Survive and Thrive in the Loan Modification Process

Arriving at the decision to do a loan modification is rarely done at the liesure of the homeowner. It is normally done under the duress of phone calls for collections, the stress of an uncertain future, and the possibility of foreclosure. The beauty of a properly done loan modification is that the process can solve all these issues by bringing your payments back in line with what you can afford and put you back in charge of your life. Stay positive, hold your head up, and keep the end result in mind as you head into the process because it’s going to take some time, work, and patience to get through it.

Qualifying for a loan modification is a hardship based, as opposed to applying for a mortgage under conventional circumstances. Under normal conditions, two of the big hurdles are credit scores and payment/income ratios. These are not big factors  in the approval process for a loan modification. The list of hardships includes job loss, divorce, illness, being underwater on the mortgage, and adjusted or recasted rates that have increased to the point where they are now out of reach for the the homeowner. Verifying financial hardship is done with a “hardship letter“ which documents the nature of the hardship and how it’s affecting the homeowner’s ability to pay the monthly mortgage payment. As with many aspects of the loan modification process, different lenders look for different things in a hardship letter. Having an experienced loan modification attorney to assist with crafting a hardship letter which can address the specifics of what the lender is looking for gives the borrower a much better chance at getting past the first hurdle.

The second hurdle is the verification of employment and income. This aspect of the process carries much more weight in the approval process than it did in the first half of 2008 due to the fact that almost fifty percent of the loans that were modified in the first half of 2008 ended up back in default, or “refault“ as the situation is now titled. Like hardship letters, each lender is looking for their own datapoints to determine whether hardship exists but that the hardship is manageable. Again, going with a firm that is familiar with what a lender is looking for in the “hardship to income ratio“ calculation increases the odds of approval dramatically.

Borrowers can do themselves a huge favor by delivering requested documents as quickly as possible. Being responsive to document requests decreases the odds that the file will go stale and end up at the bottom of a tall pile of loan mod applications on an overworked processor’s desk. Some lenders are so backed up that a file that goes stale waiting for paperwork can add weeks to the process.

Because so many lenders are overwhelmed with applications the typical loan modification takes months to complete. It can be extremely frustrating at times when it appears nothing is happening and all you want is for the whole thing to be over. Be patient and remember why you’re doing this in the first place. A completed modification can get you out of the hole you’re in, stop a potential foreclosure, and get you back in control of your payments. Considering the alternatives, waiting an extra month, or two, will be well worth it.  

Legal Disclaimer
The information contained herein is provided for general information and advertising purposes only and is not intended to convey a legal option nor legal advice for any particular case or situation. Nothing in this article shall create an attorney-client relationship. Nothing sent to this law office via e-mail shall constitute an attorney-client relationship. Nothing contained in this article shall be construed to be a guarantee or prediction of result. Prior results are provided for general information purposes only and do not guaranty, warranty or predict a similar outcome with respect to any future matter.   Results achieved depend on individual circumstances and not everyone will qualify or be successful in restructuring their mortgage loan.