DO's AND Don’ts: Do not sign a new modified term that you do not feel comfortable with because once you sign a modified new term, you will most likely not be able to modify your loan again.
If you can afford, we advise to hire a company of your choice, you seek that company out, check their references, go meet them, we believe you should hire a firm who does not get paid by your lender to work on your modification why? It is obvious if you hire them they have to satisfy you
Myth 1
DO NOT ASSUME THAT YOU WILL AUTOMATICALLY GET QUALIFIED for modification just because your bank sent you an application for modification.
Most banks deny modifications due to income vs expense ratio since your banks never gives you where the ratio to get qualify it is complete disaster from get go
Myth 2
LENDERS DO NOT MODIFY INVESTMENT PROPERTY
Yes it is true most lenders do not modify investment property but when it make sense they will consider them and we have several samples of modified investment properties.
MYTH 3
IF YOU SHORT SELL OR FORECLOSE YOU ARE RID OF YOUR PROBLEMThis is the beginning of your problems, not the end of your problems. You may be in for some serious tax liabilities
MYTH 4
I WILL SHORT SELL MY HOUSE AND GET A NEW LOAN IN MY FRIENDS NAME
Most loop holes are now closed. So, think hard before walking away from your home. It will be nearly impossible to get a new home loan even under some one else's name due to the new lending guidelines.
How to modify your mortgage absolutely Free
Every one asks us if they can modify their mortgage themselves and we always say YES, YOU LEGALLY CAN modify your own mortgage yourself, there is no legal battle between banks and homeowners. That is why we think that so many of the law firm ads are so misleading. If this were true, by now there would have been numerous class action suits against banks. In fact, getting your loan modified is just a matter of underwriting your loan all over again and lawyers are not in the business of underwriting home mortgages.
STEP ONE:
Call your bank and ask for a modification package. While your bank is sending you an application do the following: research, research, research. Find out everything about your servicing company as well as the actual investor or the owner of your loan if you can. These two are usually not the same companies. Read blogs, check on line, and talk to as many people to find out as much information about your true investor and your servicing company.
STEP TWO:
Before you submit any kind of financial information, first make sure you get the acceptable expense guidelines from your bank. This is the most common area where people get disqualified because of writing the wrong information on the application. i.e., let’s say you’re a household of four spends for Food, meals/snacks $950 per month which is $2.63 a meal per average and you can prove this expense. However, your lender may have a $400 food allowance no ifs ands or buts. Without knowing this information, you will have had a $550 surplus income and this surplus income may get your request rejected. So, do your homework and it is okay if it takes you an additional 2 to 3 weeks to gather information. Do not rush to send your application and remember, according to “The Washington Post,” April 2009 58% of modified loans got ZERO payment reduction. We ourselves often take as much as 3 weeks before we send our clients’ package to the banks unless we can get all the information sooner.
STEP THREE:
Extra income. In times like these, we find that many clients are taking extra small side jobs which may pay them in cash, i.e., you may take a few hours of babysitting, your husband may do some handy work on weekends to raise extra cash. We are also finding that many of these “extra income” are cash based income. So, you must find out if any of this income is acceptable to your lender and what do they want as a form of proof. You do not want to find this out 4 months later after you became disqualified due to a lack of income. So, be proactive.
STEP FOUR:
By now you should know who really owns your actual loan. So, try to find out what does your investor considers as a solid hardship and what kind of ratios are they looking for before modifying any loan. When we submit our applications for modification, we have seen that a few lenders are requesting a 50% income to expense ratio, as well as some other lenders who wanted our clients to be negative on income against expense and off course many who wants you to be positieve on income and even then by how much of positive or negative income will make a difference. So, keep in mind that there is a wide range. Often, we find out that customers only know the myths about what is an acceptable hardship. This is very important because so often we only find out the real and acceptable hardship after talking to a client for 20 minutes and, most importantly, they themselves were not aware of the real hardship from the myths that they heard on the street.
STEP FIVE:
Before you send all of your documents, make sure you calculate all of your income and expenses correctly. Almost 95% of the applications we reviewed got rejected due to the miscalculation of income. Consumers are always looking into their last paycheck when in fact; lenders are looking for the income trend over the year, compared to last year. So, find some one who can actually double check your net income for this, is the NUMBER ONE cause of getting rejected, as well as miscalculating the income and writing unqualified expenses.
LAST STEP:
This is the most important step so make sure that you set aside every week, 2 to 3 hours to speak with your servicing company. Remember they are getting as much as 5,000 applications a week and, without your follow up, you will not get the attention you need. Our recommendation is that you speak with your bank and be prepared to get a lot of run-around. We are facing an unprecedented time like never before so don’t get frustrated, your banks are going through a lot more changes just to adjust to the new bail out programs themselves. Our advise is for you to allow 2 to 6 months for a final outcome depending on your servicing company, actual investor, your hardship, and accuracy of your paperwork.
