Tuesday, July 14, 2009

Top 5 Tips for Obtaining a Loan Modification


We get a lot of calls from people who are looking for help with a loan modification. With so many people laid off, downsized, or suffering from the crushing weight of too much debt, there are many homeowners who simply can’t afford their mortgage. Unfortunately, many of our clients come to us because their bank is treating them like an enemy, rather than working with them to forge a creative solution.

Having helped numerous clients to successfully obtain a mortgage modification, I’ve created the following Top 5 tips for obtaining a loan modification:

  1. Analyze Your Financial Picture. What is your hardship situation? Have you lost a job or had hours cut back at work, or do you have high hospital bills? If you don’t have a hardship situation, but you just want to get your lender to give you a deal because your property is “under water,” you are unlikely to get a modification.
  2. Gather Your Paperwork. It’s best to gather together all the documents you will need. Although every bank has different requirements, you’ll likely need the following: a copy of your most recent mortgage statement, at least three months’ bank statements, at least three months’ paystubs, the last two years’ tax returns, copies of the last two years W-2’s, a list of monthly expenses, and proof of any other income earned.
  3. Call Your Bank and ask for their “Loss Mitigation” Department. Ask your bank what documents you specifically need and what information should be included in your “hardship letter” (see #4 below).
  4. Draft Your Hardship Letter. Here is where your attorney can help. An experienced attorney can craft a hardship letter which explains succinctly why you deserve a loan modification based upon your personal facts and circumstances.
  5. Follow up, Follow up, Follow up. It’s not enough to fax in your documents and wait for your bank to contact you. The banks are overwhelmed with requests for modifications, and it’s taking them months to respond, even to customers who are already behind several months on payments. You need to follow up every couple days to be sure your application is on track.

I would be thrilled if obtaining a modification of your mortgage was always as easy as following these simple steps. Sadly, however, a successful mortgage modification usually takes many months of follow up and persistence. Most people don’t have the time or energy to see an application through to completion. That is why so many of our current clients have started out trying to obtain a modification on their own, only to come to us many months later, frustrated and fed up with their lender.

In spite of this, I encourage you to give it a shot. Even if they don’t seem like it, your lender would rather you work with them to create an amicable solution that allows you to stay in the home, remain current (or become current) on your payments, and saves the bank the money, time and hassle of going through another foreclosure. If you have lost a job, lost hours at work, or suffered some other hardship so that your mortgage payment is weighing you down, then you owe it to yourself and your family to give it a shot.

If you need advice on your particular situation, please feel free to give me a call at (415) 250-8131 or email me at johncorcoran@gmail.com for a free consultation.

2 comments:

Berchta said...

Thanks alot for sharing this article with us
but i think a loan modification is when the terms of a loan are permanently changed for the life of the loan. There are many questions home owners have about loan modifications and hopefully this article will help clear some of them up.Every one needs loan modification help

John Corcoran said...

Berchta:

Thank you for your comment. A "loan modification" can broadly include many different types of changes to an existing mortgage. Many of the banks are reluctant to grant a permanent modification and only willing to grant a short-term modification (anywhere between 2-3 months to 5 years) which will allow the borrower to "get back on their feet again." Unfortunately, in my experience, the banks are dragging their feet too often.