Basic Guide For A Loan Modification

Keep in mind that no two lenders are created equal; meaning their steps for modifications will vary. Here are some guidelines to reference.

1 – Don’t pay debt with debt. This will generally lead to bankruptcy. Do not hide from your lender. Communication is key.

2 – Make a list of all of your outstanding debts. See where your money is going. Compare your debts to your income and see how much you have left over at the end of the month. If your debts are higher than your income you need to see where you have to cut back. Always start with all of your expenses and then cut back or adjust where you can. This will help when you contact your lender.

3 - Contact your lender and ask for the loss mitigation department. Make sure they don’t’ direct you to the collections department. That is NOT who you want to speak to. Have them explain to you in detail exactly what they will need to consider your modification. You may be able to persuade them to freeze your loan. This means that won’t assess late fees, credit lates or start foreclosure proceedings until after the modification decision has been made. If you have suffered a hardship this would be the time discuss that. (Job loss, divorce, arm adjustment, etc)

4 – Once the loss mitigation reviews all of your documents and accepts your proposal you did a great job and it’s time to celebrate. Unfortunately it’s rarely that easy. Most times this is where the negotiations start. They wont’ deviate far from the actual numbers that you submitted. Your income, the value of the property and the loss they will take in foreclosure. If you have documented your case correctly you should come out of the negotiation with something you can afford.

5 – If they deny your request for loan modification then unfortunately its time to seek the advice of an attorney or an attorney based loan Modification Company. If you have not already examined your loan documents for TILA or RESPA violation then ask the attorney to research that. If one is found the bank will re-open your request. They would rather modify than be sued.

6 – The bank can’t modify your loan without your notarized signature. Be sure to read the modification agreement closely. Once your loan is modified and you place your signature on the new agreement it’s a done deal. There are no 2nd chances. You may want to have an attorney review the documents prior to signing.

Next post we’ll talk a little about a Forensic Loan Audit…