Loan Modification

Is The Bank Helping Your Loan Mod?

In many cases, it’s a homeowner’s “Hail Mary,” a last-ditch effort to preserve their home. But getting approved for a loan modification, despite recent encouragement from the federal government, is not as simple as merely calling your lender and asking for one, or visiting its website and applying for one. There is nearly as much preparation required as there was when you originally signed your loan.

First, what is a loan modification? In short, itís an agreement to restructure the terms of your loan. It might include a reduction in interest. It might involve extending the loan period. In either case, the purpose is to provide you with lower monthly payments in order to make the property more affordable.

Making Your Case To The Bank

First and foremost, you must convince your bank that it is in its best interest to approve your modification, and to do that you must build a case for yourself. Banks are in the business of making money, so you must show proof that you have the financial ability to meet the loan’s new terms.

To prepare that case, expect to produce documents such as your three most recent federal tax returns, paid and unpaid bills that help document your financial responsibilities, any correspondence you’ve had with your lender, three or four months of paycheck stubs, three to six months of bank statements, and all of your original mortgage paperwork. Most importantly, expect to generate a handwritten hardship letter that explains how you fell behind in your mortgage payments and how you expect to be able to maintain payments under the modified contract. Based on the case you present, the bank will either approve your modification or declare your case unfavorable and continue with foreclosure proceedings.

Loan Modification Keys to Remember

If your lender is working with you, has accepted your loan modification package, and has informed you that your modified mortgage is likely, move forward wisely. Continue to make your monthly payments as scheduled until the modification is finalized, and prepare yourself for a “good faith” deposit that could total hundreds of dollars in late fees, attorney fees and other costs. And understand that without being able to make this payment, your modification is in jeopardy.

It’s important that you always remember with whom you’re speaking in your lender’s organization. To improve your chances of getting approval for a loan modification, try to advance beyond the collections department and speak directly to a representative in the loan mitigation department. Often, a collections department is more interested in getting you to pay on your current mortgage rather than assist you in getting a modification.

More than anything, remember that you don’t have to accept a bank’s modification offer. Speak to a legal professional to get clarity on an offer’s terms, and understand that, while losing your home may be your last resort, it sometimes is in your best interest to conduct a short-sale, walk away from the house, and put yourself in a situation where housing is more affordable for the months and years ahead. Toucan Homes specializes in helping homeowners successfully complete a short-sale by dealing directly with private investors who will purchase properties directly from the bank.

For more information, contact Justin Velthoen of Toucan Homes. Justin is a real estate professional who helps homeowners find general answers to their questions. The content presented above should not be considered tax or legal advice. Toucan Homes recommends that homeowners seek professional tax and legal advice from a licensed lawyer and/or CPA.

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