What You Need To Know To Succeed At A Loan Modification

Comment or e-mail me at miketowersrealty@gmail.com to request a pdf copy or hardcopy of this information.

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.

Treasury Withholds HAMP Funds From BofA, Chase AGAIN

Comment from Mike: I can attest that Bank of America SUCKS at doing loan modifications! They are one of the WORST. They are always losing people's paperwork, asking them to send it in again and again.

 

A slight rise in July mortgage delinquencies underscores ongoing fragility in the nation's housing market, the Obama administration said Thursday in its August Housing Scorecard Report.
The Treasury Department said economic data is mixed with the Standard & Poor's/Case-Shiller Home Price Index rising for a third consecutive month in July, while mortgage delinquencies grew slightly, suggesting a weak foundation for significant growth.
During July, 404,000 distressed borrowers received some type of counseling, with 10.9 million borrowers underwater, or owing more than the property is worth, nationwide, according to August scorecard. Furthermore, the government cited statistics showing prime mortgages have a delinquency rate of 4.5%, compared to 33.2% among subprime loans and 12.2% for FHA loans. About 3.65 million existing homes were on the sales block. Mortgage rates during the period averaged 4.22%, down from 4.36% a year earlier.
While mortgage aid programs pushed the number of foreclosure starts and completions down, the administration's housing scorecard said declining foreclosure activity is partly tied to lender processing issues slowing the default process down.
The report said while federal efforts have improved the performances of mortgage servicers, the administration recognizes a need to keep pressure on servicers to reach solutions for troubled borrowers.
"These assessments provide an unprecedented level of information about servicer performance and are designed to help more eligible homeowners walk away from this process with better results," said Tim Massad, assistant secretary for financial stability at the Treasury.
In July, more than 28,000 homeowners received a permanent loan modification through the government's Home Affordable Modification Program. To date, about 790,000 homeowners have received a HAMP modification with the medium payment reduction in the range of 37%.
Write to: Kerri Panchuk.

Full article here.

Housing Market Lingers in Fragile State: Obama Administration

A slight rise in July mortgage delinquencies underscores ongoing fragility in the nation's housing market, the Obama administration said Thursday in its August Housing Scorecard Report.
The Treasury Department said economic data is mixed with the Standard & Poor's/Case-Shiller Home Price Index rising for a third consecutive month in July, while mortgage delinquencies grew slightly, suggesting a weak foundation for significant growth.
During July, 404,000 distressed borrowers received some type of counseling, with 10.9 million borrowers underwater, or owing more than the property is worth, nationwide, according to August scorecard. Furthermore, the government cited statistics showing prime mortgages have a delinquency rate of 4.5%, compared to 33.2% among subprime loans and 12.2% for FHA loans. About 3.65 million existing homes were on the sales block. Mortgage rates during the period averaged 4.22%, down from 4.36% a year earlier.
While mortgage aid programs pushed the number of foreclosure starts and completions down, the administration's housing scorecard said declining foreclosure activity is partly tied to lender processing issues slowing the default process down.
The report said while federal efforts have improved the performances of mortgage servicers, the administration recognizes a need to keep pressure on servicers to reach solutions for troubled borrowers.
"These assessments provide an unprecedented level of information about servicer performance and are designed to help more eligible homeowners walk away from this process with better results," said Tim Massad, assistant secretary for financial stability at the Treasury.
In July, more than 28,000 homeowners received a permanent loan modification through the government's Home Affordable Modification Program. To date, about 790,000 homeowners have received a HAMP modification with the medium payment reduction in the range of 37%.
Write to: Kerri Panchuk.


Full article here.

IndyMac, Loan Modifications and the FDIC

If you, or someone you know, is attempting to get a loan modification through Indymac Bank, PREPARE TO BE VERY TICKED OFF!

If You Are Not Yet Late On Home Mortgage Payments, Starting Loan Modification Will HURT Your Credit

The beginning phase of a loan modification is a "trial loan modification" which will hurt your credit. Most people who apply for a loan modification are already late on their payments, so the effects are barely seen. However, if you apply for a loan modification and have not yet missed a payment, the process will hurt your credit score!

http://money.cnn.com/2009/12/28/news/economy/loan_modifications_credit_history/index.htm

Sniff a Scam - Is the guy doing your Loan Mod a Scam Artist?

If you want to do a loan modification, I strongly recommend going straight through the bank itself. Not only can you do it yourself, it is also free.

If you must use a third party to do it for you, here is what to watch out for:

1. Third parties that want to charge you an up-front, non-refundable fee to do a loan modification for you. The usual price is $3000 or $3500. Not only is this poor practice, it borders on mortgage fraud (article here).

2. Third parties that encourage you to intentionally MISS a payment. Some banks previously wouldn't work a loan modification with you unless you were already in a form of default (i.e.- a missed payment). However that is no longer the case. Loan modifications and short sales are available to people who have NEVER missed a payment.

3. Third parties that are IMPOSSIBLE to get a hold of after you pay them. Or, when they do call you back, they always tell you "I'm working on it. " You can always call the bank and ask them what the progress is. Customer service reps will type in notes for EVERY single call. The third party should keep a call log of the date and time of his calls, who he spoke to, and what was discussed.

Make sure the third party clearly indicates to you if your modification is an actual loan modification or simply a forebearance. A forebearance is nothing more than a partial payment that keeps the default status in "limbo." As soon as you miss one of these payments, the default process continues where it left off.

Good luck. For more information on the benefits of short sales, please call us at 661-616-3601.

54% of Loan Modifications DON'T Work

From the article:

"The latest data from the Office of the Comptroller of the Currency (OCC) shows that over 50% of homeowners who had their loans previously modified in order to avoid foreclosure have re-defaulted. This seems like an awfully high failure rate."

Full article here.