If you are considering a mortgage loan modification program with your mortgage company by either doing it yourself or hiring a loan modification company or attorney then you are taking an important step in preventing foreclosure on your home as well as saving some serious damage to your credit report. Before you start the loan mod process, there are some steps to take as you prepare to start this journey.
Information To Collect Before Contacting Your Lender For A Loan Mod
Collect all the information you think the mortgage company might need. Doing this ahead of time, before calling the lender and being thorough, makes the process go much smoother and also allows you to develop a clear picture of what outcome works best for you. You may also consider purchasing a loan modification guide that will provide you a lot more information. You only get one shot with your lender to present your best case for why they should approve your loan modification. With this in mind, it can never hurt to have more information about this important process for reducing your monthly mortgage payment.
- All correspondence from the lender and/or the loan servicer (save the envelopes)
- Closing statements
- Loan documents
- Identification documents:
> Copy of driver’s licenses
> Copy Social security cards
- Everything related to income and expenses:
> Last 4 months of pay stubs
> 3 Years of Tax returns and W-2s
> 3 to 6 months of bank statements/credit card statements
- All other recurring bills:
> Utilities (Electric/Gas/Phone/Internet/Cell Phone/Etc)
> Auto payments
> Credit cards
> Student Loans
> Medical Bills
> Child support
- Include any evidence of change in employment, marital status or health status that has contributed to your falling behind. The idea is to be able to very quickly paint a complete and accurate picture for the loss mitigation department with the hopes of obtaining a swift response so doesn’t leave anything out. Remember the guidelines for the HOPE program are very specific related to housing ratio – the magic 31% needs to be very clearly demonstrated.
- Get your local realtor to do a no-cost Competitive Market Analysis (CMA) for you. This will give you a rough target price to shoot for. Have the agent estimate a new payment at the reduced loan amount.
- Incorporate the new payment into a projected monthly budget that you will show to the lender.
- Decide what your goal is before picking up the phone.
- Contact a credit counselor for help if you need it.
Contact Your Lender To Get Loan Modification
The next step is to pick up the phone. The trick here seems to be getting through to the right individual, which sometimes can take some tenacity.
You have to get through to a decision maker in the lender’s loss mitigation department. You may have to work your way up the food chain so hang tough and be determined. Be sure to thoroughly answer all questions. Present your budget and show that the modification makes sense, that you will be able to afford the new payment and that you will not be jetting off to Europe with the excess funds once the loan has been modified. This is where your preparation will pay huge dividends.
The mortgage company will naturally try to structure any modification to their benefit, which means that if there is extra money left in the budget they will want you to make a higher payment. Be sure not to accept any terms that are too strict and will not solve your financial dilemma.
If you have stopped making payments on your present mortgage, it is extremely important that you bank the money. You may need it to close on the new home or you may to make the payments current on the old loan in order to get the modification approved. In the end, you may need the money to get set up in a rental if the modification fails and you ultimately have to go into foreclosure.
Most lenders websites also contain forms to start the process online, but talking to a live person is still preferred.
In the end, the decision making process becomes much easier if you take the time to prepare and then explore all of the opportunities with your lender. Before spending any money ask yourself, “Does it make sense”? Try asking the same question from the lender’s perspective. If the numbers don’t add up then there is probably no reason to believe that your lender will be willing to modify your loan and therefore certainly, no reason to pay for “expert” help.
Finally, if it looks like it does make sense then you need to decide whether on not to pay for help and how much you can afford. How will that extra payment affect the overall chances of getting a loan modification and will it ultimately leave you too cash poor? Work that number into your budget.
Given that a Loan Modification is one of the new methods homeowners should explore if they are facing foreclosure, they should spend some time doing research prior to spending any money for help. The recommended source for help would be legal counsel that will guarantee results or return your money. Using an attorney who specializes in loan modification rather then one of the home-grown, so called ‘experts’ is highly recommended. Check the attorney’s credentials with the state bar association; ask for references and details about the past success rates, be clear about what happens to any up front money if the modification is not successful.
Being thorough in your preparation can bring clarity to your situation and help you decide what your next step should be. Links to lenders loss mitigation departments
Article Sumitted by Jim Greisiger. Jim is a licensed Real Estate Broker in the state of Arizona. He has over 30 years residential real estate experience. For more on this topic from Jim real estate website please visit: Popularity of Loan Modification Explodes. Jim can be reached at 480.298.2884 or emailed at: jgreisiger (at) qwest.net.
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