By Dorothy Bunce
If you previously applied for a home loan modification and gave up in frustration, now may be a good time to try again. Lenders have started to get their acts together and have made the process simpler by hiring people with real qualifications to process the applications. The cost to apply is virtually nothing.
Should you apply? There is no point in applying if you can’t afford your mortgage or if you have unrealistic expectations. You should expect that the best you will be able to accomplish is to temporarily reduce the interest rate on your home mortgage to between 2-3%. Don’t expect to get a principal write down or forgiveness, and don’t expect any modification for your rental or investment properties. Don’t expect to pay less than 31% of your income for your home mortgage.
What’s required? The lender will want to see some tax returns, bank records and pay stubs to verify your claim of hardship. Believe it or not, that is because some people lie when they submit an application for a loan modification, and the mortgage companies don’t intend to be made fools of again like they did with the “stated income” loans, which have been referred to as “liar loans.”
When you submit the paperwork, double check your records. If the lender has asked you for your four most recent pay stubs, providing a pay stub out of sequence is a red flag that you are hiding something and will result in your application being rejected. To avoid having the lender lose your documents, put your name and account number on the bottom of every page you send them, even the pay stubs, tax returns and bank records. Number each page and include the total number of pages submitted (for example, page 15 of 37) to minimize the chance that your paperwork will be lost.
Keep a copy of everything you sent to the mortgage company. Call once a week until you have confirmation that your application package has been received and is being processed. Note the name of the people you speak to when you call your lender for information. By being polite to them, they may be willing to provide you with information that will clue you in to what is going on or put you in touch with information about programs that are not being widely publicized.
There are still lawyers who will charge a substantial amount of money to submit your loan modification application. Unfortunately, the amount of money you can expect to pay for a lawyer to do this for you could wipe out any money you might save with a mortgage loan modification. So get out your pay stubs, your tax returns and your bank records and make up your mind that submitting this application really isn’t so hard as everyone has told you. There are no trick questions, and although the process of obtaining a loan modification is still slow, if you are patient and can follow instructions, you may be able to lower your mortgage payments for the next three to five years. And something is better than nothing!