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(Since I first wrote this 9 months ago, much more has been learned about what the lenders are doing with loan mods, and I have updated to reflect the new "reality".) The Loan Modification Process is one of the most convoluted processes imaginable. Each lender has its own standards and procedures, ones that change on a daily basis, and from person to person. To make matters worse, you will hang on the phone for hours, never speaking to the same person twice, and when you do talk to a live person, you will have to retell your story again and again. What is never mentioned is that each negotiator for the lender has from 500-700 files that they are working on at the same time. Most of these people NEVER get help, and many end up losing their homes. Of those people who attempt to do it for themselves, perhaps 20% actually succeed. The loan modification is a process whereby the lender will change the terms and payment on your loan, due to financial hardship. This used to be an uncommon event, but with the Housing Crisis of today, it has become much more common. The only problem is that the process is too cumbersome and fails most homeowners. But the earlier you start the process, the better the chance of getting favorable terms on your mortgage. (Do not get Forbearance confused with Loan Modification. Forbearance is a process whereby the lender will temporarily change the terms of the loan for a homeowner to get caught up on his late payments. The problem is that this involves higher payments than before and it does not change the terms of the loan. Also, it only postpones the foreclosure and if you miss just one payment, the foreclosure process resumes, and the forbearance in terminated.) The process for getting a loan modification is supposed to be pretty straight forward. You accumulate the documents that the lender requires and fax to them. This includes an accurate monthly budget, income documentation, hardship letter and any other records that might be needed. (Most often, these documents are lost, so expect to be faxing them again, time and time over.) The lender will review the documents and make a decision. If only it were that easy in reality. Homeowners are being told that they must be behind on the mortgage before a loan modification can be started. So the homeowner will deliberately miss payments at the lender's insistence. Then, when the mod process is started, many lenders will reverse course and tell the homeowner that they must be caught up on payments before it can go forward. In the meantime, homeowners have trashed their credit, grown increasingly frustrated with the process and eventually just give up, often of which means giving up their home. The reality is that the lender has no intention of granting a loan modification, unless forced to do so. What people do not understand is that the lender has "insurance" on most of these loans, the Credit Default Swaps that you here about but do not understand, or other types of insurance that pay them in the event of default. However, to file an insurance claim, the lender MUST foreclose and take back the home. The lender will review the loan submitted for modification, and then determine which solution offers them the most money. If they make more money by doing a loan modification, then they grant the modification. If foreclosure is finacially better for them, then that is the course that they will take. When a homeowner seeks an attorney to work on a loan modification for him, the results are amazing. Lost paperwork is found. Calls are returned. The process is quickened and homeowners get results. It does not necessarily mean that an attorney is needed by everyone, but it does help, especially when a homeowner is in foreclosure. So when doing a loan modification for yourself, expect delays, lost paperwork, long wait times on the phone, and calls never returned. Prepare to be frustrated and expect long delays, and you just might get it done for yourself after many weeks and months of frustration. |