Special offer

Mortgage Modification...What Does It Take?

By
Mortgage and Lending with Brand Mortgage

Mortgage Modification...What does it take?

 

President Obama set out to help our economy regain its steam by providing several stimulus bills. Under the stimulus bill were many homeowner assistance programs. The loan modification program was meant to help homeowners reduce their current interest rate for a certain period of time to help lower their monthly payments in hopes to help them fight off foreclosure. What no one expected was the difficulty or the popularity of this program. In this report, we will discuss the "Help for Homeowners" program and what you will need to help the process. Processing times will vary depending on the complexity of your situation and the mortgage servicer you are working with.


First, lets begin with why you might need to consider modifying your mortgage. If you are behind on your mortgage more than three months, and 50% of your income or more is going to pay for you home and other debt, you might be a reasonable candidate. Be aware that it is a long process and you must be diligent with following up, because the mortgage company does not really care if you modify or not.


Once you feel you might be a modification candidate, be prepared to give them all of your financial records. The servicer requests this information to prove beyond a doubt you are unable to make your current payment. Loan modification is not limited to owner occupied properties. All investors who might be underwater, might consider this option before selling.


The program details may vary, however the main goal of the program is to reduce your interest rate in order to lower your payment to a more manageable sum. Interest rates could be reduced to as low as 2%, which is fantastic. If you have an interest only loan, this is a great opportunity to obtain a low interest rate to help pay down some of the pincipal balance. The rate is fixed for five years. The government decided that five years would be enough time for a homeowner to correct any issues with there financing and credit in order to refinance their home into a more suitable mortgage. Typically you can repair credit obligations within 12 months, depending on the severity of the credit issues. Correcting your financial situation may take longer depending on your motivation and job preferences. It would be beneficial to get in touch with a credit counselor, or financial planner to devise a plan to correct your financial position in a shorter time frame.


Now that you have an understanding of the program, the next item, is figuring out exactly what documents the servicerwill need to modify your current mortgage. The list below is not an exact list, because documents may vary between servicers.


1. Locate the contact information for the modification or loss mitigation department. The loan modification department will have a separate fax number to fax the needed paperwork for your odification. Do not get it confused with min fax number. If you do, you can rest assured they will not get the paperwork.

2. Most recent tax returns. If you are self-employed you will need both business and personal tax returns. Be sure to include all schedules.

3. Most recent pay stub. If you are self employed you will need a profit/loss statement and a break down of your income in which you will be reporting on your 1099 depending on what time of year you apply for your modification.

4. They will requiring you to fill out a spread sheet that breaks down all monthly debts. For example, car insurance payment, car payments, credit card payments, food costs, etc.


Once you have gathered the information needed to begin the modification, fax the information to the modification department. Follow up with the department 30 minutes to and hour after you faxed the paperwork to make sure they received it. You will need to follow up with them every two to three days to check in. You may find that the initial paperwork may not been filled out completely, or they may need additional information. The quicker you can provide the requested information, the faster the process will be.



Once you have submitted all needed paperwork, and no new information is needed, the modification department will review your paperwork to determine if you are eligible for the modification.



The process to determine if you will be approved for a loan modification could take several weeks. Continue to follow up until a decision is made. If you are approved for a loan modification, they will discuss the modification details and mail paperwork outlining the entire modification for you to sign and return. Once you agree to the modification, you are on the road to recovery.

Posted by

 

MaryBeth Mills Muldowney
TradeWinds Realty Group LLC - Braintree, MA
Massachusetts Broker Owner

great post, is there any time limit on the amount of time it can take for them to approve or disapprove?  Does the owner looking to a loan modification have to be three months in arrears to be qualified to go forth?

Happy New Year!

MaryBeth Mills Muldowney, TradeWinds Realty  Group, LLC  Massachusetts

Jan 04, 2010 03:15 PM
Anonymous
Steve Shockley

There is no set time for loan modification approval, however the process can take several months depending on the company who is currently servicing the mortgage. American servicing has been difficult to deal with and they have a long processing time.  Bank of America and Wells Fargo have produced quick responses and have been easy to work with.  A homeowner does not have to be late on thier mortgage to get a loan modification.  If they are not late, they must produced enough information to warrent a modification (I.E. reduction of income, medical issues, etc).  If a client owns rental property, the modification program may have slightly different terms.  Bank of America actually has a list of items a loan modification client must meet before a decision can be made.  If the client meets the inital checklist, they will receive a package in the mail that outlines the the modification terms, but it is not an actual approval. Once the client has returned the signed package to the servicer, is when the file is reviewed for approval or denial.  Be sure the client reads and understands the terms.  Bank of America will actually reduce your monthly payment during the decision process.  You can choose to pay the lower amount or not, however, if Bank of America decides later that you are not a modification candiate, the difference between your lowered payment and your actual payment will have to paid back.  The amount to pay back is determined by how long you paid the lower payment.  In some cases, the client might actually be better off selling the home or consider a short sale.  Let me know if you have any other questions. 

Thanks,

Steve Shockley

 

Jan 05, 2010 03:26 PM
#2
Freddie Gonzales
WEM PACIFIC Investments, Inc. - Daly City, CA
CRS, GRI, RDCPro

Great post. What do you think is the ratio of loans modified vs. applications received for loan mods? Thanks and good luck.

Jan 12, 2010 03:57 PM
Stephen Shockley
Brand Mortgage - Duluth, GA

Freddie,

That is a great questions, I am not 100% sure what the actual pull through rate is.  I can certainly try and find out and get back in touch with you.   

Thanks,

Steve

Jan 14, 2010 02:01 PM
Stephen Shockley
Brand Mortgage - Duluth, GA

Freddie,

That is a great questions, I am not 100% sure what the actual pull through rate is.  I can certainly try and find out and get back in touch with you.   

Thanks,

Steve

Jan 14, 2010 02:01 PM
Stephen Shockley
Brand Mortgage - Duluth, GA

Freddie,

That is a great questions, I am not 100% sure what the actual pull through rate is.  I can certainly try and find out and get back in touch with you.   

Thanks,

Steve

Jan 14, 2010 02:01 PM