6 Keys to Getting a Loan Modification in 2019
1) You Have to Apply to Be Considered – Sisyphus Never Got to Underwriting.
The most important thing you need to know is that you cannot get a loan modification unless you get a complete loan modification application “under review.” This is no easy task as the call center operators you deal with are expert at shuffling papers, asking for missing documents, claiming signatures are illegible, and changing “Point[s] of Contact”—(“POC”) just when things are coming together, without accomplishing anything.
As attorneys, we know the rules that govern servicers like Wells Fargo, JP Morgan Chase, Bank of America, CitiMortgage, Mr. Cooper (formerly Nationstar), Ocwen Loan Servicing, Caliber Home Loans, Carrington Mortgage, M&T Mortgage, Ditech Financial, PHH Mortgage, and Specialized Loan Servicing. We can hold their feet to the fire, where you have failed.
While you may be doing everything you are asked by your POC, you still may be stuck at the “document gathering” stage. Like Sisyphus pushing a rock up a hill, you send the same documents over-and-over again, only to be told that the documents are “outdated” b/c they are more than 30-days old, and therefore need to be resubmitted
One 2010 report by ProPublica describes the loan modification process as a black hole of lost time where, on average, homeowners: (a) submit the same documents 6 times; (b) go an average of 14 months without being “under review,”; and (c) are frequently given incorrect information that is contradictory of what other servicer representatives told them in the past.
The image these statistics paint is a grizzly picture of how banks engage in dual-tracking and lead you down the garden path, making matters worse while you await “loss mitigation assistance” which never comes. 82% of respondents in a 2010 ProPublica survey felt that they “didn’t trust their servicers to make a good-faith effort” on their files. The situation has improved, but not by much. Some other disturbing findings were: (a) most denials resulted from servicer error; (b) the reasons for a denial were often unclear; and (c) homeowners were repeatedly asked to provide documents that had become “outdated” even when prior submissions were complete.
Please call one of our foreclosure paralegals at (201) 529-8024 if you have questions about how to make sure your servicer reviews you and actually puts you “under review” for all the loss mitigation options you qualify for.
2) Make the Servicer an Offer They “Can’t Refuse?”
You would be surprised how often the people processing your loan modification simply cannot figure out what your income and expenses are. They are hung up on your DTI ratio, NPV ratio, and a slew of other nomenclature in their data entry programs that they barely understand.
If you provide a breakdown of your own asking for particular new re-payment terms and demonstrating how you pass the necessary financial ratio hurdles, you stand a far better chance of having your file worked diligently.
Some tricks of the trade for making a proposal you can live with are to suggest some or all of the following: (a) extended amortization (moving from a 30-year to a 40-year term); (b) interest rate reduction (less of a sensitive issue as long as it is at current market rates you’d get on a new loan, as compared with “principal reduction”); (c) 20-year balloons (much easier for loans held in trust than a traditional “principal reduction”); and (d) partial claims for FHA loans.
3) Leave a Paper Trail – Keeping them Honest
Most data entry personnel working for the major servicers of loans spend a lot of time talking to angry homeowners and processing complex paperwork they frankly aren’t qualified or trained to fully understand. They are paid poorly, worked mercilessly, and abused continuously. Good, bad, or indifferent, they are customer service professionals who have a tough job. Many of them are interested in finance and banking careers and really would like to help homeowners through the process, but face so much internal red tape, that they can’t always do so without a little help.
One key to keeping the process on track and giving your POC some ammunition for the layers upon layers of corporate brass they have to navigate, is to keep a paper trail. That means faxing or mailing everything with folders and stamped copies of what you sent out, or scanning & filing each fresh submission in a separate folder. When we represent a homeowner, this is one of the tricks we use to ensure a good outcome with the servicer. If you decide to pursue the loan modification on your own, you can use the same approach.
4) Keep a Log – Don’t Rely on Your Memory
One day they may tell you that the 4506-T has the wrong years, and the next day you may speak to someone else that tells you that they reviewed it again and it is fine. Whomever you listen to, there’s a 50% chance that they were mistaken.
So, you need to keep a log of what you were told about whether particular items were uploaded to your file and are no longer needed, and also for any instructions you were given. When you get the person that you usually speak with back on the phone, you can check, double-check, and verify that everything you were told was correct and the file is still on track.
5) Federally Subsidized Loan Modification Programs Are Currently Very Limited, But You Should Still Apply and Aggressively Prosecute Your Loan Modification Application
The federal government previously offered the Home Affordable Modification Program, but it expired at the end of 2016. Fannie Mae and Freddie Mac have a new foreclosure-prevention program, called the Flex Modification program, which goes into effect Oct. 1, 2017. If your mortgage is owned or guaranteed by either Fannie or Freddie, you may be eligible for this new program, for which lenders have greater discretion in relaxing borrowing criteria than they previously did under HAMP.
The federal Home Affordable Refinance Program, or HARP, helps underwater homeowners refinance their mortgages, but there are important limits on who qualifies and this program also expired on Dec. 31, 2018.
6) The Loan Modification Process Has Many Benefits
Whether accepted, denied, or delayed – the loan modification process has a large number of benefits. First, it shows the bank, servicer, bank’s attorneys, and the court you are serious about keeping your home and mean business.
Second, it builds delays and flexibility into the foreclosure timeline and places the onus back on the bank to give you a decision, rather than on you to come up with a solution to the problem.
Third, it provides court and bank attorneys with something to think about other than helping the bank take back your home.
Fourth, it helps you as denials or re-submissions occur to know where you fall short. It is hard to hit a moving target, but once you know where to aim, you can be much more accurate. Thus, if you have a DTI that is too high, you can reduce debt or increase income. If you have an LTV/NPV problem, there are ways to deal with that. Information is power, but you have to push the banks to a decision to get useful information. Unfortunately, they don’t tell you what they need to see for you to qualify. However, sometimes a seasoned foreclosure attorney can give you a pretty good idea.
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If you have questions about how to plan to avoid default on your home loan or what to do if you get into trouble and find your self strapped and in a pre-foreclosure situation, please give us a call at (201) 529-8024 or e-mail me at [email protected]
Category: Foreclosure Law
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