- Personal Finance
How To Get Your Loan Modification Approved
A loan modification is a not so easy thing to get as recent government case studies have shown. Even though there is big government push for help, the data suggest more people are being left out in the cold. Mortgage lenders just don't have their act together so it's up to homeowners to get there ducks in a row.
To get a loan modification approved you must demonstrate a real financial need to qualify, and you will be required to provide documentation to support your request for a loan modification on your mortgage. Here are seven steps to get you going along the way. Do not skip any of these, especially the seventh step, because this is the one that can really make a difference.
Your overall strategy is to prove to the lender that you are in fact in need of help but can and will have the means to continue payment on the new loan modification agreement. You will be required to complete a financial form, listing all forms of income and your monthly debt obligations such as credit cards, car loans, utilities, etc. A quick analysis of your debt to income ratio (gross monthly income divided by your total monthly obligations) will give your mortgage lender a clearer picture of your current financial position.
Unfortunately, most mortgage lenders will not consider a loan modification request until the debtor is severely delinquent on their current mortgage, which often begins when the mortgage is more than 90 days delinquent (not always true).
My first suggestion is that you get a loan modification attorney. Although this is not required, my personal opinion is that an attorney will do a much better job fighting those monsters than you ever will. Also, make sure you call an actual attorney firm and not some fly by night scam artist representing themselves otherwise. You can simply Google the words "loan modification attorney" to get help.
7 Steps To Get Your Loan Modification Approved
1. Describe how the borrower got in trouble. Provide a loan hardship letter. What caused the borrower to fall behind in his mortgage payments? Give as much detail as possible. Did the payment amount recently reset on his or her ARM mortgage to a higher monthly payment? Did your borrower suffer a loss of a job or lengthy illness? Did your borrower go through a separation from his or her spouse and now only one person's income is being used to make the payment?
2. Express your borrower's desire to keep his or her home and to make the modified payment in the future. Tell a story that convinces the lender that the borrower will pay on the modified payment terms in order to keep their home for the long term.
3. List borrower's attempts to sell the property if any.
4. Describe the occurrence of recent events that will help the borrower make the modified payment. Did the borrower regain employment recently? Did the borrower just now recover from an illness and is back to work?
5. Make a statement regarding how the proposed modification will improve the situation for the lender. For example, without this modification, your client will lose his property in foreclosure and the lender will have to take extreme losses by selling the home in this market.
6. List your expenses correctly. Although I put this at number six, it is one of the most important parts of the process. The first five above are part of your sob story to win them over. Now, you go for the jugular with the numbers. You have to prove your situation by documenting all of your expenses and show how a lower mortgage payment will help your family and put you in a better financial position to payback the loan they originally gave to you. Find out what it takes to be offered a beneficial mortgage modification. Sometimes they will tell you exactly what you need to do and exactly what they are looking for, then you can have your attorney do the paperwork for you.
Second mortgages are more vulnerable to loss of their position if the home goes to foreclosure auction. First mortgages have first claim on the money generated at the sale. Bids usually do not go high enough to pay the second mortgage any of the proceeds. This means that they would far rather offer a loan modification than receive nothing from a foreclosure sale. It may be that a loan modification could indeed save your home and your credit. To say that it is more than worth it to find out if you can get one, would be the understatement of the decade. Call, talk, plead, see what kind of deal you can get from your mortgage lender.
7. Important Step - Get A Free Copy of Your Credit Report for Validation
It is extremely important that you have a copy of your credit report to compare with your lender. I am getting a lot of people tell me that there are mistakes with the lender's credit report. This is a problem because their decision on approving your loan modification is dependent on certain variables on your credit report. A lender looking at your debt to income ratio to make there final decision could mean the difference in approval and the final payment program they offer you in the process. So, if you have your own copy of your credit report you can disarm any false information they are hitting you with and forward a copy to your attorney.