A loan modification trial period plan is a short test, usually three monthly payments at the proposed new amount, that a servicer requires before it signs a permanent modification. Make every trial payment in full and on time, keep proof, and watch for the permanent agreement. Most failed trials trace back to timing, paperwork or a servicer that stops responding.
Already in a trial and hearing nothing about the permanent documents? Call (415) 754-0115 to schedule a free consultation, or reach us through the contact page.
How a loan modification trial period plan works
The trial offer usually arrives after the servicer has finished evaluating a complete application. It is an approval decision in practice, but a conditional one. The letter will state the trial payment amount, the due dates, how to pay and what happens at the end.
- Length: three months is common. Some programs use four, and some servicers extend a trial while they finish paperwork.
- Payment: close to or the same as the expected permanent payment, including escrow for taxes and insurance.
- Accepting: for many programs, making the first trial payment is how you accept the offer. Read the letter to confirm.
- What does not change yet: your original loan terms stay in place. The unpaid balance, late charges and arrears are not resolved until the permanent modification is signed.
Where trial plans go wrong
Servicer guidelines are strict. Under Fannie Mae's rules, for example, a borrower who does not make a trial payment by the last day of the month it is due is treated as having failed the plan. The traps below are the ones homeowners hit most.
Payment timing and amount
Pay by the due date, not the end of a grace period, and pay the exact amount stated. Do not send your old payment out of habit. If you use online bill pay, confirm the servicer received it rather than relying on the date you sent it.
Missing the permanent agreement
At the end of the trial the servicer sends a modification agreement that must be signed, sometimes notarized, and returned by a deadline. If it goes to an old address or sits unopened, the offer can lapse.
Servicing transfers
Loans are sold or transferred during trials more often than people expect. Federal rules require the new servicer to honor loss mitigation that was in progress, and California's Homeowner Bill of Rights also carries an approved foreclosure prevention alternative over to a new servicer. Still, send the new servicer a copy of your trial letter and payment history immediately.
Credit reports during the trial
Because the original terms are still in effect, some servicers report trial months as delinquent. That can be frustrating, but it does not by itself mean the trial failed. Keep paying as the letter instructs.
What to keep while you are in the trial
Treat the trial like a legal file, because it may become one.
- The trial offer letter and any later letters changing its terms.
- Proof of each payment: confirmation numbers, bank records or receipts.
- A log of every call with the date, the representative's name and what was said.
- Copies of anything you sent, and proof it was delivered.
- Any foreclosure notices received during the trial.
If your hardship changes during the trial, such as a job loss, tell the servicer in writing right away instead of simply missing a payment.
If the servicer stalls after you finish the trial
A frequent complaint is that the homeowner completed every payment and the servicer never sends the permanent agreement, or sends a denial with no clear reason. There are practical steps to take.
Keep paying the trial amount
Unless the servicer tells you in writing that the trial has ended, continuing the trial payment usually protects you better than stopping. A long gap can be used as a reason to deny.
Put it in writing
Under federal servicing rules you can send a written request for information or a notice of error to the servicer's designated address. The servicer must acknowledge it and respond within set timelines. This creates a record and often gets a stalled file moving.
Know the California protections
For a first-lien loan on an owner-occupied home of one to four units, HBOR generally bars the servicer from recording a notice of default or notice of sale, or holding a sale, while you are in compliance with the terms of a written trial plan. If foreclosure activity continues anyway, that may be a dual-tracking violation worth raising before any sale date. Our article on saving your home from foreclosure explains the wider set of tools.
Getting help with the trial or the permanent agreement
The Somal Law Firm handles loan modifications and foreclosure defense for homeowners in Pleasanton, the Tri-Valley and across the East Bay. Attorney Bob Somal can review the trial letter and the proposed permanent agreement before you sign, check how arrears and deferred amounts are being treated, and deal with the servicer if the process stalls. If the trial fails despite your payments, he can explain whether Chapter 13, a new application or another option makes sense. Call (415) 754-0115 to schedule a free consultation about your trial. For how modification compares with letting a foreclosure proceed, see loan modification vs foreclosure.
Frequently asked questions
Is my modification final once I start the trial?
No. The permanent modification exists only once both sides sign the final agreement. Until then, your original note and deed of trust control.
What if the permanent terms differ from what I expected?
Read the agreement closely before signing, especially the new balance, interest rate, term and any non-interest-bearing deferred amount due at payoff. Raise questions in writing, and have an attorney review terms that do not match the trial letter.
Can I be foreclosed on during a trial plan?
For covered California loans, the servicer generally cannot move forward with foreclosure while you are complying with a written trial plan. If you see a new notice, act quickly.
If your trial is under way, finished without a permanent offer, or was cancelled without explanation, call (415) 754-0115 to set up a free consultation with Bob Somal. You can also send your trial letter and payment dates through our contact form. We will look at where the process broke down and what can be done before the servicer takes its next step.
Attorney Advertising. This article is general legal information for Bay Area residents, not legal advice, and does not create an attorney–client relationship. Every situation is different — please consult a licensed attorney about your specific circumstances.