What is a Trial Payment Plan?
Once approved for a modification, your lender will usually require you to go through a Trial Payment Plan (TPP) before they complete the modification.
A TPP requires you to make a mortgage payment for a fixed number of months prior to fully modifying the loan.
Lenders force you to go through a TPP as a way to test the household income to make sure that resuming regular mortgage payments is affordable for you.
A typical TPP usually starts on the 1st of the next upcoming month and usually lasts for three months. (I have seen six, nine and twelve month TPPs – but these timeframes are less common).
The amount required for each TPP payment is the same for all three months and the amount is close (if not identical) to what the modified mortgage payment will be at the end of the TPP period.
TPP payments are usually due on the first of the month.
It can be exciting to receive a TPP because it does mean you are preliminarily approved for a modification. However, it is your job to be vigilant during the TPP period to make sure you avoid issues and successfully make it through the TPP.
Don’t make all three TPP payments at once
Some people think it’s better to make all three TPP payments at once.
Borrowers do this with good intentions – to show the lender how motivated they are to make it through the process and to speed up the timeframe.
However, paying all three payments at once can actually backfire, as the lender often struggles to apply the payments correctly when it comes as a lump sum. It also doesn’t help the lender see that you can consistently afford a monthly payment (which is what they’re testing).
Don’t overpay or underpay or split the TPP payment
The TPP payment should be paid in the exact amount each month (down to the cent).
Don’t pay the TPP payment online
Some lenders will offer a “pay online” option for TPP payments in addition to “pay over the phone” and “pay by mail” options. Paying online for a TPP is not a good idea (even if the lender tells you that you can!).
Paying online can confuse the lender’s automatic system. Since you likely have an outstanding balance, paying online will sometimes cause the payment to get applied to the outstanding balance instead of your TPP.
Mail your TPP payment with TRACKING information
Most lenders offer a “mail-in option” for TPP payments. Mailing a TPP payment is fine but you should mail it with tracking information attached, even if it costs extra.
Attaching tracking information allows you to follow the payment and ensure it gets delivered correctly. If the payment gets lost in the lender’s system or lost in the mail (which does happen), the tracking information will help the lender locate the lost payment.
Without tracking information, you could end up in a situation where it’s your word against the lenders that payment was made.
How to attach tracking information to the TPP Payment: You can attach tracking information to any USPS, FedEx or UPS mailings. Take your payment to either the post office, FedEx or UPS store and tell them you want to mail it tracked. Make sure you walk away with a receipt that allows you to follow the payment to ensure successful delivery. Use the links below to track the payment:
(Find the address for the TPP payment in the copy of the TPP document. If there is no address listed, call the lender and ask them where they want the TPP payment sent)
Pay the TPP payment in certified funds if your TPP agreement says the payment needs to be certified
Some banks are particular about accepting only certified funds for a TPP payment. It is important for borrowers to read their TPP document carefully to see whether the bank is requesting payment be made in “certified funds.”
“Certified funds” is a form of payment that is guaranteed to process – personal checks are typically not certified funds. To get certified funds, borrowers usually have to get a certified check from their bank or a cashier’s check.
Call to confirm the receipt and application of the TPP payment
After you make your TPP payment, call the bank to ensure the bank received and applied the TPP payment correctly.
Make this call no later than 7 business days after payment is made.
Use the below questions when asking the bank to confirm the payment:
- Question 1: Has there been a recent payment made to the account?
- Question 2 (assuming they said “yes”): What was the amount and what was the payment for?
Avoid saying: “I made a TPP payment on November 1st for $1,600. Can you confirm this was received?” If you ask it like this, you may get a representative on the other end who doesn’t check the file and just says “yes” to you. Make the bank confirm everything first to be 100% sure the TPP payment was received.
Don’t wait until the last minute to make the TPP payment
Many lenders will tell you that you have the entire month to make your TPP payment. It is not advisable to rely on this and make a TPP payment last minute.
If you make a TPP payment shortly before the expiration of the TPP month, and something goes wrong (either on your end or on the lender’s end) and the payment doesn’t get applied to the TPP quickly in the month it’s due, the lender can close the TPP and refuse to move forward with the loan modification.