I thought I would write about this subject since there seems to be many homeowners upside down thinking there is no way they can modify their loans and stay in their homes because their values have dropped. There are no mandatory equity positions required with a loan modification as with doing a refinance. A loan modification or loan workout is NOT a new loan. It is a temporary adjustment to the existing loan usually lasting 3-5 years. After that time, the terms go back to normal per the Note. A loan modification may be granted based on the nature of the hardship and current financial information provided by the homeowners. You have to prove to them that you can pay on the amount borrowed, your loan amount. If you have back payments and interest, escrow shortages and attorney fees, this can be added to the back of the loan with approval from the servicer and/or their investor. The lenders typically want to see the following to anaylze your request for a loan modification:
1. Hardship Letter
2. Current Paystubs
3. Tax Returns (if self-employed)
4. Two Months Current and Consecutive Bank Statements
5. Household Budget or Completed Financial Statement provided
the servicer.
It is encouraged to mail, fax and email this information as much as possible. Many homeowners are getting lost in the loss mitigation departments due to failing banks and laid off staff. You need to make yourself known. I would recommend faxing to all departments as well as sending a Qualified Written Request.
I would highly encourage everyone to obtain a copy of your loan documents if they were not provided on your last transaction. This is ammunition for your arsenal if needed. Many homeowners are having their loan documents reviewed, also known as a Doc Compliance Review or Doc Audit to see if there are any TILA/RESPA or HOEPA violations on the loan. If there are violations or fraud found in the loan, consult with an attorney on your next plan of action. We offer these services at Sequoia Consulting Group.
If for any reason the servicer denies you for a loan modification, you need to understand your options and why you were denied. If you are significantly negative on your budget, they may offer to entertain a short sale or deed in lieu. These have less of an impact on your credit than a full blown foreclosure. Its shows that you made every attempt to work with the servicer. Bankruptcies should be discussed with an attorney so that he/she/they can offer advice on which way to go.
John Camacho
800-521-2877
john@sequoiaconsultinggroup.com
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