost. Some other options to avoid foreclosure include:

Forbearance – Your mortgage payments are temporarily suspended or reduced for a set time.

Repayment plan – You repay the arrearage on your mortgage over time in addition to your regular monthly payments.

Partial claim – Your lender provides an interest-free loan to bring your mortgage current.

Loan refinancing – If you can qualify to refinance your mortgage on better terms, this may help you avoid default.

Deed-in-lieu of foreclosure – You voluntarily deed the property to the lender to avoid foreclosure.

Short sale – With lender approval, you sell the home yourself and the lender forgives the remainder of mortgage debt.

Talk to your lender/servicer to see if any of these options are available and would meet your needs.

Key Takeaways

• There is no legal limit on the number of loan mods you can request. Guidelines vary between lenders.

• Government-backed loans allow 2-5 modifications generally, though more are possible.

• Private lenders and investors have individual policies on loan mod limits.

• Show changed circumstances and positive payment history to improve chances for repeat mods.

• Applying for loan mods continuously can delay foreclosure even if you are denied.

• If loan mods are exhausted, alternatives like forbearance, repayment plans, and loan refinancing may help.

• Special COVID-19 provisions may offer extra flexibility if you entered pandemic forbearance.

If you are struggling to pay your mortgage don’t wait to seek help. Contact your lender right away to pursue loan modification or other relief options. The sooner you take action, the more likely you will be able to avoid foreclosure altogether and remain in your home.