Do-It-Yourself Loan Modification- Four Easy Steps
Today in our economic crisis many homeowners around the country are having a difficult time keep up on their mortgage payments. So to help out the homeowners who are struggling lenders are offering loan modifications to borrowers that qualify. This has got to be the number one most effective way for a homeowner to prevent foreclosure and remain in their home. If you qualify you can catch up on all late payments to become current and also lower your current interest rate.
Below are four easy do-it-yourself steps that can help you achieve a loan modification on your own:
1. Examine your current finacial situation. The very first thing you need to do before you apply for a loan mod is to analyze your current and future financial standings. While your current standings are very important, your lender is also going to review your case to see if this type of assistance is beneficial in the long run for themselves and the borrower. You need to really figure out if you can afford the home and just not the loan.
2. Time to write an effective hardship letter. Your hardship letter is going to play a major role as to whether or not you are approved for a modification. It is very important that your lender realizes that you are indeed currently facing a financial hardship(s). When writing this letter it is crucial that you prove your hardships by listing the events that have put you in this situation. You should also make sure to keep this letter short and straight to the point. No rep is going to sit there and take there time to read through a five page hardship. Remember these lenders receive thousands of loan modification requests a day, so do not make the letter any longer than one or two pages. Below are some common hardships lenders will take into consideration:
-Military Duties
-Income Reduced
-Job loss
-Death of Family member
-Serious illness
-Divorce
-Incarceration
-Serious Medical Debt
-Serious Damage to Home(such as a natural disaster or possible vandalism)
3. Gather and calculate all of your financial information. Once you have completed your hardship letter it is now time to go ahead and start gathering all needed financial documents. Your lender is most definitely going to require you to send in your most recent bank statements, couple months of paystubs, and two years of tax returns. This information plays a major role as to whether or not you will qualify.
Another very important piece of information is your current monthly budget. Your lender is going to provide you with a financial worksheet to fill out all of your monthly expenses and income. This will help you calculate all of your info to see if you have a surplus left over or you are in the negatives each month and draining your savings. Once you have done this, if you are far in the negatives or have a good amount of cash left over each month, you will most definitely be denied for a loan modification.
4. Now that you have completed the following steps it is now time to pick up the phone and make your first initial contact to your lender. Make sure that you contact the loss mitigation department and let them know you want to apply for a loan modification. Ask what address to fed-ex your paperwork and what is the best number to fax your packet to. It is crucial that you get tracking numbers on your fed-ex package and also fax the information multiple times as well. you need to understand that all lenders are completely overwhelmed with modification requests due to our economic crisis. It may take a few weeks for them to even receive the paperwork you had sent.
The key is to be polite, persistent, but to remain firm at the same time. Remember these lenders do not have to accept your loan modification request, so it is important you remain in good standing with their reps.
What does loss mitigation mean?
Due to our economic crisis homeowners have begun to fall behind on their mortgage payments and are in great danger of having their home foreclosed on. So because of this the term “loss mitigation” tends to be used more than ever before. This is actually an attempt by your current mortgage lender to reduce their loss as much as possible in the event the homeowner defaults on their monthly payments. The lender will try to regain as much as the loans value as possible even though they are likely to suffer some loss.
Pretty much every major mortgage company will have a special loss mitigation department that is trained to negotiate with the homeowner new loan terms that will better fit their financial situation. Once the borrower begins to fall behind on the monthly payments they will usually start receiving calls from either their collection department or loss mitigation. This department is trained to negotiate several kinds of loss mitigation with the homeowner such as a loan modification, short sale, or possibly even a deed in lieu.
Today the most common and popular method used to avoid foreclosure is through a loan modification. Through this route the homeowner will try to negotiate completely new terms for their current loan. A loan modification can help the homeowner catch up on their missed payments to become current, lower interest rate, or possibly even achieve a principle reduction to match the current market value. This has got to be the best route to choose to avoid losing your home.
Short sales are the second best route to avoid the devastating affects of foreclosure. Although, this method will have negative affects on your credit score and should only be used when there is no other choice. Through a short sale the borrower will list their home for a asking price that is less then what they owe on the home. But the sale price of the property must be agreed upon by the mortgage lender that holds the loan. By selling the home instead of foreclosing the lender will still gain some profit from the sale. I’m some cases the lender will issue the borrower a 1099 for the deficiency balance after the sale.
Loss mitigation has been used by many mortgage companies for many years and has helped many people remain in their homes. But ever since the foreclosure rates in America have risen higher than ever over the past two years, this is being used more than ever. If you are one of thousands of borrowers who have fallen behind on their monthly payments, I suggest you contact your lenders loss mitigation department and negotiate new terms to avoid foreclosure.
Loan Modification Q’s and A’s
Everyone is well aware of loan modifications and how they are the number one way for a homeowner to avoid foreclosure and stay in there home. But many homeowners looking for this kind of assistance find the process to be very difficult, frustrating, confusing, and just overall stressful on their daily lives. That’s why it is very important that before you begin this process you are armed with as much information as possible and present your case in a professional matter.
Below we will answer some of the most common questions homeowners have in regards to this process:
Q. What does a loan modification do? Read more
Why do lenders prefer a loan modification over a foreclosure?
