Loan Modification

Can you do it yourself? Should you hire an Attorney? Seek the services of a Loan Modification firm or a nonprofit housing group?
Going it alone requires that you have the time, skills and experience necessary to battle your lender. Few private citizens have had any previous experience with negotiating the terms of a loan.

There are HUD approved counseling agencies who have plenty of experience with loan modifications who do not charge for their services. Make sure you don’t pay any up-front fees or give confidential information to any company that is not a law firm. These should be heeded warning signs that you may be scammed by a loan modification company.

Obtaining the services of an Attorney, who is well versed in the many issues of loan modifications and can get you the best terms, is money well spent. Nominal Attorney fees expended during the negotiations can be recouped many times over during the life of your loan.

Nowadays loans can be with a single bank or lending institution or can be cut into many portions and held by a mortgage back security. This means it is now held by many individuals. You can’t determine if you qualify for a modification if you don’t know who holds your mortgage. There are several ways to find out. Start by going straight to your mortgage servicer and ask who owns your loan. Phone numbers can be found on your mortgage statement or on your payment coupons. There also are the websites for both Fannie Mae and Freddie Mac where by just inputting your home address you can determine if it’s held by either group.

While participation by lenders in the MHAP is voluntary, the Federal Government is providing financial incentives if they participate. Many of the major lenders are participating in the program.

In order to apply, there is a lot of financial data you will have to gather a give to the lender. If you provide precisely what the lender needs, the process will go quickly. Make sure that all of the information you provide is accurate and truthful. Do not be tempted to “fudge” the numbers as any inaccuracies can hurt you in the long run.

Before contacting your lender, you should gather the following information:

• Monthly Mortgage statement
• Information about any other mortgages on your home, if applicable
• The two most recent pay stubs for all household members who contribute to the mortgage payment(s)
• The last two years of tax returns
• If self-employed, the most recent quarterly or year-to-date profit and loss statement
• Documentation of other income you may receive such as alimony, child support, social security etc.)
• The two most recent bank statements (savings, checking etc.)
• A utility bill showing homeowner name and property address
• Unemployment insurance letter, if applicable
• Account balances and minimum payments due on all of your credit cards
• Information on all your other assets
• It could be very helpful to prepare a letter describing any circumstances that caused your income to be reduced or expenses to increase (job loss, reduction in hours or rate of pay, divorce, illness, etc.)

As mentioned in Tip No. 4, a letter which explaining how you got into this predicament can be extremely helpful. It’s critical that it be well written as well as be factual. The lender must understand exactly why you are in this situation. Your letter should also be chronologically correct so that the chain of events can be easily be followed by the reader. And lastly, endeavor to keep your letter concise and to the point. In other words make it easy to read and follow.

Homeowners who have attempted a loan modification on their own often report that the most frustrating part was getting to talk to the right party. First you have to find the correct department within that organization. Once you accomplished that task you then have to find the person who has the proper authority to act in behalf of the lender.

And that your new terms are affordable. Once you present your case you will have very little influence over the terms of your modification. The lender’s representative is tasked with  getting you the most money possible while still keeping you as a customer. If offered a deal that you still cannot afford, don’t accept it out of desperation. The representative usually has some latitude, so you must be able to persuade him/her that the terms are still too expensive for you to afford. Impress upon them that your detailed budget indicates that you can’t reasonably make the payments.

Foreclosure is very expensive for lenders, which gives you a bit of an edge when negotiating a loan modification. Just make sure you or your attorney provides justifiable data on why the deal won’t work.

This can be a frustrating ordeal and it’s easy to become angry. Don’t succumb to this temptation. Poor conduct by you can lead to further frustrations. Such behavior on your part can lead to a variety of negative actions by others. If you treat them harshly they will be less inclined to help you. Remember the old adage, “You can attract more flies with sugar than you can with salt.”

Leave a paper trail of all your actions. This even includes telephone conversations. Include names and the basic essence of conversations. Either use certified mail or servicers like Fed Ex to ensure your documents arrive and you have proof that they were received. Keep copies of everything you transmit, and keep it well organized.

You have to be patient and proactive at the same time. Normal loan modifications can take from six to nine months. Obtain a proposed time schedule from your lender at the onset of the process. Monitor the schedule of key events and follow up, in a professional manner, as key events approach and you have not heard anything.

Remember: If you think you’re getting the runaround don’t hesitate to “CC” your senator or congressman on the correspondence. Your representatives will probably not intervene for you, but it still could affect how your lender deals with you in the future. This should not be considered as an initial procedure but as a tactic that you can use if you are getting resistance from your lender.