If you can’t afford your mortgage payments, getting a loan modification just might keep you out of foreclosure. Your eligibility for a modification is determined by the investor’s set of guidelines not everyone will qualify.
How Often Do Loan Modifications Get Approved?
While it's mostly a numbers game that looks at your income, loan payment, and financial circumstances, you can help or hurt your chances of getting approved for a modification with your actions (or inaction) during the process. If you meet the program requirements and take all necessary steps, you’ll get one.
Because your actions can be vitally important in getting your loan modified, it’s essential that you to learn the do's and don'ts of the process.
Do:
Apply for a modification as soon as possible. To qualify for a modification, you’ll have to submit a complete “loss mitigation” application to your loan servicer.
It’s best to submit your application as soon as you know you’ll have trouble making your payments or shortly after you fall behind. If you take several weeks or months to put your paperwork together, a foreclosure could start or continue, leaving you with less time to work out a foreclosure alternative.
Send in all items the servicer requests. To get protection against dual tracking under federal and some state laws, you have to send your servicer a complete application. An application is complete once you’ve sent in everything that the servicer requested—like a financial worksheet, pay stubs, bank statements, information about your assets, tax returns, and a hardship statement.
One of the main reasons that people often don’t get approved for a modification is because they fail to send in every document that the servicer requests. The servicer won’t make a decision your application until all of your items are in. If you leave out just one document—or send paperwork that’s outdated—the servicer will likely deny your request for a modification.
Be sure to include every page of each required item. When you send your paperwork to the servicer, don’t omit any pages. For example, even if page three of your bank statement is blank, if the other pages say “Page 1 of 3” and “Page 2 of 3”, you need to send all three pages. Otherwise, the servicer will probably consider the document incomplete.
Keep all correspondence you receive from the servicer. Be sure to retain all written communications you receive from the servicer, such as a confirmation letter that the servicer received your complete application or a letter telling you that certain items are missing.
This information could be useful later on if you want to challenge a foreclosure by showing the servicer didn’t comply with servicing laws. (To learn what to do, and what not to do, in a foreclosure, see Foreclosure Do’s and Don’ts.)
Learn about laws that protect you in the process. Servicers sometimes make mistakes when processing borrowers’ modification applications. Find out about the federal and state laws that protect you in the loss mitigation process so you can enforce your rights if the servicer fails to abide by the law.
Don’t:
Send illegible documents. When you send your paperwork to the servicer, be sure that all pages are legible. Otherwise, the servicer might deem them unacceptable and deny your application. Be aware that what you consider acceptable and what the servicer considers readable might be different.
The servicer won't put in a lot of effort to decipher words or numbers that are potentially unclear. It’s in your best interest to make it easy for the servicer to read the documents by submitting only clear, clean copies.
Lose your cool if the process isn’t perfectly smooth. Stay calm, even if you have to resubmit paperwork you already sent in. Resend whatever item the servicer asks for, and send it as soon as possible.
If you get irritated with the servicer and insist that you already submitted all required documents rather than resending them, you’ll only hurt yourself. Remember that your servicer is likely getting thousands of requests for modifications—don’t give the staff an easy reason to turn down your request.
Be afraid to get clarification. Be sure that you’re clear on exactly what items you need to send in. The servicer might request two pay stubs assuming that covers one month of your income.
But if you’re paid weekly, bimonthly, or monthly, you might have to send in more or fewer pay stubs. If you need clarification, ask your point of contact. (Under federal law, in most cases, by the time you’re 45 days' delinquent, the servicer has to assign a single person or a team to help you with the loss mitigation process.)
Forget to put your name, loan number, and contact information on each page of every document you turn in. Normally, you get a few options for sending your documents to the servicer: by regular mail, overnight mail, fax, or secure email. Paperwork sometimes gets lost, so the best option is secure email.
Whatever option you choose, be sure to put your identifying information on every page of each document. Otherwise, the servicer might misplace one page and think your application is incomplete. When possible, send all of your application documents at one time, which significantly reduces the opportunity for items to get lost.
Assume everything is on track, even after you’ve sent in your complete application. After you send in your paperwork, remain in touch with the servicer. Call at least one time each week to check on the status of your application. Keep notes detailing when you called the servicer, who you talked to, and what you discussed. Also, be sure to ask if the servicer needs any updated documents or information from you.
How Long Does a Loan Modification Take?
The loan modification process typically takes 30 to 90 days, depending mostly on your lender and your ability to efficiently work through the process with your attorney or other loan modification representative.
Note: The loan modification timeline is not set in stone. The more complex your situation or the greater the degree of concessions needed from the investor, the longer the process takes.
Borrowers with a lot of collateral issues can see their loans take longer than what has become the typical 30- to 90-day timeframe.
A professional can often reduce the amount of time required by processing your paperwork efficiently, presenting your application exactly the way the lender wants it, and knowing from past experience what the lender is able and typically willing to agree to.
Although each borrower’s situation is unique, knowing the measures the lender is willing to take for similarly situated borrowers can be a real time saver.
Whether you are dealing directly with your lender or through a loan modification specialist, ask several questions up front:
How long is the process likely to take? Find out the best- and worst-case scenarios and then count out the days and mark them on your calendar.
When can I expect to hear something about my case? Mark this date on your calendar.
If I don’t hear anything by the specified date, whom should I contact? Get the person’s name, employee identification number (if available), phone number, and any extension you need to dial to reach the person directly.
What should I do while I’m waiting?
Playing the waiting game can be agonizing, particularly when you have no idea of whether your application will be accepted or rejected or what the lender will offer in terms of a workout.
It feels like your future hangs in the balance, and you remain in the dark. Knowing the standard timeline for processing a loan modification can certainly help relieve some anxiety. In addition, you can continue to make progress on your own by doing the following:
If you hired a loan modification specialist to represent you, do not speak with your lender or lender’s representative.
Refer all matters to the professional who is representing you. Anything you say to the lender could confuse things or compromise your representative’s ability to negotiate the best deal on your behalf.
Log all phone calls and correspondence between you and your lender or representative. Write down the number you called, the person you talked with, what the person said, and what you said – not word for word, just jot down the key points.
Keep track of important dates. If you do not hear something back on the date promised, call the next day to find out what’s going on. Lenders almost never call you back with updates.
If you hired a third party representative, they will (or should) keep you posted, but the lender simply doesn’t have the time to make follow up phone calls. If you’re dealing with your lender directly, you’ll have to be the one making the calls. Mark your calendar and schedule periodic update phone calls. Consistent follow up is paramount to a successful modification.
Explore other options. If the lender denies your request for a loan modification or presents an offer that you cannot accept, you will need a plan B (and maybe a plan C and a plan D).
In addition, other options may be better for you than a loan modification. Consult a real estate agent about listing your home for sale. Talk to a mortgage broker or loan officer about refinancing. Speak with a bankruptcy attorney to find out whether filing bankruptcy would be a better choice.
Don’t be surprised if you continue to receive delinquency notices or late payment phone calls. Lenders rarely put a stop on the foreclosure process until a workout solution is fully in place.
You should ask your lender if your attempts to negotiate a solution will stop or at least postpone other collection actions. If they do not, you should find out what that means for you.
If the lender is able to foreclose in 30 days and a workout takes 60 days, there’s a slight timeline problem. Push to have all default and foreclosure actions put on hold while your workout attempts are underway.
When your fate is in someone else’s hands, 30 to 90 days can seem like an eternity. By doing your part to keep the process on track, remain informed, and explore other options, you not only improve your chances of achieving a positive outcome, but you can also reduce the stress that commonly accompanies the waiting process.
Know more details please visit on Wikipedia
