Do It Yourself Loan Modification
As the foreclosure rate rises drastically, millions of Americans are facing the misfortune of losing their homes. We are committed to helping homeowners find alternatives to foreclosure. No matter how severe your situation is, there might still be time to avoid this.
Contact us for a Loan Modification Package which will help you organize your financial information into an easy-to-read format for your lender's review. It is important that you disclose all details pertaining to your present circumstances and supply the documents that verify those details. It is also important that you are very specific in your Hardship Letter, as to what the circumstances are that caused your financial challenges, and how that is changing. Many loan modifications are for a period of time, 1-5 years, so the lender wants to see that there is going to be the ability to pay a higher payment in the future.
Once everything is complete and submitted to your lender, be sure to call them to ensure they received all your information and are working on your file. Contacting the lender on a weekly basis is the best way to make sure things are moving forward. Be prepared to resend the documents a few times, as it is not unusual for the lender to lose documents within their system. Keep a log of dates, phone numbers and who you spoke with, and what you were told.
Options to Understand
Loan Modification is an agreement by your lender to modify your existing mortgage terms; by either reducing the loan balance, payment or interest rate, and/or by fixing your adjustable rate.
Forbearance is a repayment plan that lenders arrange for you for a predetermined period of time. This will allow you to catch up on delinquent payments, while still making your regular mortgage payments.
Deed-In-Lieu of Foreclosure allows you to turn the property and title over to the lender. This method does not allow for you to have any idea of what the property actually sells for and how much you may owe on the deficient amount, which is the same situation that a foreclosure creates.
Short Sale is an agreement by which the lender agrees to accept a payoff amount that is less than what is actually owed on the loan. As such, you cannot receive any proceeds and the lender pays all the costs of sale, including the real estate commissions, escrow and title fees, as well as some of the buyer's closing costs in some cases. Once we have listed the property and obtained a Purchase Agreement, we begin the negotiations with your lender(s).
Do It Yourself Loan Modification ~ Instructions
Don't wait for the lender to offer a rate modification because it may never happen. Borrowers need to be very proactive about getting a rate modification. The most important thing to understand in attempting to do your own loan modification is that you will be dealing with "debt collectors" and when doing so on your own behalf it is hard not to get angry and frustrated. We get frustrated dealing with these banks on our clients behalf, so believe me, it's even hard when it's your personal situation you are discussing.
Beyond that there is sometimes absolutely no logical reason that people are turned down for a loan modification, despite the fact that there is an obvious need. You have to remember that there is nothing that can force the lender to accept a loan modification. They have the right, which you gave them, to foreclose on the property. They seem much more willing to accept a short sale than a loan modification is most cases, even though they will never tell you that.
Who are you talking to?
Know who you are dealing with, a mortgage services, or a mortgage loan originator. A mortgage servicer is responsible for collecting your monthly loan payments and crediting your account. A servicer also handles your escrow account if you have one. A mortgage originator is the broker or bank who secured your mortgage loan in the first place. This does make a difference, as the mortgage servicing companies tend to be a bit more equipped in dealing with loan modification requests, as they typically have a longer term outlook on loan and have special departments assigned to loss mitigation and foreclosure prevention. They could, however, be a bit more difficult to negotiate with wince they are very methodical and objective.
Understand your Lender's Modification Policy
Become familiar with your lender's loan modification policies. Loan Modification Requirements are not the same with every lender. Find out if your mortgage company is willing to discuss modifying your loan if you are not yet behind on your mortgage payments. Some lenders require borrowers to be delinquent for at least two months before they even accept applications for a loan modification. If you have lost your job and have no income, you will not be qualified for a loan modification.
Get your Lender's Modification Package
Call and request a loan modification package from your lender, or go online and print out the documents they want you to complete before discussing with them your specific case. By reviewing their package, you will know what information they need and what their policies are. Doing so will provide you with ample time to prepare your answers to the questions you might have otherwise been asked over the phone. Additionally, but conforming to your lender's own unique form you will have a better chance for a response than other applications which are submitted in other formats. There are forms in this package for you to submit for a loan modification if you have difficulty obtaining your lenders' forms.
You want to convey to your lender that you have experienced a life event or hardship and can no longer afford your mortgage payment. A rate increase is actually considered such an event. In this case you must explain to your lender that you have an adjustable rate mortgage and are unable to make the higher monthly payments. You are delinquent on your loan and need to modify it or there is a serious chance that you'll fall further behind and/or go into foreclosure. You accomplish this by preparing a hardship letter.
