Recently, as I am looking online and on sites like Twitter, I am seeing a trend of Do-It-Yourself Loan Modification Tools and/or 3rd party representatives who charge a fee ($500-$3000) to assist homeowners in the loan modification process. I am almost certain that the number one question you (the homeowner) have on your mind is: should you trust the DIY loan modification tools or even a 3rd party to assist you in your modification?
I am going to share with you two personal stories that I think will help you answer the above question. If you are struggling financially, many mortgage companies are inclined to work with you to help you stay in your home since the cost of liquidating a property could be 1 full year of no interests payments, unpaid insurance, taxes, property maintenance once you vacate, lost of property value and then even the cost of hiring an REO agent, possibly even vandalism, winterization, attorney fees, etc, which are all expenses for a mortgage company.
First, what you should know is that I've had success helping clients modify their loans when they are one to two months behind on their payments. Let me be clear. I am not advocating that you should be late intentionally as that would be unethical. However, I've had clients that tried to modify their loan before being late and they were not successful. In fact, many went through the loan modification process albeit online and did not receive feedback or even a call back from their lender when they weren't late on their mortgage. Then, after one to two months consecutive late payments, they were given the full attention they deserved.
Second, you are well within your means to modify your loan on your own. Here are the items that you need to prepare. Please note some or all of the following items may be asked for.
- A hardship letter with 3-5 paragrahs outlining or tells a story as to what causes you to not make payments on time. Examples might include: Lost of income from unemployment or change in job position, divorce, lost of a spouse's income from unemployment, death, health, burden of taking care of extended family unexpectedly, change in interests rate, etc.
- Make a list of your monthly expenses: Food, clothing, car and insurance payments, telephone, credit cards, child support and/or alimony, gas or commuting expenses, entertainment and hobbies, HOA fees, taxes, mortgage, charities, tuition, medical, house maintenance, utilities and other misc expenses. If you are a small business owner, independent contractor or self-employed professional, you might need to provide a list of business expenses and/or an updated profit and lost statement.
- Provide a copy of two of your most recent bank statements and paychecks. Some banks may even ask for your 401k, 403b account amounts.
- Have handy your w2's or 1099s from previous two years: 2008, 2007.
- You will need to know the approximate value of your home, which is where someone like me comes in i.e. a Realtor. Realtors in general are more than happy to provide you with what we call a free market analysis for an opportunity to be considered to be your seller's agent, assuming you do not qualify for a loan modification. It is also possible that the mortgage company may order an appraisal.
- When you receive your first default notice (the notice that reminds you are late on your mortgage), call the 1800 number that connects you to your bank/lender/mortgage company's short sale, home retention or lost mitigation department. Ask to apply for a loan modification. Some of the information I reported above may be collected over the phone at the time of your first call and you will have to follow-up with a packet that comes to you in the mail. Expect to sign off on disclosure forms that say what you are providing is true to the best of your knowledge. Some people might be think can't I do this online as well and the answer is yes, but that depends on your lender. In fact, as I stated in the beginning of this post, I had success with clients who called as oppose to filling out the online forms.
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