Loan Modification Tips
One way to prevent foreclosure is to obtain a loan modification from your lender. Be ready for challenge. Lenders are horrible at processing modifications and they do not really care about their customers. If they did, modifications would be a top priority. However, lenders generally consider loan modifications a bother unworthy of their time. The internet is full of loan modification horror stories which you should read.
Here are some tips for dealing with your lender on a loan modification request.
- Ask yourself if you really want the house first. Does it make sense to keep it if the payment is high? Chances are, a modification will not lower your payment much. Also, lenders will not reduce the principal balance on your loan despite the realities of the housing market. Common sense and lenders don’t often meet.
- Get organized. You will need to a monthly budget, proof of income, pay-stubs and tax returns. You will also have to write a hardship letter.
- Contact your lender’s “loss mitigation or “home retention” department. Request a modification package. Fill it out and return it to the lender with the documents they request.
- Keep copies of everything you send to the lender. They will lose the documents you send them. You will have to resend the documents. They will lose the documents again. You will have to resend the documents again. Remember, they don’t really care. You will probably talk to a different person each time you call.
- This is the most important tip: Be persistent! Since your lender does not care, you will need to call them frequently for status updates. I suggest calling no less than once a week. You have to stay on them relentlessly, or your modification will be lost in the paper sea.
- Don’t pay some company to do your modification for you. You will be scammed out of hundreds or thousands of dollars. If you want help, contact one of the following: Department of Housing and Urban Development; NID Housing Counseling Agency; NACA or CredAbility.
- Don’t spend your mortgage payments. If your lender tells you not to send in payments, be sure to save the payments. You will need them if the lender denies the modification. Also, you may need some or all of the past payments if a modification is approved.
- If your lender does not treat you fairly, you can file a complaint with the federal government. The agency to file your complaint with is the Office of the Comptroller of the Currency.
- Filing Chapter 13 to keep the house should be a last resort. If you are considering Chapter 13, you must ask yourself if it makes sense to keep the house. It may be best to let the house go back to the lender or try a short-sale. If you file for a Chapter 13, you can still try to do a loan modification after your case is filed.