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How to Qualify for a Mortgage Modification.
THE Government set out a plan to assist homeowners who are ‘upside down’ in their home mortgage; that is, they owe more than the home is worth. Said plan allows the lender to modify the existing loan to better suit the borrower’s current financial position resulting in a reduction of the interest rate, or an extension in the length of the term, or any combination of the three! To qualify for Mortgage Modification, the applicant must have income as a fully documented loan application will be taken then must also qualify for "hardship." For me, the cookie-cutter type of clients they are referring to are those who might have lost their jobs, gotten sick temporarily and are now ready to take on their mortgage payments again.
Since the Loan Modification Process came about, I’ve been deep in due diligence to uncover not only the truth about its promises, but the pitfalls the plan has relative to a new industry that has sprung up around it - that of Mortgage Modification Services.
Pitfall #1 – lack of manpower and systems
The government’s published information strongly suggests that the borrower negotiate directly with their lender/mortgage servicer. With the current state of the financial institutions, they, like most companies, have greatly reduced their staffs. They simply don’t have the manpower or systems in place to handle the millions of calls they are currently receiving leaving the consumer on hold and out in the cold.
That is why you have to know and understand when to call and how to prepare for the package for a Loan Mod.
Solution #1
Option #1 – Understanding that this will take time and patience, free access to HUD approved counselors (1-888-995-HOPE (4673) is offered. They are more than willing to help negotiate with lenders, as it is their job to do so. Also another company that I recommend is www.NACA.com. They will be able to also assist for a minimal fee after you have successfully modified your loan.
Option #2 – You have the opportunity to do the Loan Mod yourself and just follow their instructions on your own. With early AM phone calls and follow ups, I believe you will do a lot better than paying a third party to do it for you. Your aggravation will either be from the lender or your Loan Mod third party. I prefer it from the lender so I can keep extra cash in my pockets.
Pitfall #2 - the offer of forbearance
When contacted by borrowers seeking help with mortgage modification per the government’s instruction, lenders are currently reverting to the old way of doing business, which is an offer of forbearance. Forbearance simply means they will forgo the borrower’s payments for a period of time, let’s say three months, to help relieve the pressure and add (re-amortize) these payments back into the mortgage payment later. That’s right, the borrower gets three months reprieve so they will have bigger payments later. How in the world will this help? If they can’t afford the payments they have now, what makes the lender think they can make bigger payments later? So the offer of Forbearance only delays the inevitable!
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