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Budgeting & Finance Guide

Category Archives: Home Loan Modification

In our tough economy, interest rates can be our worst enemy when it comes to owning a home. It’s making it difficult for us to even afford a home and it seems as the days go by more and more home are being foreclosed on.

We all try to find ways to prevent that. Paying companies thousands of dollars to have them “modify” your home loan and lower your payments. Well stop! You are able to do it yourself and you’ll save a ton of money doing so.

First, make sure you balance your expenses and see where the problem starts. If on that sheet where you write all your expenses and your incoming income monthly and there is a huge deficit, then you need to see what you can deduct to make your expenses and income more even.

Then, give your lender a call, tell them you are interested in doing a Loan Modification and make that clear to them because some reps on the phone make the mistake and write Short Sale on the notes which is what we are not trying to do.

After you tell them what are your intentions, ask them what it is they need from you to submit your “hardship” package and where you send it in. (Remember to keep notes on all conversations with the lender, so it’s proof that you have done something in lowering your payments and also proof that you want to keep your home.)

The hardship package usually consists of: Hardship letter, financials (that’s were your income and expense sheet kicks in), two months worth of any income you have (pay stubs, profit and loss, rental agreements, child support, social security, un-employment, etc.), two years Tax Returns and W2’s and finally two months Bank Statements.

After you gather everything, type up your hardship letter and be honest, don’t just say payments are high, explain why the payments are high. Did you recently have a loss in income, family member became ill, over time hours have been cut, children started school and your income cannot support their books and tuition. Be honest and the lenders will notice that.

Now, after this is complete, submit your hardship package to the lender and make sure you keep the fax confirmation page to ensure you have submitted the documents and it went through with no errors. Now, it’s the wait time, call within 2-3 days to see if your hardship package has been received, some Lenders are over-loaded with the amount of requests that they have for “modifications” so stay calm.

If they haven’t received it within those 2-3 days give it a week or ask them, what’s their turn-around time for receiving and imaging documents into the system. From my experience, I’ve seen them get received and imaged into their systems from 2-3 days to about 1 1/2 months. So time varies with all lenders.

As soon as your documents have been imaged, ask them what’s the turn around time for completion and if a negotiator is assigned to your file. What process is it in and if it is active in review for the modification. Ask lots of questions, they may tell you, “it’s in review, no updates,” but don’t let that stop you. Keep calling at least 1-2 times a week to find out what the status is. If you don’t call as often you won’t know if they have requested additional documents and that’s what you want to keep up with.

Some lenders are strict, to the point if you don’t send in the documents they’ve requested, they will kick your file out of review and you will have to start all over. I’m not saying this process only takes 1 month to 2 months, this is a long process (unlike online payday loans that are approved in less than 3 minutes), so you should stay dedicated. I’ve seen some loans get modified in 3 months and some in 9 months. So stay calm and just remember to stay focus and keep up to date on calling your file.

When the negotiator or investor has come up with a solution, they will either tell you your file has been denied or approved. If approved, as for the terms and the length of which your new interest rate will take place. Ask for the documents you need to submit and when your new payment will be. Remember, when approved they give you a certain time to gather what ever information they have requested.

If not submitted that can mean automatic denial of a application, because they would consider the file to be “incomplete.” If denied, don’t stop there! Try it again, find out why your file was denied. What reason, there is always a reason. If they don’t tell you, ask to speak with a supervisor or the negotiator that was handling your file. Don’t give up, just resubmit with updated documents and try again.

This is time consuming, hectic and stressful, but in the end, if you stick with it and don’t give up, you’ll be rewarded with lower payments, lower interest rate and possibly a principal reduction! Just give it a try yourself and don’t spend thousands on others to do work you can do yourself!

home loan modification

1. Decide what you are asking for; a forbearance, a deed in lieu, an actual modification, etc. Go to the following website to see if your lender is participating in the Federal HAMP program.

If so, download an application from the website. If not, call your lender to find out if they have an in house loan modification dept.

2. Call your lender. Be ready for the person you are talking to tell you that you don’t qualify for any programs. Then apply anyway. I was asked the initial screening questions by my lender (just someone answering the phone in the loss mitigation dept) and told I would not qualify. I subsequently applied for and got the modification!

3. Be creative with the solutions you think will help your situation. Your lender is limited to what they can offer, but it doesn’t hurt to ask. For example, I asked for a lower interest rate, a principal reduction, a term extension from 30 years to 50 years, and asked them to bring my property taxes current. I got the lower rate, extended-term and they wrapped my overdue taxes into my total loan.

4. Find out who the head of the dept is, then try to get their direct ext and email. They may still farm your package to one of the underlings, but you will have someone to follow up with if you don’t get timely responses.

5. Be nice, even if they aren’t. It makes all the difference. Make them want to help you. They have many files on their desk. If you are a jerk, guess what, your file never seems to reach the top of the pile. They are frustrated too.

6. Be persistent. Treat this as a second job. You must follow up regularly. Make the calls and respond to requests for information. This is a reason that many modifications are turned down. The lender simply did not receive (or lost) the requested information from the borrower and /or the borrower won’t respond.

7. Supply requested information whenever it is requested no matter how many times you have already submitted it. Submit it in the manner they request, whether it be the fax, email, certified snail mail, whatever. I always made sure to fax in the info AND sent a set of the requested items certified mail, return receipt requested so I had a date received and a signature. This may seem over the top, but I had to submit the same set of tax returns three times because the lender said they didn’t receive it! I then followed up with a phone call to make sure the person requesting the items received them.

8. Take care to thoughtfully compose your hardship letter. It is a human being that will be reading it, and sometimes an entire committee that evaluates your situation. Make it compelling.

9. If you are turned down, consider reapplying. I was turned down twice before getting the loan modification.

10. Do not freak out if you are getting different information from various depts. Many times, the left hand does not know what the right hand is doing. You may be working on a modification with one dept, and getting threats of foreclosure from another. I did not succumb to any pressure for payments until I had an agreement in writing from my lender. If I was going to be foreclosed on, those payments would have done me no good anyway.

11. If you are not able to work out a solution for staying in the home, don’t just move out. Find out if you qualify for the many “cash for keys” programs many lenders offer. You agree to be out by an agreed-on date, leaving the property tidy and they give you cash to help with relocation and moving expenses. This can be between 3k and 5k depending on the lender and the state.