Loan Modification DIY Secrets

August 26, 2009 by  Filed under: Loans 

The concept of a Loan Modification has gained increasing popularity in today’s uncertain real estate market. I’m sure you have heard the term many times before, but maybe you are still unclear as to exactly what it is and how it can help you.

To start, the term loan modification simply means restructuring or changing the terms of your current Mortgage Note. An example of this could be a permanent interest rate reduction or a principal balance reduction. For example, let’s say that you currently have an 8% Interest Only mortgage payment. As you may know, paying Interest Only never actually pays down the principal. In this case, they bank may be willing to reduce your interest rate to 5% Fixed(example only) for the life of your loan. Why would the bank agree to do this?

What you have to realize is that your Bank/Lender/Servicer is in the business of collecting mortgage payments, not buying and selling real estate. That being said, if you can prove to them that you might be at risk for foreclosure on your home, they will attempt to work with you to prevent that. Your bank does NOT want to foreclosure on your home. But remember, they WILL if they have no other choice. They would prefer to keep receiving your monthly payments for the life of your loan.

But sometimes, unfortunate circumstances out of your control can happen. The bank calls this a Hardship. A hardship could be anything from a loss of income, a health issue, divorce, or anything else that causes a decline in your monthly income. In order to qualify for a Loan Modification, you need to have a legitimate hardship that has made it difficult for you to keep up with your payments. Regardless of whether you are current or behind on your mortgage payments, you still may qualify for a Loan Modification.

Sometimes it may be harder to convince your bank to give you a modification if you are current. But it is not impossible. The reason for this is that the bank is more occupied helping people who are closer to foreclosure, like those who are 2-4 months behind on their payment. The bank realizes that these people are closer to losing their homes, then someone who is still current on their payments. In this case, if you are many months behind, the bank may actually call you to try to work something out. But what about if you are current and you can foresee a hardship in the future? You should definitely call your bank and ask to speak to the Loss Mitigation Department. Tell them about your situation.

When you get to the Loss Mitigation Department, you should request a Workout Package or a Hardship package. Tell them to send you one so you can start filling it out. The package will require you to fill out your monthly income and expenses. You will have to justify these numbers with your bank statements and pay stubs (typically they ask for the last two months). In addition, the bank will require you to write a Hardship Letter. In this letter, you must detail the circumstances that put you in this position where you can no longer afford your normal payment. You must make sure to create this letter the right way. There are many factors that you must consider while preparing your Loan Modification Package and Proposal. Remember, the bank will work towards a solution that satisfies THEIR best interest, not yours. So you must be prepared and you must know your rights. Do not let the Bank bully you into signing something that you can’t afford, or you are not comfortable with. You need to know exactly what to say, how to say it, and what to include in your proposal. If you miss a crucial element, this could prevent you from being approved for that Loan Modification.

Don’t take a chance being unprepared when you negotiate with your bank. Learn the Inside Secrets and the Step by Step process to ensure your modification is successful. Visit our website, and learn about the whole process in complete detail. After reading our e-book, you will have the tools, knowledge, and confidence to negotiate the lowest possible payment.

David Wathen
Loan Mod Secrets
10553 Zenor Lane Suite 54
San Diego, CA 92127
619-252-5154 Office

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