Many homeowners find it frustrating and difficult to deal with their bank to get a loan modification. Banks have tough guidelines and standards for approving modifications. The reason is they want to make sure you can afford to pay them back. If you already defaulted once, you are a higher risk borrower. You will have to prove to your bank the following before they will agree to give you a modification:
- You have a valid financial hardship such as job loss, wage reduction, disability, illness, death in the family or job relocation.
- Your financial condition is only temporary.
- How you plan on improving your financial situation.
- Ability to repay the loan. This means you must have stable and sufficient income.
How to Improve your Chances?
One of the main reasons why banks are so difficult to deal with is they are overwhelmed with requests from thousands of customers who are in default, upside on their mortgages or have lost their jobs and they are asking for either loan modifications or short sales. Banks don’t’ have enough staff to keep up with the requests. If you make a mistake on your application or forget to send required documentation, they don’t have time or available personnel to contact you. They may just deny your application. To improve your chances of obtaining a successful modification, you should hire a modification attorney to help you. Since you only get one attempt to obtain a loan modification, it is best to use an expert to help you negotiate with your bank.
Government Pressures
Conditions are more favorable for you to obtain a modification right now because the government has been putting pressures on banks to work with their customers to speed up the loan modification process, to qualify more borrowers and stop foreclosures so that more people can stay in their homes. The problem in the past has been banks were not prepared or organized to deal with the record number of homeowners defaulting on their mortgages as a result of the sub-prime mortgage crisis, the economy and falling home prices. It has taken them a couple years to figure out how to solve the problem and come up with foreclosure prevention alternatives for borrowers who do not have equity to refinance or who owe more on their mortgage than their home is now worth.
While things are still not perfect, they are heading in the right direction. The government has offered banks, loan servicers and borrowers incentives to participate in government approved programs such as HAFA, which give borrowers the option to sell their home with a short sale or give their bank a deed in lieu of foreclosure and walk away owing their bank nothing. HAFA also speeds up the short sale process that has been taking as long as a year. Most banks have realized that they have too much foreclosure inventory and even though they are reluctant, they are even agreeing now to reductions in principle, waiving late fees and penalties and allowing borrowers to catch up with forbearance programs.
Speak to an Attorney
A loan modification attorney is experienced and skilled at negotiating loan modifications with banks and their loss mitigation departments. An attorney knows how the process works and the pitfalls to avoid to help improve your chances of obtaining a more favorable and successful loan modification.
