With a bank or loan modification you could potentially lower the interest rate, reduce the principle owed, catch up on delinquent payments, change your interest rate from an adjustable rate to a fixed rate, and avoid foreclosure. This process is for homeowners who are already behind on their mortgage payments.
During the course of the modification process, you will be changing the terms on a current loan for your primary residence. For most of the programs currently offered by banks and the government, you must live in the house, not use it as a rental, vacation, or investment property.
Because there have been some problems with a few banks responding very slowly to the bank modification, you might want to consider using a loan modification company. This can be a good idea as long as you select a reliable, reputable company, and stay away from the various new foreclosure scams that keep cropping up.
Many bank modification companies use specialists and consultants instead of attorneys. You really want to go with a company that is using lawyers to negotiate with the lenders. The attorney will be more familiar with all aspects of the law and will be better prepared to really fight for your needs.
You should avoid companies which promise to make the bank modification process quick and easy. Whether the process is quick or easy depends to a large degree on the bank itself -- not whichever company or individual is negotiating with it. This is a time-consuming process and the law is never an easy thing to work with.
For homeowners who simply do not have the time or willpower to invest in such a long process, you will want to avoid do-it-yourself (DIY) modification kits. It can very difficult for any one kit to provide all of the information you will need to go through this process completely on your own.
Also, watch out for websites claiming to be government sponsored sites for this process. The FTC has warned about websites using President Obama's name while advertising the new modification program. If it is an official government site, it has the “.gov” tag at the end. All other tags are not true government sites.
However, it should be noted that most people are perfectly capable of obtaining a bank modification without assistance. Remember, the bank makes its decision based on your financial situation, not on who is doing the actual asking.
You should consider contacting your bank first. Their loan consultant will provide you with the information you need to file for a mortgage modification. If you feel completely overwhelmed at this stage, then you might want to consider seeking external help.
Why would your bank agree to a modification? The alternatives are really no better than foreclosure. The bank could repossess your house and try to resell it for a much lower price than what you owe. It could also accept the loss of your payments and let the house sit. You could also decide to declare bankruptcy which results in little or no money going to the lender. Finally, the lender could try to collect the money from you or hire an outside collection agency to do so.
None of these are really viable options for either you or the bank. Your credit would be ruined, and the bank gets little or no money and sometimes even takes a loss. Damage may be done to the property directly, or it may fall into disrepair the longer it sits on the market unsold.
When you apply for a bank modification you will need to prove you have suffered a temporary financial hardship which caused you to fall behind in your current payments. The bank will want to see the following information: Your monthly income (including any money earned by your spouse) shown on your most recent pay stub. A detailed list of your expenditures. This means sitting down and figuring out exactly what you spend on other bills such as transportation (car, bus, etc.), credit cards, electricity, water, groceries, alimony- literally everything you spend any money on. Your most recent bank statements. The lender will want to see proof of the list you made in the previous step. You should be prepared to show a couple of months’ worth of statements. Any other loan paperwork you might have- for the mortgage or any other loan (especially if you have taken out a second mortgage or have a home equity loan).
The more thorough you are in presenting any financial information the easier it will be for the bank to decide whether or not to approve your bank modification. You should also prepare a hardship letter explaining exactly why you fell behind, as well as why you are now able to make a reasonable monthly payment.
Once you have presented your information, it can take the bank weeks or a couple months to make a final decision. During this time, you may need to continue making whatever payments you can, as well as staying in touch with the lender for status updates. The bank will let you know what they expect from you during this time frame- if they do not, make sure you ask.
Do not let your financial struggles result in your home being taken away. Ask for a bank modification before this happens, and you may be able to work out a solution with the lender that allows them to keep receiving payments and for you to continue living in your property.
on November 24, 2009, 9:20 pm