- Who sends it
- Your mortgage servicer, after you finish your trial payments
- What it starts
- A deadline to sign and return it. For FHA loans, it must be back within the month the change takes effect
- Do this first
- Find the return deadline, and keep making your trial payment until the change is final
What this document is
Most modifications start with a trial period plan: a few months of the new payment to show you can make it. The permanent agreement comes next. It changes your loan for the rest of its life, so it matters more than any letter before it.
- Fannie Mae loans: the agreement is the Loan Modification Agreement (Form 3179). The modification is not binding until you have met every trial requirement, signed and returned the agreement, and the servicer (or Fannie Mae) has signed and dated it.
- FHA loans: the servicer must send the permanent documents within 15 days after you finish the trial. They take effect no later than the first day of the second month after your last trial month, and you must get them at least 15 days before that date, with a deadline to return them.
- VA loans: VA's options include a traditional modification, which adds missed payments and related legal costs to the balance, and 30-year and 40-year modifications. VA warns that with higher rates your new payment could be higher.
- USDA guaranteed loans: a modification sets a fixed rate no higher than the market rate, adds the past-due amount to the balance, and can extend the term up to 40 years from the modification date.
What to check before you sign
- Interest rate. Is it fixed? Fannie Mae's Flex Modification uses the same fixed rate that was set for your trial plan. FHA's rate can be no higher than HUD's Market Rate, set when the trial was offered.
- Term and maturity date. Count how many years you will be paying. Fannie Mae can extend to 480 months (40 years), FHA offers 30-year or 40-year terms, and USDA up to 40 years.
- New principal balance and what was added. Past-due interest and money the servicer paid for taxes, insurance or other costs are often added (capitalized). Ask for a list. Fannie Mae does not allow late charges to be added, and waives them when you finish the trial.
- Any deferred or non-interest-bearing balance. Fannie Mae may set part of the principal aside with no interest. It is not forgiven: it is due when the loan matures, or earlier if you sell, refinance or pay off the loan. For FHA, a partial claim is a separate zero-interest note and mortgage in favor of HUD that you must also sign.
- Escrow and the total payment. Your payment includes taxes and insurance. Fannie Mae requires an escrow analysis before the trial and does not add an escrow shortage to the balance. For FHA loans, the permanent payment can be higher than the trial payment if taxes or insurance went up.
- Effective date and first payment date. Make sure you know which payment is the first one at the new amount.
- Signatures, notary and return method. Check whether every borrower must sign, whether a notary is needed, and where and how to send it. Fannie Mae and FHA allow some exceptions when a co-borrower cannot sign, for example because of military deployment or mental incapacity, but the servicer decides.
- Waivers. FHA does not allow a modification document to make you give up your rights under state or federal law or your mortgage as a condition of getting help. If any agreement asks you to waive rights, ask why before signing.
Deadlines, and what happens if you miss one
- FHA loans: the servicer must accept your signed documents if they come back within the month the modification takes effect and you keep making payments. If they do not come back in time, the servicer must deny the modification and review you for options to leave the home, such as a short sale or deed in lieu. The servicer must send you a fully signed copy within 15 days after it accepts yours.
- Fannie Mae loans: until you return the signed agreement and the servicer signs it, the modification is not in effect. Missing a trial payment by the last day of its month counts as failing the trial.
- Keep paying. FHA's trial letter must tell you to keep making the trial payment after the trial ends until the permanent documents are signed by everyone. Do the same for any loan unless your servicer tells you otherwise in writing.
- Federal rule for trial plans: if you sent the trial payments on time but missed another step the servicer required to accept the trial, you must be given a reasonable time to finish that step.
- Once you are in an agreement, federal rules generally bar a servicer that got your complete application in time from moving ahead with foreclosure unless you fail to perform under it. Small servicers also may not foreclose while you are performing. See your federal rights.
What to do this week
- Put the return deadline on your calendar. Then compare the agreement line by line with your trial plan letter.
- If a number looks wrong or you do not understand something, call the servicer and ask it to explain in writing. Do not let questions run past the deadline.
- Ask a free HUD-approved housing counselor to review it with you at (800) 569-4287. If the agreement involves a lawsuit or a sale date, also talk to a lawyer.
- Sign exactly as instructed, get it notarized if required, and send it in a way you can track. Keep a full copy and proof of when it arrived.
- Keep making your payment, and check that your first statement after the change shows the new terms.
