Dealing with financial pressures is often one of the biggest challenges facing the public today. The potential of losing your home can impact many aspects of your life. It’s important to get the best help when evaluating your options.
Loan Modification and the basic process.
We will outline what to expect from your loan modification and the basic process. The rules and guidelines for a loan modification change on a regular basis.
First, modifications are approved or rejected by the lender who owns your loan. The lender or its designated servicer reviews the submitted paperwork and renders a decision based on its current guidelines. To clarify, most mortgages today are owned by pension funds and investment groups, and serviced by banks and loan servicing companies. Many consumers falsely believe that major banks such as Wells Fargo and Bank of America own all the mortgage loans they service. The truth is that while they do own some of the loans, they act as a servicer for most loans. As a result, they are instructed by the owner of the note on what guidelines are to be used to determine whether a loan application is approved or denied.
Secondly, many consumers believe the lending institution is obligated to modify the loan. This is again false. The government bailout did not require lenders to modify mortgages. However, lenders have been pressured by the government to modify mortgages and in cases where the mortgage is owned by a government sponsored entity the lender has been given directive to modify to a payment equal to 32% of gross income, if reasonable. However, the means for determining income was left to the lender along with the definition of “if reasonable”, no timeline was given under which they had to review the modification documentation, and the 32% of gross income to mortgage payment was vague as they were not required to modify to the percentage, only asked to when reasonable.
With that said, there are ways of making modifications work. It is crucial to present the documentation to the lender in the light of showing the lenders’ benefit for modifying as well as the borrowers. If the lender can be convinced the modification benefits both parties, they are much more likely to approve the modification. The follow up and documentation of the process is crucial. It is important to keep detailed conversation logs and notate each time any documentation is submitted, and then verify it was received within 2-3 days after submittal (time needs to be allowed to have documentation loaded into their system). It is also important to review the documentation to ensure the lender will see that you will be able to make the payment once the modification is complete, without making it appear you can make the current payment without modification. It is important to review any offers to ensure they meet your needs.
How the process works:
The modification process has several steps. The length of time it takes and the documentation needed will vary greatly depending on whom the lender is and the nature of your personal situation. When approved, most modifications reduce interest rate and payments but extend the term of the loan. In some cases, principle reduction to the loan is offered. In some cases, the delinquent amount is placed on the back of the loan or included in the new payment, waiving the requirement to pay the delinquency in one lump sum.
We urge you to be patient and work through the process without getting discouraged.
The basic process for modification is as follows:
1. Signature and Documentation:
The loan application documents required in the lender’s packet must be completely filled out including required signatures. All documentation must be submitted per the items listed in the packet along with any documentation for your specific circumstance.
2. Submission of Documentation:
Once the application is completed and the required documents are gathered your loan number and the last 4 of your social security needs to be noted in the right hand corner of each page.
The application and the documentation can then be submitted to your lender via fax, email or US Mail depending on their submittal process.
The loan application and the documentation, once received by the lender is reviewed by your personal contact person for legibility and completeness.
The personal contact person will contact you if the loan application is incomplete or documentation is missing.
Contact your personal contact person on a weekly basis to check the status and updates to expedite this process.
Once your application is considered complete the application and documentation is then sent to an underwriter for review and approval.
Depending on the information and documentation that was supplied the underwriter might request additional information or documentation before making a determination.
This last step takes approximately 30 days before a determination is made.
5. Approval for Trial Payments:
Once your application is reviewed and if approved you will be required to make 3 trial payments before your final loan modification is approved.
The trial payments need to be made in a timely manner or your loan modification will be denied.
6. Final Approval:
Once the 3 trial modification payments have been made and received by the lender, the final loan modification will be prepared and sent to you for review and approval. If the terms are acceptable, you must sign and return the loan modification in the allotted timeframe.
If you currently are in a bankruptcy, Court approval must be obtained before the loan modification is final. A motion will be prepared to file with the Court and set for hearing in order to get the required Court approval.
The loan modification is not final until all the required documents are signed by both the lender and yourself.
We are committed to helping you get the new start in life you are seeking.