Ok..I have been getting a lot of emails and phone calls lately on home loan modifications so I'm going to have a series of posts dedicated to home loan modifications.
In this post, I'm going to tell you exactly what "Home Loan Modification" is and who qualifies for it. "Home Loan Modification" is also referred to as a "Loss Mitigation Program." It is the process of renegotiating one's mortgage with their current lender. The definition of "loss mitigation" to the lender is to minimize their loss from a defaulting loan. Loss Mitigation is NOT based on credit or equity. It is solely based on the ability of the homeowner to afford some type of reasonable payment moving forward. A homeowner must exhibit one and / or a combination of the following qualities in order to be considered for loss mitigation by their lender.
1) Inability to afford their mortgage payment recently or currently. Most lenders will not consider the homeowner for loss mitigation unless they are behind in their payments OR they have an adjustable rate that is due to adjust within the next 90 to 120 days. The further behind the homeowner is, the higher the priority is with the lender.
2) A legitimate reason for falling behind on mortgage payments, known as HARDSHIP. We must be able to show that they have recovered or are recovering from the hardship or that the homeowner can afford to make a lower payment on a consistent basis. Legitimate HARDSHIP reasons include the following:
a) Increased expenses or decreased income. b) Rate or payment increase. c) Death in family, divorce, illness, incarceration and many other case by case situations. d) Lenders WILL NOT accept a HARDSHIP that the homeowner says they were tricked by a mortgage broker or any reason where the homeowner points the finger at the lender. I will follow up with more information.
- Call the Bank: This is the bank that you pay your mortgage to every month. Grab your monthly mortgage statement and you should be able to find the contact information on the upper left or right hand corner of the statement. Ask for the “Loss Mitigation” department. If you get routed to customer service first, escalate to the supervisors and be persistent about speaking to a representative in Loss Mitigation to restructure/renegotiate your loan. Don't let them push you around!
- Paint the Picture: Once you get to Loss Mitigation, explain to the representative why you are having a hard time paying your loan (you can also be proactive and do this prior to your loan adjusting). Be ready to provide solid financial documentation as they are not going to take your word for it. Once they receive all of your information they will run your Debt to Income Ratio just like they did when you were qualifying for your loan and determine whether you will be a candidate for renegotiation
- Provide Paperwork: If your lender decides to let you renegotiate your loan, do WHATEVER they say and send in everything they ask for within the require time periods otherwise, you may blow the deal completely!
Once you provide everything they need, you should receive paperwork with new loan terms spelled out. CAREFULLY READ over the new terms carefully to ensure it’s what was agreed to over the phone.
P.S. As of right now, investment properties are currently NOT eligible for renegotiating.
Check it out!! I guess there is still some money out there.
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