It is difficult to get your bank to commit to giving you a loan mod because they are understaffed and overwhelmed with loan modification requests from thousands of customers. The uncertainty that these conditions are creating is stressful for homeowners because they don’t know if they are going to lose their homes or save them with by obtaining a loan modification. Banks would prefer to give loan modifications to qualified borrowers if they could just weed through all the backlog of paperwork they have right now. However, they are being extra cautious on approving applications because they want to make sure that borrowers can afford to pay their new mortgage payments. You need to show that you have a temporary hardship and how you are going to solve your financial situation in order to get your bank to approve your request for loan modification.
Financial Documents
Before you speak to your lender about obtaining a loan mod, you should get all your financial paperwork together including the following:
- Your paycheck stubs for the last two pay periods
- Bank statements
- Last two year’s tax returns
- List of your assets, debts and liabilities
- W-2 or 1099 forms
- Your most recent mortgage statement
Being organized will speed up the process.
What if the Lender Has Instituted Foreclosure Proceedings?
It is recommended that you contact a loan modification attorney for advice if your bank has instituted foreclosure proceedings against you, and you want to keep your home. The attorney is an expert at foreclosure defenses and can help you negotiate with the bank. You can still request a modification even if you are in the middle of a foreclosure proceeding. It is not unusual for the bank to stop or drop the foreclosure proceeding during modification negotiations. The bank will probably take your modification request more serious knowing you are represented by an attorney.
New Steps to Prevent Modification Failures
Banks have had bad luck with giving borrowers modifications because a large number of them have defaulted six months later. Now banks are giving trial modifications to qualified borrowers to determine if the borrower can make at least three payments on time before granting them a permanent modification. The three month program is helping to avoid further delinquencies. The economy and unemployment has also made matters worse for the banks and the borrowers because many borrowers that were approved for modifications have lost their jobs, and can no longer afford to make their modification payments. The government is trying to turn around the loan mod failure rates by encouraging banks to either give their unemployed borrowers a 3-6 month period of no payments until they find a job or forbearance, which is a short term catch up plan. Some banks are also reducing the borrower's principal on their loan balances. The government is also giving borrowers and their banks cash incentives to participate in a short sale or deed in lieu of foreclosure transaction for borrowers who cannot afford to keep their homes and are upside down on their mortgages.
Banks are trying to be more cooperative now because of government pressures. It is getting easier for borrowers to get a modification quicker using government program guidelines. More banks have been holding off on foreclosing and displacing homeowners who want to keep their homes by offering them modifications. It’s just taking longer than anyone anticipated for them to process the applications because so many homeowners have asked for immediate help.
Talk to an Attorney
A loan modification attorney is the best person to help you obtain a loan modification with your bank. The attorney is skilled at negotiating loan modifications and will get you better results.
