What You Need To Know To Succeed At A Loan Modification

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What is a Loan Modification? A “loan mod” is asking the bank to lower your monthly payment due to a hardship, in order to avoid foreclosure. The bank usually readjusts the interest payment, monthly required principal payment, or may even (although very rare) eliminate part of the principal entirely (take the balance owed to the bank from $200,000 down to $175,000, for example). This is often a drawn out process that takes a LOT of patience.

General Summary of the Process: Contact the bank, ask for a loan modification. Answer questions, provide requested paperwork. You may have to provide paperwork again, or updated paperwork. Wait and wait and wait. Bank tells you that you are approved for a TRIAL loan modification. (Many do not successfully get a loan modification.) Make minimum of three trial loan modification payments. Bank tells you that you have been fully approved for loan modification. Sign paperwork agreeing to the terms of the loan modification. Bank brings your account current. Make new monthly payments.

TIPS

Paperwork the Bank May Request: Bank statements of your checking and savings account (usually two most recent months worth). Paystubs (usually two most recent months worth). Tax returns (most recent or sometimes 2 most recent years – an affidavit can be written if you don’t have these). A hardship letter, signed and dated by the borrower, asking for a loan modification and stating reasoning why a loan modification is being requested. Paperwork forms the bank specifically has for their process (for you to fill out financial information, other questions). A financial comparison sheet (Income vs. Expenses).

***Paperwork BIG TIP: Keep all this paperwork in a file. The bank sometimes “loses” this paperwork or “didn’t receive” the paperwork and may ask you to send it all again. Make copies and return the originals to your files for safekeeping. If they ask you to mail in paperwork, mail COPIES ONLY. Set aside a copy of each new bank statement and paystub as they come out, in case the bank asks for updated paperwork. Make a copy of the pay stub onto a 8.5x11 sheet of paper so all your paperwork is on the same size pieces of paper. The bank may encourage you to write your loan number on EACH page of paperwork, either on the very top or very bottom, like this: LOAN # 000000000000.

***SUPER IMPORTANT CONTACT TIPS: Check in with the bank WEEKLY. After you are asked to fax or mail in paperwork, check in to confirm they have received it. Trust me, they sometimes do NOT receive it!

*******************************THREE QUESTIONS YOU ABSOLUTELY

MUST ASK EVERY PHONE CALL! 1. Is there a scheduled trustee’s sale date, and if so, what is the date please? 2. Do you have all necessary paperwork from me? 3. Is there anything else you need from me right now?

What Do I Need to Know About the Trial Loan Modification Payments? When the bank offers you to make trial loan modification payments, it is to confirm you can afford the new payment. Please remember that this does NOT stop the foreclosure/default process. Also know that these payments, even though the bank is telling you to make them, are LESS than your monthly mortgage payments, so they may still be reported as late payments. IT IS ESSENTIAL YOU MAKE THESE PAYMENTS ON TIME! Do not be a day late! There are no grace periods for these payments. The bank usually asks for 3 trial loan modification payments in a row before final loan modification approval is offered to you. Send these payments in advance in plenty of time for the bank to receive them and process them on time.

***What Else Do I Need to be Aware of During This Time? The typical process the banks take is to declare that you are in default/foreclosure process after 2 missed payments. This timeframe usually lasts 90 days. Then they can schedule a trustee’s sale (the foreclosure sale). You can ask the bank for this date, or you can call me and I can check for you for free. I have a subscription to a website that gives me daily updates of most trustee sales in California. UNTIL THE LOAN MODIFICATION IS APPROVED AND SIGNED AND AGREED TO BY YOU, THE BANK CAN STILL PURSUE FORECLOSING ON YOUR HOME. They may postpone your trustee sale date to allow you time to proceed with a loan mod attempt, so they can foreclose on you sooner in case you do not qualify for a loan mod.

What if I Want Someone To Handle The Loan Mod Process For Me?

Most important thing to remember for this: DO NOT PAY SOMEONE IN ADVANCE! (Check how this applies with attorneys, but this definitely applies if you are working with someone with a real estate or lending license.) Getting paid in advance to process a loan modification is officially mortgage fraud. If you do hire someone, find someone with experience in loan modifications or short sales. Remember that people usually charge up to $6000 to do this for people. We can take care of this for you for only $2000, and we are not paid until we get the bank to approve you for a trial loan modification. Call Mike Towers at 661-706-6922 for more info.

Is a Loan Mod Better Than a Short Sale For Me? It depends on your plans and end results you are hoping for. It is definitely better than being foreclosed upon! Generally, in my opinion, a short sale is a better option than a loan modification, but I can review your situation (taking into account your loan types, intentions, employment, etc.) to let you know your options. This consultation is absolutely free to you, and at no obligation. Please call Mike Towers at 661-706-6922 and request a free consultation over the phone!

What is the One Thing That Stops a Loan Modification Every Time? Unfortunately, banks do not do loan modifications if you are currently without income.