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.
WHAT IS A LOAN MODIFICATION?
A loan modification is a complete re-structuring of your home mortgage. The lender who holds your home mortgage may agree to modify your home mortgage in one or more of the following ways:
- If you are behind on mortgage payments, they may add mortgage arrears to the end of the loan, or capitalize arrears into the balance of the loan.
- If your payments are too high, the Lender may decrease the amount of a monthly mortgage payment;
- The lender may reduce your interest rate which may also lower the monthly mortgage payment;
- Extend the term of a loan such as from 30 to 40 years to absorb the mortgage arrears and/or lower the mortgage payment.
- If your home is worth less than you owe on your loan, the Lender may possibly reduce the principal balance of a mortgage.
YOU CAN APPLY FOR AND OBTAIN A LOAN MODIFICATION YOURSELF TO SAVE MONEY, OR YOU CAN RETAIN AN ATTORNEY TO ASSIST YOU IN MODIFYING YOUR HOME MORTGAGE.
Although you can apply for a loan modification yourself you may need or want to retain the assistance of an attorney to help you. Utah Bankruptcy Professionals has assisted hundreds of individuals to obtain loan modifications in all the ways discussed above (reduction in the amount of mortgage payment and interest rate, adding arrears to end of the loan, reducing principal balance, etc.) To succeed, it is important to present yourself and your financial picture in the most favorable and accurate light possible to increase the likelihood the Lender will approve your application for modification. It is also important to demonstrate that the loan modification benefits both you and the Lender. Utah Bankruptcy Professionals has assisted many individuals in preparing, organizing and evaluating documentation requested in applications for loan modifications. Utah Bankruptcy has helped numerous individuals strategize means of increasing income to their households to qualify for a loan modification. The Lenders are very demanding in their requirements that all requested documents are submitted with the application for loan modification. There are often multiple additional requests for documentation.
DOCUMENT COMMUNICATIONS AND SUBMISSIONS TO THE MORTGAGE LENDER
The follow-up and documentation of the application 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.
LOAN OWNERS APPROVE OR DENY APPLICATIONS FOR LOAN MODIFICATIONS
Loan modifications are either approved or denied by the lender who owns your loan and its designated servicer. The lender’s designated servicer reviews the submitted paperwork and renders a decision based on the loan owners’ 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.
GOVERNMENT DOES NOT REQUIRE LENDERS TO MODIFY MORTGAGES
However, lenders have been pressured by the government to modify mortgages to assist homeowners, and in cases where the mortgage is owned by a government sponsored entity the lenders are directed to modify a mortgage payment equal to 32% of gross income, if reasonable. However, the government left the means to the Lender 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.
Utah Bankruptcy Professionals has helped many individuals save their homes and lower their mortgage payments by appealing Lenders’ denials of applications for loan modifications. Due to the complexity of this process, you may want our help.
OVERVIEW OF PROCESS FOR OBTAINING A LOAN MODIFICATION
The modification process has several steps. The length of time and the documentation required will vary greatly depending on the lender and the nature of your personal situation.
The basic process for modification is as follows:
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.
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 must 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.
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.
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.
YOU CAN PURSUE A LOAN MODIFICATION WHILE YOU ARE IN BANKRUPTCY
Individuals very often apply for and obtain loan modifications while they are in an active bankruptcy case. They may initially file a bankruptcy case to stop a foreclosure sale, and they often propose to catch up on their home mortgage through a Chapter 13 bankruptcy plan over a period of three to five years. If individuals are significantly behind on their home mortgage, they may not have the financial ability to catch up on the mortgage through the Chapter 13 Plan over a period of 3 to 5 yours. Your attorney will explain this to you. An alternative would be to apply for and obtain a loan modification while you are in bankruptcy.
BANKRUPTCY HAS BECOME INCREASINGLY COMPLEX AND SHOULD NOT BE ATTEMPTED WITHOUT THE ASSISTANCE OF AN EXPERIENCED BANKRUPTCY ATTORNEY. THE INFORMATION CONTAINED IN THIS HANDBOOK IS INTENDED TO INFORM YOU OF POTENTIAL ISSUES APPLICABLE TO YOUR FINANCIAL SITUATION WHICH SHOULD BE DISCUSSED FURTHER WITH AN ATTORNEY. THE INFORMATION IN THIS HANDBOOK IS NOT INTENDED TO CONSTITUTE LEGAL ADVICE DOES NOT ESTABLISH OR CONSTITUTE AN ATTORNEY-CLIENT RELATIONSHIP WITH UTAH BANKRUPTCY PROFESSIONALS OR ANY OF ITS ATTORNEYS OR ASSOCIATES.
For more information on Loan Modifications In The State Of Utah, a free initial consultation is your next best step. Get the information and legal answers you are seeking by calling (801) 501-0100 today.