A loan modification is an agreement that is negotiated with your current lender that changes the terms of your current loan. Lenders are willing to negotiate when borrowers are facing financial difficulties and can't obtain other financing alternatives. You must show the lender why it would be in the lender's best interest to agree to a workout arrangement. If convinced, a lender may be willing to reduce the loan interest rate, reduce monthly payment amounts or change other loan terms.

A loan modification generally occurs where the parties to a problem loan mutually agree to workout the problem by creating new and better loan terms. The hope is that the new loan will enable to the borrower to meet their obligations.

When applying for a loan modification, make a game plan on how exactly you are going to approach them. These people are trained in minimizing loss for their company and they get paid to by getting the most amount of money out of you as possible or declare that your case is un workable and foreclose on you. That is how they mitigate loss. If you understand this, then you'll know that you have to approach them and all conversations very carefully. Everything can and will be used against you.

Don't think for one second that they are there to help you save your home. If you do that then you'll just end up blowing up on whoever is handling your file and maybe blowing your chances of saving your home. It's a game of cards and their the dealers. You never know what card your going to get and this may be the biggest gamble of your life.

Have all your ducks is a row before you call and be in a good mood. Be prepared to be fake and nice.(even though you would like to tell them off). Make sure all your financials are together.

Oh yeah, don't talk with collections. If you are transfered to collections, be asked to be transferred to the loss mitigation department or home retention department. Don't give collections any of your personal information or tell them what you are trying to do. Just give them you social, loan number and address. If they try and badger you, tell them your lawyer is on the phone and he advised you not to tell them more than that. Trust me, it shuts them up every time. Get everyone's name, extension employee number. Take meticulous notes of all calls or record them and tell them you are recording them.

The trick with any bank and getting a work out done is learning to navigate their phone system so as to increase your chances of getting a live person. Over the years Ive learned some tricks that help, sometimes you hear options that you know will lead to a person like when it says "to speak to a representative press ___" but sometimes they don't give you these options (cricket wireless is the worst at this) so you have to think, what options WOULD get a live person. For example often anything that involves new clients signing up will get a live representative...cause they always want new business. You have to be a little savvy though, you cant just tell the sales guy you called them so you could get a warm body to answer the phone!

Once you get a live person, you want to be working your way up to a decision maker. This is sometimes harder to do for a homeowner than a 3rd party. Often with the homeowner they get stonewalled at the first level, and sadly the first tier in Loss Mitigation is really a glorified collections department. They are paid hourly employee's who have very little if not zero motivation to go the extra mile and help you get some needed comfort and relief while resolving your problem. Often they just compound the problem by being rude and demanding, telling people things like "just pay your bills". So its essential that you get beyond these people and to a specialist.

Sometimes to get to this point you have to put up with the hourly employee's through a process of filling out their forms and information. Providing them with items such as pay stubs, tax returns and a whole host of financial information. Once everything is provided, then some lenders will assign the file to someone higher up in the loss mitigation department.

The MOST crucial element to this whole process is your Budget. They will ask you for a detailed list of your monthly expenses. If its too tight, you may not get approved, if you have too much extra income you are going to have an outrageous payment plan.

The 2nd MOST important thing you can do is DO NOT SPEND YOUR HOUSE PAYMENTS.  Sock away as much of that money each month as you can. Its crucial, heres why;

By saving up your payment for 2-3 months or more depending on the foreclosure time line in your state, you can not only have enough to put together a really nice plan with your lender, but also have some in the bank for a rainy day. Often payment plans with the bank can be pricey and very short terms, like 6 months total to repay what you fell behind on. The people ive worked with who took my advice to save up and keep some funds in the bank, were successful 100% of the time at keeping their home. Because they were prepared for life's curve balls. Even though they had fallen behind in the past, if they had an expense one month, they just pulled a little from the slush fund in the bank to help supplement their house payment that month.

If all else fails, seek out a third party to handle this for you. There are many non-profit and for profits that are very experienced in loan modifications and loan workouts.

Don't give up and fight to stop foreclosure and save your home!

Good Luck!

Moe

Founder & Homeowner Advocate
LoanSafe.org
LoanWorkout.org
951-271-6283 Phone
800-734-8819 Fax
Moe at LoanSafe.org Email