When homeowners are struggling to make mortgage payments and fear foreclosure, a loan modification is often the answer. A loan modification will restructure the terms of the existing loan, such as the interest rate, length of the loan, and even the monthly payment amount. By modifying a loan, the payments become more affordable and could keep homeowners out of foreclosure.
Loan modifications today provide much more relief than they once did. In the past, homeowners would modify their loan only to find that in a short time, they were in the exact same situation. The Making Home Affordable Program (MHA) was created to make loan modification a more attractive and realistic option for homeowners. The program has been so successful it’s been extended until December 31, 2113.
There are no guarantees that a lender or servicer will approve a loan modification, however. If a lender does not approve a modification, homeowners may find themselves facing the same situation they were trying to avoid. When the below tips are followed, there is a much better chance that the lender will approve the loan modification, and that the homeowner will keep their home.
Begin as Soon as You Need To
Too many homeowners don’t start the loan modification process until they are already in foreclosure, but that is often too late. MHA doesn’t require the foreclosure process to have started before homeowners apply. The program also has a calculator on their website that gives homeowners an estimate of their monthly payment if they are approved for a modification.
Contact an Attorney
Lenders are often still willing to negotiate a loan modification when the homeowner does not have legal representation, but doing it this way offers the owner little protection. An attorney can guide homeowners throughout the entire modification process, and can even help them get the best possible terms in their modification.
Determine Which Lender You Need to Deal With
This is another area in which an attorney can help. Many homeowners may think their loan is with a single lending institution. Truthfully though, mortgages are often divided into many pieces and held by mortgage-backed security. When that is the case, the mortgage is then held by many different people.
This is important information because only once a homeowner understands who holds their mortgage can they apply for a loan modification. There are many ways to do this, such as visiting the websites of Fannie Mae and Freddie Mac, or by phoning the numbers found on the mortgage statement. An attorney can track this information down and pass it on to homeowners so they can focus on gathering their paperwork.
Gather Necessary Paperwork
When applying for a loan modification, there is a lot of paperwork the homeowner must submit. The process goes much more smoothly if this documentation has been collected beforehand. The paperwork required includes:
- Monthly mortgage statement;
- Any information pertaining to a second mortgage on the home;
- Two recent pay stubs for any members of the household who contribute to the mortgage;
- Tax returns for the last two years;
- Most recent quarterly or year-to-date profit and loss statement for those who are self-employed;
- Paperwork for any other sources of income, such as alimony, child support, or Social Security;
- Two most recent statements from all bank accounts;
- A utility bill stating the homeowner’s name and address of the property;
- Letter confirming unemployment insurance, if applicable;
- Account balances and minimum payments on all credit cards;
- Information pertaining to any other assets; and
- A hardship letter explaining the reasons for the loan modification application.
Track Down the Right Personnel
The most frustrating part of the loan modification process is often not even applying – it’s finding the right person to speak to. Often, homeowners find it difficult to determine which lender or lenders even have their mortgage, then locating the right department, then locating the right person with the authority to modify the loan.
This is another area where having legal representation can help. A foreclosure defense attorney is experienced with loan modifications and will know which department they need to talk to, and which person is likely to have the authorization to work on the lender’s behalf.
Get the Best Terms Possible
An attorney can help when negotiating the terms of the loan modification. However, homeowners often accept the first deal offered because they are grateful the lender is working with them, even if they know they still won’t be able to afford the payments in the future.
It’s important to keep in mind, though, that representatives usually have a little bit of latitude to change the terms of the loan to something that is suitable for the homeowner. When homeowners can show through their detailed budget that they still can’t afford those payments, representatives are often willing to work with them. This is particularly true when considering that it’s often more expensive for the lender to foreclose than it is to modify the loan.
Going through the process of modifying a loan is often frustrating. It’s easy for homeowners to become upset, but it’s important they never show it. It’s important that the lender and representative remain on the homeowner’s side throughout the process, and they won’t if the homeowner becomes visibly angry with them.
In addition to being a frustrating process, applying for a loan modification also takes a great deal of time. In fact, it could take anywhere from six to nine months. It’s important that homeowners remain patient and remember that just because it’s taking a long time doesn’t mean it’s not going well. An attorney can also request a time schedule from the representative, which can provide some reassurance to the homeowner that everything is on track.
Contact the Right Florida Foreclosure Defense Attorneys Who Can Help
Clearly, there’s a lot to know about loan modifications, and homeowners shouldn’t do it on their own. Instead, they should contact the experienced Fort Lauderdale foreclosure defense lawyers who can help.
If you are facing foreclosure or have already missed some mortgage payments, contact the Loan Lawyers at (954) 523-HELP (4357). We can guide you through the entire modification process and will negotiate with the representative and lender to get you the best terms possible. Call today and learn more about how we can help you.
Loan Lawyers has helped over 5,000 South Florida homeowners and consumers with their debt problems, we have saved over 2,000 homes from foreclosure, eliminated more than $100,000,000 in mortgage principal and consumer debt, and have recovered over $10,000,000 on behalf of our clients due to bank, loan servicer, and debt collector violations. Contact us for a free consultation to see how we may be able to help you.