Loan Modification - Dallas/Ft. Worth, TX

Loan Modification - Dallas/Ft. Worth

With the rising number of foreclosures and distressed home owners, there has also been an increase in fraudulent activity that preys on the misfortune of others by providing false hope to consumers facing foreclosure, claiming that they can stop it. The fact of the matter is your lender is the only one that can make the decision to stop or delay a foreclosure. So many consumers have fallen into these fraudulent traps and have paid thousands of dollars to companies that never even take the first step in working on someone's loan modification. What you should be mindful of:

• Don't let anyone tell you to stop making payments to your lender.
• Don't make your mortgage payment to anyone except your lender.
• If someone gives you a guarantee that they will stop the foreclosure of your home, walk away.
• If you are dealing with a company on the internet,  investigate and see if they have a local address where you can potentially drop in or set an appointment.
• Do not sign over the deed to your property to any organization or individual unless you are working directly with your lender to forgive your debt

Do It Yourself Loan Modification - A Guide

Because I am a big fan of DIY, I was excited to find an online DIY loan mod system that walks you through the loan modification process and includes  online support that will review your loan mod package before it gets sent to your lender.  With all the scams out there, it's good to know that there are services that are trying to help consumers who are in a bind and above all not charging thousands of dollars for loan modification assistance.  The online system covers everything from gathering the necessary loan modification documents to providing a proposal for your lender which includes an estimate of the cost of foreclosure for your lender.

Why should you take advantage of a Loan Modification?

The current administration has implemented a rescue plan to curb the current foreclosures rates. The Home Affordable Modification Plan (HAMP) was signed into action by President  Obama and funded with $75 billion dollars. The plan has the following qualifications :

1. Is your home your primary residence ?
2. Is the amount you owe on your first mortgage equal to or less than $729,750?
3. Are you having trouble paying your mortgage ?
4. Did you get your current mortgage before January 1st 2009 ?
5. Is you mortgage payment including payment, interest , taxes, insurance, HOA dues greater that 31% ?

If you answered yes to all these questions then you pre-qualify for a loan modification.

There are over 38 servicers that have signed contracts with the Treasury and they receive incentive payments for modifying loans.  The combination of these servicers and Fannie Mae and Freddie Mac provided coverage of 85% of all mortgage loans.

Now here is where your benefits come in. Assuming that you can prove  your hardship and you can show an ability to pay and your current income situation is temporary; then you receive the following benefits :

1. The government will reduce your principal by  $1000 per year up to a total of $5000 as long as you remain current with your loan modification plan
2. Some servicers/lenders may take consideration to reduce your principal balance
3. If you are in an adjustable rate mortgage you can convert your loan to a fixed rate loan without having to pay for refinance costs.
4. The HAMP guideline provides for an interest rate floor of 2%.  In most cases, this rate is used for a stepped rate plan. Your rates will gradually increase to the a current rate or a slightly higher interestrate..

Realities of Loan Modification

There are things that you will need to understand when requesting a loan modification.

First of all, you MUST understand that the situation you are in is not your hardship but it is the bank's hardship.  You signed an agreement with your lender and,  although you may have had some unfortunate circumstances occur, you are still obligated to make your monthly payments. 

Secondly , If you are behind on your payments , your principal and interest payments will most likely be rolled into the bank end of the loan and your loan may be extended to keep your monthly payment affordable.  Late fees will be waived. .

Third,  it ‘s very possible that your payment may increase due to these late payments.  At this point, you may have to make some difficult decisions in regards to your home.  To avoid foreclosure,  a short sale or a deed in lieu may need to be executed on your home. 

Things you need to understand about a loan modification

1. The first thing you need to understand is that communication with your lender is a must. It is amazing to me that there are thousands of delinquent borrowers who never have the courage to pick up the phone and talk to their lender before heading in to foreclosure.
2. If you are behind on your mortgage don't waste your time with a customer service rep and ask for the loss mitigation department. Before you are transferred ask for the direct dial number to the department. This will save you a step in your (many) subsequent follow up phone calls.
3. Once in the loss mitigation department get the name, title and direct number.  Let them know your situation and tell them that you are or may become delinquent on your loan and need assistance in modifying your loan and that you will most likely fall seriously behind on your payment and want to avoid foreclosure. Be sure that you let them know that this requires immediate attention
4. Answer all questions HONESTLY.  Not being honest will get you nowhere and you will most likely be one step closer to a foreclosure notice.
5. Assuming that you are able to pre-qualify the lender will send you a packet of information that you will need to fill out and complete. The objective is to validate that you are currently unable to make your mortgage payments and a modification will assist in making your payments.  Don't exaggerate your expenses. This will quickly disqualify you and your modification request will be denied. If you are using a DIY loan modification system all of this documentation is online and will provide a professional, organized document that will be ready to send to your lender including the 4605-T Tax Transcript request authorization document. This document gives your lender permission to request your tax returns directly from the IRS.
6. Most modifications are declined or rejected because they have not provided all the documentation that the lender requires. When this happens, it increases the delay of the loan modification process. Denied loan modifications are usually caused by not providing accurate and truthful income/assets and expenses. However, the primary reason is that modification would not prove the ability to make mortgage payments..

Documenting Your Loan Modification Efforts is Critical

The most frustrating part of the modification is waiting to hear from your lender and waiting on hold to speak to your lender. This is something you will need to be patient with and persistent.  You will want to document every conversation and file every document faxed, emailed or mailed to your lender.  This is a critical part of the process. There are too many stories of faxes or documents never received.  If you mail something mail it certified with receipt confirmation.

While they have phone notes it's important that you capture conversations on your own so that if you run into a roadblock or dead end you can use the information you've written down in your log to help you keep pushing forward. You can also reference promises, comments or details that may help you overcome objections as you talk to other people in the department.

Final Thoughts

Be persistent and patient, but above all be HONEST and TRUTHFUL not only to your lender but to yourself.  “Honesty is the best policy - when there is money in it”.  Marc Twain.  

This educational content is for educational purposes only and does not constitute legal, financial, home improvement or health advice. Content on this page is provided by Ask The Experts and not the featured advertiser.

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