Today in America foreclosure rates are higher than ever and many people are in desperate need of a modification. Many homeowners are beginning to default on their payments due to financial hardships such as lost jobs or even had there ARM loan adjust to a payment that is just not affordable. The question many people are asking is “why does a bank choose to foreclose rather than perform a loan modification?”
Well as we all know mortgage lenders are currently playing hardball when it comes to modifying your mortgage. But many homeowners don’t know that foreclosure do not benefit the bank much at all and they should modify to save them the trouble. One reason why it is so hard to get your lender to work with you is because they are just overwhelmed with thousands of loan mod requests from all over the united states. Each and every request takes a certain amount of time to review and make sure the calculations are correct. Read more
Can I get a loan modification if my mortgage is not behind?
You may be able to get a mortgage loan modification if you are not behind in your payments because the lender’s risk is not as big compared to someone who is way behind on his mortgage payments. However, your lender would naturally be curious as to why you would need a loan modification if you are not late on your payments. This is because a loan modification is often requested by homeowners who have already fallen behind as a result of a financial hardship.
The Obama Administration announced the making Home Affordable program in March that was received with much fan fair by struggling homeowners since it had a provision in the plan to extend assistance to homeowners that are not yet late on their home loans. However, here at LoanSafe.org, many members have experienced the complete opposite and are NOT getting assistance from their mortgage servicers. Yes, some have got help, but very few are and many are getting BS excuses ad to why they are denied. Read more
Loan modification pros and cons
A loan modification is the most popular solution for helping a homeowner avoid foreclosure. It can also help a homeowner achieve a lower monthly mortgage payment that is more affordable for their financial needs. But you must fit all the qualifications set by your lender, in order to be approved for this type of assistance.
Homeowners who are not familiar with this process may wonder “What are the advantages and disadvantages of a loan modification?” One thing for sure is that there are many benefits that come along with this type of assistance. Read more
Can the lender include late payments into the loan modification?
Homeowners today are struggling paying their monthly mortgage payments due to financial hardships and are wondering “if they can get their late payments and fees included into the loan modification?”
Yes! In most modifications you lender will include your late mortgage payments along with the late fees that occurred as well.
Make sure that your lender is aware that this is your intention. Request when first applying that the deliquent payments be added to the back of the loan. Read more
What do I do if my loan modification is denied?
The main reason loan modifications are denied is because of a mistake. Most often it is a mistake on the mortgage servicers side because they are so inundated and their employees so overworked. Many are making mistakes daily andmisplacing paperwork by the second. Sometimes the homeowner makes a mistake in applying for their loan modification and usually it is on their income and expense sheet.
Your job is to find out where the mistake is!
Unfortunately when a homeowner is denied, there is usually no reason given by the mortgage servicer. Leaving the homeowner in left field with unanswered questions and in complete fear of losing their home.
So what should you do if your loan modification is denied?
Breathe and say, “Moe says that there most likely is a mistake and I need to find out what the mistake is!”
If you are current on your mortgage, I can bet you a gazillion jujubees that is the reason why you did not get a loan modification. They will not tell you this, but my research has proven and the member here on the LoanSafe Forum will testify that if you aren’t yet delinquent on your payments, then you most likely will not get help.
If you are late and really feel you deserve help and can pay your loan at a reduced rate, then keep fighting. If you aren’t late, consider other alternatives.
Just because you were denied does not mean you can’t reapply for a 2nd or 3rd time,. There is no law or lender policy that states this. So, get your paperwork together and analyze your whole situation to see what went wrong or where the mistake is.
If you did it alone the 1st time, then maybe the 2nd time you should get the help of a non-profit skilled in submitting loan modifications and dealing with mortgage servicers. If you went the non-protfit route, ask for your package from the non-profit or a copy and tell them you would like to make sure there are no mistakes and then you would like them to resubmit your loan modification.
You can also obtain the assistance of a law firm and I suggest you do. But make sure that they are skilled in loan modifications and bankruptcy’s because you may need an attorney who can properly represent you in all your financial areas. My guess is that your mortgage isn’t the only debt issues you have right now. A lawyer that understands both mortgage law and bankruptcy law is lawyer that is a step ahead of the lenders.
What to expect when you apply for a loan modification
Well today more than ever, homeowners all across America are being faced with the horrible threat of foreclosure. The main reason behind this is that many people have unknowingly been put into fradulent loans that have caused them to become deliquent on their mortgage payments.
The number one most effective way to prevent foreclosure today is applying for a home loan modification. By doing this you may be able to catch up on all of your late payments to become current, lower your monthly interest rate, or even change the terms of the mortgage loan completely. But one problem many homeowners seem to have is that they just simply are not sure how to apply for a loan modification. Read more
Federal Loan Modification Program
When people refer to the federal loan modification program, they are most likely referring to President Barack Obama’s Making Home Affordable Program. The purpose of the plan is to either refinance the mortgage or modify the loan terms as a way to assist homeowners in their monthly payments and/or prevent foreclosures.
It has been estimated that approximately five million homeowners will benefit from this program. But lately more and more reports and complaints here on LoanSafe.org tell another tale. Because the plan is voluntary for mortgage servicers, it is proving to provide little relief for homeowners who are trying to get help under the program. Read more
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