What is a home loan modification?
A loan modification is a reduction of your payment by your lender. This new payment is supposed to be affordable for the homeowner and in exchange for this lower payment your bank is now saved the cost and hassle of a foreclosure sale of your home.
Attorney Assistance in Home Loan Modification
The Singleton Group -Real Estate Law Business Law and Bankruptcy Attorneys
According to a recent report
by RealtyTrac, over 7 million homeowners (13 percent) still have combined loan amounts exceeding their property’s worth by at least 25 percent. Many of these homeowners can’t obtain a loan modification because their credit scores or the value of their home is too low. Millions of other homeowners have home loans with rates that make it nearly impossible to keep up with payments. What are the realistic options for climbing out of this situation?
When you find yourself in a financial mess due to circumstances beyond your control, you have a number of options. Do you walk away from your home when your mortgage exceeds its value? Do you default on your mortgage and/or declare bankruptcy? Alternatively, do you stay the course and do your best to climb out of the mess? Even when people can show hardship, obtaining a loan modification can be a daunting proposition.
Do you Qualify for a Loan Modification?
The primary consideration for approval for a home loan modification is that the (s) can afford the new payment structure of the modified home loan. The applicant must produce the appropriate documentation to be considered for a modified home loan. These documents are outlined under “what we need to get started”.What you need to get started:
- your Monthly mortgage statement
- Information about other mortgages on your home, if applicable
- Two most recent pay stubs for all household members contributing toward the mortgage payment
- Last two years of tax returns
- If self-employed, the most recent quarterly or year-to-date profit and loss statement
- Documentation of income you receive from other sources (alimony, child support, social security, etc.)
- Two most recent bank statements
- A utility bill showing name and property address
- Unemployment insurance letter, if applicable
- Account balances and minimum monthly payments due on all of your credit cards
- Information about your savings and other assets
- It can also be helpful to have a hardship letter describing any circumstances that caused your income to be reduced or expenses to be increased (job loss, divorce, illness, etc.)
Basic tips to help you down the path of qualifying for a home loan modification
Banks and home loan lenders do not give out home loan modifications to just anyone, the must demonstrate that they are facing or enduring a financial hardship that, without assistance, will yield an inability to maintain their original agreement with their lender to keep their agreement current and possibly face foreclosure.
To increase your chances of qualifying and succeeding with a home loan modification
, here are a number of suggested actions you can take:
- Start the process by coming to terms with the fact that you are doing all of this because you are fighting for your home.
- Start by making a complete list of your income and expenses and be fairly harsh when it comes to which expenses you must keep and which you can eliminate. A lender might not look favorably upon a request to modify a home loan when the household generates a $100 / month cable bill, has excessive and expensive cell phone accounts (minimum work and safety accounts can be rationalized), or any other expenses that are not a priority such as food, clothing and shelter. Providing an income and expense sheet may feel like you are exposing your personal life, but this information will allow a lender to draw a more clear picture of the type of renegotiated home loan you can afford, and that can only be beneficial to the .
- Using this list of revenue and expenses, take a moment to consider what your future monthly home loan payment might look like and what you can afford to pay.
- Research your original home loan, if you were unrealistically approved then this can go towards an argument that supports your hardship statement. Don’t forget that the main reason for a home loan modification is to avoid foreclosure, so if that is something you want to avoid, then make sure that your idea of what you can afford in the future is a more desirable situation for the bank than to foreclose on your property.
- You’ll need to write a Letter of Hardship which outlines the reasons as to why you are making the decision to go through with a home loan modification. They need to describe the reasons as to how you found yourself in this situation and what is preventing you from maintaining your original home loan agreement.
Resources to protect homeowners
The first thing that homeowners who go for a loan modification must understand is that any error in your submission package will result in a denial. Second, you must carefully document everything. Any discrepancy can result in a denial.
Due to the complexity of this process, and the need for constant supervision and follow-up, many people choose to hire an attorney to help with the modification process.
If you find yourself in dire financial straits or have become victims of predatory lending, here are three additional resources:
Eric Singleton has successfully fought for mortgage modifications for clients in the most difficult situations. Many clients are seeing large drops in their interest rates and some have had over a hundred thousand dollars removed from their principle balance. Most applicants reduce their monthly mortgage payment by hundreds of dollars.
The National Association of Consumer Advocates has been helping homeowners fight predatory loan practices. One of the current causes is urging a ban on forced arbitration that it feels prevents consumers from having their day in court.
The CFPB has aggressively pursued lenders who engage in predatory loan and credit practices. It’s the one agency they actually fear.
Eric C. Singleton, Attorney
307 W. 200 South, #2002
Salt Lake City, UT 84101