The term “loan modification” has become widely known due to the number of homeowners seeking financial relief. And it seems almost everyone knows a homeowner who has secured a home loan modification.
The definition of a loan modification seems simple enough – a lender changes the terms of an existing loan to accommodate a homeowner’s inability to meet a monthly housing liability. However, there are many homeowners who have been unsuccessful in obtaining a home loan modification. The loan modification process is complex, and it has far-reaching financial and legal consequences if not secured timely and properly.
Here are six important pointers to help homeowners steer clear of complications when seeking a loan modification.
1. Be organized and anticipate the documentation required
Banks and lenders are not legally required to modify a mortgage loan. Rather, they underwrite a request based upon loan investor guidelines. Similar to underwriting a loan request, homeowners will be asked to provide financial and employment information to obtain a modification. Make every attempt to provide the requested documents timely and in an orderly fashion. Lenders work on tight time lines and are often unable to accept documents past investor deadlines. Retain fax transmission forms or delivery receipts.
2. Know when to seek help
Be prepared to expend a lot of time to obtain a modification. It’s almost like having a second job. And it can be very frustrating. This drives homeowners to seek last minute help, often in the wrong places. At the very least, consult with a verified professional early on in the process.
3. Avoid Scams
Unfortunately, there are people who take advantage of financially distressed individuals. To avoid disappointment, understand the following:
* There is no such vocation as a “foreclosure expert.” While a real estate agent or title agent may say they understand the foreclosure process, unless they are a real estate attorney, they cannot give legal advice. Non-attorneys often stray into areas reserved for the practice of law and tend to make matters worse for their clients.
* Never sign a deed over to any “expert.” This should serve as a warning sign. Contact an attorney or the state’s Attorney General. Most importantly, do not sign any paperwork without reviewing it and understanding its provisions. Definitely do not sign any documents that are blank. That’s how people get into further trouble.
* Research is important. Investigate the qualifications of the person or company offering help. There are a number of government agencies that can offer assistance. Research them and then contact them first. Verify licenses with the state. Real estate agents, mortgage brokers, finance companies, title agents and attorneys must all be licensed.
* Intelligently consider alternatives. Automatically filing for bankruptcy is a poor plan. Seek out several professionals who can discuss bankruptcy alternatives and help weigh the pros and cons of any legal action.
4. Know when to move on
Understand and be aware of the inherent conflicts of interest in the home loan modification business. Mortgage brokers and bank employees work for the lender. Except for processing paperwork for underwriting, they are unqualified to provide service in a situation beyond the requested modification. Banks employee shut off their computers at the end of the day. Time is not on a homeowner’s side, so it’s wise not to wait too long for assistance. Consult with other independent professionals if there is a lack of response from the mortgage broker or bank.
5. Realize that each loan modification is unique
Seek out a qualified attorney to review loan documents. Only licensed attorneys who practice real estate law understand the nuances of contract law, mortgage law, real estate law, or finance law. Forget about what happened with a friend’s or family member’s situation. There are too many variables that may not apply to another homeowner’s circumstances.
6. Be honest
Information filed in a bankruptcy needs to be consistent with that filed with the bank earlier. Intentionally filing misleading or inaccurate information with a bank in order to achieve a modification is considered fraud. Honestly consider what is affordable when working to save a home. If downsizing is in order, then hire a good real estate agent.
To avoid being disappointed in getting a home loan modified, it’s advisable to seek out qualified and licensed professionals early in the process. Doing your homework and following through in a timely manner can go a long way in achieving a positive outcome.