You don't want to say for certain you're headed to foreclosure because lenders don't like wasting time with lost causes - there are enough people out there that have a slim chance of staying off total loss through a loan modification - but you want to communicate to them that the problem is serious and needs immediate attention.
They will ask you some basic questions. You must be honest and frank in your assessment of your financial situation. If you're the eternal optimist, now is not the time to be upbeat about your finances. Within the bounds of honesty, you must show that you are in a bad financial place. Offer to send a copy of your budget or letter detailing your financial situation, and if you are asked to do this, send it return receipt.
If they assess that your situation qualifies for a loan modification, they will send you an information packet along with a worksheet to calculate your monthly expenses. Think of this process as similar to when you qualified for the loan, but in reverse. You must un-qualify yourself to prove that you are financially incapable of making the increased mortgage payment. You also must prove that a modification is going to improve your situation to a point where you will be an acceptable risk for them. If they calculate that even after a loan modification, you're still too deep in the red to be helped they will deny you a chance at modifying your loan.
Keep a call log of the who, what and when of your communication history with your lender during this process. You will be talking to many different people in the loss mitigation department. While they have phone notes, it's important that you capture conversations on your own so that if you run into a roadblock or dead end you can use the information you've written down in your log to help you keep pushing forward. You can also reference promises, comments or details that may help you overcome objections as you talk to other people in the department.
On your call log you'll want to capture date, time, number called, full name of the person you spoke with, and detailed notes of the conversation.
Not only does this keep you organized, it helps document your efforts to improve your situation should lender initiate foreclosure proceedings. You'll have it available to all parties to show you've made a good faith effort to work out a fair resolution to the problem.
Anger and Frustration will not help
These loss mitigation employees are trained, and you are not. Your ability to stay calm is hindered by the emotional nature of the situation you are in. As such, it is very easy to get irate and react. Understand that this is difficult for everyone who is going through this now and that is about half the country. The fact is that many people, not only you, are unable to pay their debts and are facing the very real possibility of losing their home. It is very difficult but you need to remember in the end it really is just a house and it is and can be replaceable in the future. Keep in mind that what is most important to you and your family is getting through this time with your health and sanity. Spending hours on the phone frustrated and screaming is going to do nothing for your blood pressure and your state of mind. For most people, the reality is that a short sale is the best know answer because of the difficulty in negotiating a loan modification.
Be prepared to make payment
Lenders would like to see you start making mortgage payments again. Since by the time you request a loan modification you have more than likely missed three or more payments, they assume that you have some of that money saved up and can start making the new payments. It will certainly help your cause if you have the initial payment ready to be made to get started on a good note.
Many lenders are now doing what they call "Trial Modifications". They will put you on a reduced payment plan for three months, and as long as you make those payments on time, they will then modify your loan. The terms of that modification are usually not disclosed to you until the end of the trial period and they once again ask you to supply all the updated documents to verify that your situation has remained the same. Keep everything you send to the lender as well as the dates that you sent them so that you know what it is they are expecting to see again.
Loan Modification - Who is eligible?
Many homeowners are looking for ways to cope with the current housing market, and you might find yourself doing the same. Right now, there is a lot of buzz about loan modifications. One BIG question is: who qualifies? Typically there are 9 questions that help you determine if you qualify for a loan modification. Let's see if you qualify!
1. Are you currently occupying the property you wish to sell? - If it is an investment property it will not qualify.
2. Are you in a financial position to qualify for a re-finance? - Lenders would rather re-finance than modify the loan.
3. Are you current on your mortgage or adjustable rate mortgage (ARM)?
4. Are you behind on your mortgage? - Some lenders will take this into consideration when making a decision to approve a loan modification.
5. Have your mortgage payments become so high that you will not be able to continue payments in the future?
6. Have you experienced a hardship?
7. Do you no longer have equity in your home?
8. Is your loan backed by Freddie Mac or Fannie Mae? - Your loan must be backed by Freddie Mac or Fannie Mae to be approved for government loan modifications.
9. Did you qualify? If you are not sure, another option for you is to short sale.
MANY homeowners are getting help (with fewer headaches) by choosing to short sell their home. The David Healey Real Estate Solutions Group has closed many short sales with a 100% success rate over the last few years.
Give us a call today or send us an email so we can talk more about your options!
(916)-799-8117 or (415) 308-3814
Mortgage Modification Resources
The Home Affordable Refinance Program
Fannie Mae Loan Lookup
Freddie Mac Loan Lookup