- Know the limits for next time. FHA allows one permanent home retention option in any 24 months (except after a disaster), and Fannie Mae will not do a Flex Modification on a loan modified three or more times.
If the agreement forgives any principal (rather than just setting it aside), that amount may be taxable. See taxes after foreclosure or forgiven debt. The rules above are federal and program rules, so they apply in every state. Learn more about loan modification and the letters you get while you apply.
Scams tied to modification agreements
Your servicer sends this agreement for free. Watch for:
- Anyone who says they can "finalize" or "speed up" your modification for a fee. Under federal rules, a company that is not your lawyer cannot collect a fee until you have signed an agreement with your servicer based on an offer it got for you.
- Instructions to send your trial or modified payments anywhere other than your servicer.
- Anyone who tells you to stop talking to your servicer, your housing counselor or your lawyer.
- Anyone who asks you to sign over your deed, or to send money anywhere other than to your servicer or the closing agent named in your papers.
- Anyone who says they are with the government or your lender without proof. Call the number on your own statement or letter to check.
Read how to spot a foreclosure rescue scam. Report fraud at ReportFraud.ftc.gov.
How much time do you have? It depends on your state.
See the foreclosure timeline, deadlines and free local help for the state where the home is.
Common questions
Is the deferred or non-interest-bearing balance forgiven?
No. It is still owed, just without interest and without a monthly payment. It comes due when the loan ends, or earlier if you sell, refinance or pay off the loan. Plan for it if you think you may sell.
Why is my permanent payment higher than my trial payment?
For FHA loans, the payment can rise if your taxes or insurance went up during the trial. For other loans, ask the servicer in writing to show how it figured the new payment, including escrow.
I missed the deadline to return the agreement. What now?
Call your servicer the same day and ask whether it will still accept it, then send it right away in a way you can track. For FHA loans, documents returned after the month of the effective date must be denied, and the servicer moves on to other options. A housing counselor can help you ask for a new review.
Does a loan modification cost anything?
No fees are charged for Fannie Mae's Flex Modification or USDA's streamline modification, and applying through your servicer is free. You may still owe amounts added to the balance, such as past-due interest.
Keep reading
- Late notice and early intervention letterThis letter is a warning, not a foreclosure. Federal rules make your servicer reach out early and tell you about help. In most cases a foreclosure cannot start until you are more than 120 days behind, so this is the best time to act.
- Breach letter (demand or notice of intent to accelerate)A breach letter says you are in default and gives you a date to catch up. If you do not, the lender can call the whole loan due and move toward foreclosure. Many standard mortgages and deeds of trust require at least 30 days to cure.
- Notice of defaultIn many states that foreclose without a court, a recorded notice of default is the official start of the foreclosure. It is not a sale and not an eviction. It starts a waiting period before a sale can be set, and you can usually still catch up or apply for help.
- Notice of intent to forecloseMany states make the lender send a warning letter before it can start a foreclosure. These letters often give you a set number of days, a cure amount and a list of free counselors. The deadline in the letter matters, so act on it now.
- Lis pendens (notice of pendency)A lis pendens is a public notice, filed in the land records, that a lawsuit or foreclosure affecting your home is pending. It does not mean the home is sold or that you must move. It usually means the court papers are coming or have already been served.
- Foreclosure summons and complaintA summons and complaint means the lender has sued to foreclose. You have a short, firm deadline to respond in writing, often 20 to 30 days from the day you were served. Missing it can let the lender win without your side being heard.
Sources
- Fannie Mae Servicing Guide D2-3.2-06, Flex Modification
- Fannie Mae Servicing Guide F-1-27, processing a Flex Modification
- HUD Handbook 4000.1, Update 18 (August 2026), FHA loss mitigation
- HUD Mortgagee Letter 2025-12, permanent loss mitigation options
- HUD Mortgagee Letter 2026-08, updates to loss mitigation requirements
- VA: Help to avoid foreclosure
- 7 C.F.R. § 3555.303, USDA guaranteed loan servicing options (eCFR)
- 7 C.F.R. § 3555.304, USDA streamline modification (eCFR)
- 12 C.F.R. § 1024.41, loss mitigation procedures (eCFR)
- 12 C.F.R. § 1024.30, scope and successors in interest (eCFR)
- CFPB: What is a loan modification?
- IRS Topic 431, canceled debt
- 12 C.F.R. § 1015.5, ban on advance fees for mortgage relief (eCFR)
- CFPB: Find a housing counselor