How to Win a Loan Modification
Obtaining a loan modification from a bank is possible. Home modifications are designed to help struggling homeowners avoid foreclosure. Certain income restrictions must be established, and the home must be your primary residence. Successfully winning a home modification could mean your interest rate is dropped to as low as 2 percent or the loan is extended to 40 years.
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Things You'll Need
- W2s
- Tax returns
- Bank statements
- Hardship letter
- HAMP agreement
- Utility bills
- Mortgage statements
- List of income and expenses
Instructions
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Organize your paperwork. By gathering your data all in one place, you'll have easy access to files you will need to access regularly. When you contact the bank, ask for a modification packet. Complete the entire packet and send it back, preferably by email. Contact the bank to ensure they have everything, and respond to any requests for additional information immediately.
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Be able to demonstrate a hardship. Whether through a job loss or underemployment, increasing mortgage interest rate, medical expenses, death of a loved one or divorce, you must be able to prove that your income has decreased or your expenses have increased or both. Increasing debt due to purchases such as expensive vacations or needless trips to the mall will not bode well for your modification. Keep nonessential purchases to a minimum.
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Keep a call log. Each call you make to your mortgage service provider should be logged with the date, time, who you talked to and what was discussed. The modification process can take several months. Be prepared for long hold times on the phone. Put the phone on speaker so you can still do other tasks at work or around your home.
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Remain professional. It is tempting after repeated calls and data requests to get upset, but always remain calm and courteous with bank personnel. The loan modification process can take up to several months. Banks are working with a large volume of files; be consistent and call them weekly, but also remain cordial.
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Know your rights. Banks are now required to negotiate in good faith regarding requests for home modifications. Some state attorney general's offices are filing formal lawsuits against those lenders that are not negotiating in good faith, as reported in a December 17, 2010, issue of the "Las Vegas Sun." You can seek legal action or obtain assistance from a local non-profit organization specializing in modification or foreclosure assistance. Contact your state attorney general's office for a list of recommended professionals.
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Tips & Warnings
To cut down on expenses and time, consider using a high-quality scanner to scan all your documents, including tax returns, utility bills, hardship letters, mortgage statements and w2s. If the bank does misplace your documents, you can easily resend them via email or upload them to an onsite document storage site.
Beware of companies charging an up-front fee in exchange for obtaining your home modification. No company can guarantee a home modification, and each scenario is decided on its individual merits. Many states have set up non-profit agencies that will assist you in pursuing a home modification, without a fee.
References
Resources
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