Ten Tips for a Successful Home Loan Modification
A home loan modification, for many homeowners, is the only option standing between them being able to stay in their homes and being forced to move after a foreclosure, a short sale, bankruptcy or a “cash for keys” negotiation. The Making Home Affordable Program has had over 90 revisions sice it's inception. It is critical to understand the importance of submitting a properly financially structured loan modification package to your lender. If events are unfolding rapidly, the modification is one shot deal that must be done correctly and as quickly as possible. If you are in forecosure it is important to comunicate with your lendrer unless you have hired an attorney to assist you with navigating the foreclosure process. The following tips will give you the best chance at getting your home loan modification completed with terms that you can sustain for the long term. They are:
1) Be realistic - If you’re behind on your payments without relief in sight, magical thinking isn’t going to get it done. It’s time evaluate things, talk to a attorney that is familiar with lender guidelines and bankruptcy law. Review your debt to income ratio and determine a coarse of action or you could lose your home.
2) Hire a professional – Getting a loan modification executed, with terms that address your specific needs is not child’s play. This is the roof over your family’s collective head. Hire an experienced attorney to make sure your ability to qualify for a loan modification is there. If you are not able to afford a reasonably modified loan then you may consider other debt relief options at that time so you can afford your home. Getting and loan modification with terms that are within your budget and sustainable for the long term is very important to prevent default in the future.
3) Pull your paperwork together - You’re going to turn in about as much documentation as you did for the original loan. Have it copied and ready to go. Keep an extra copies just in case the lender needs a re-submittal. Also, the lender will want monthly updated financials to see that nothing financially has changed since your original submition. If you make more, you may make to much. If you suffer further income loss, this may disqualify you as well.
4) Bring statements for all your credit card and consumer debt to your initial consultation – Your attorney is going to need to know the total of your monthly expenses to be able to negotiate the right loan modification for you. Additionally, there may be an opportunity to set up a debt negotiation to run concurrently with your loan modification. The debt negotiation can save you more money and increase the odds of getting your modification approved.
5) Be honest with your attorney - Whether you were stating assets and income or something else, come clean with your representation. If you got creative with your tax returns during the application process, the new 4506-T form could work against you by permitting your lender to verify that the tax returns used to apply the first time are the same as the ones you turned in to the IRS. Let your attorney know about the situation so that he can prepare for it.
6) Be honest with your lender – Trying to put one over on your lender isn’t likely to work. Remember, they still have all of your original documentation, so forgetting about bank accounts or enhancing your “resume” will be caught and definitely frowned upon. Your lender will also pull a credit report to see your obligations, revolving debt, car loans and if you are current or not.
7) Write a compelling hardship letter - This will be the basis of your loan modification. It’s basically a chronology of how events unfolded to put you in need of a loan modification and how you’re going work your way out of it. Property value loss is not a hardship. A medical illness not allowing one to work or other loss of income is.
8) Be patient – Loan modification processors have more than they know what to do with at present. Working with a law firm will expedite the process but the workload on the lender’s side is so heavy that process will take time. Don't expect this to be a easy process on your own or even with an attorney. You must be understanding, and when documents are needed by your lender you should consult your attorney priior to sending.
9) Respond to requests for additional information quickly – You may be asked for updated versions of statements and paystubs as the modification process moves forward. Responding quickly will keep your file moving and on the top of a processors stack of applications.
10) While the home loan modification is in process, save as much money as possible – The excess money that you may have as a result of not paying your mortgage can be used to rebuild your savings and cushion you from a possible income shock down the line. You may also need money to reinstate your home loan after the loan modification process.
Bonus tip:
11) Continue saving any excess funds you may have after the loan modification is completed – This goes for excess funds generated from a debt negotiation or debt settlement as well. A high number of loan modifications go back into default within months of the modification’s completion because the borrowers continue to spend money over and above their budget. Nobody wants to go through the process a second time and consistently saving money is great way to make sure it doesn’t happen. |
