Do's:
1. Plan to contact your bank as soon as you have a hardship or foresee you will be unable to make your payments.
2. Answer calls and respond to any mail offers the lender sends you. It is a starting point. If a Home Retention Consultant (HRC) sent by your lender visits your home, answer the door and call the lender with the HRC. They are there to help.
3. Visit the Making Homes Affordable website to see if you qualify under the Obama program.
4. Be prepared. Have your documentation ready. Most banks require the following:
- A list of assets & all expenses
- Two recent bank account statements
- A list of all balances and minimum payment info for credit cards and other debts
- Recent pay stubs
- Documentation proving any additional income or expenses,
- Tax returns
- A hardship letter describing why you are unable to make your payments
6. If you have stopped making payments, save as much of your income as possible. The terms of the modification may require you to pay a percentage of the delinquent balance or if the modification is unsuccessful, you may need funds to relocate.
7. Keep a log of every contact. Every time you make contact with your lender, note the date, time and the person's name you spoke to, the reason for the call and the outcome.
8. Be patient. This is a lengthy, frustrating and tedious process. You will probably spend time on hold and answer the same questions more than once and it could take three months or longer.
9. If your loan modification is approved, you will have a probationary period where you have to make your adjusted mortgage payment on-time for three consecutive months. If you do not follow the new guidelines, the trial modification will not convert to a full modification.
10. Please read the report titled DRE Loan Modification Fraud Warning for more information on protecting yourself from getting scammed.
Don'ts:
1. Avoid submitting an incomplete modification package to the bank. It will severely delay the process.
2. Don't be rude to lender's agents. They are overworked and under paid. Killing them with patience and kindness will give you the highest probability of success. Remember they are not the enemy; they are just doing their job.
3. Do not over or under report your income and expenses. If the numbers are too tight, your application may be rejected; if you have "too much" extra income, they may offer you with a payment plan (terms and rates) you cannot afford. On average, after ALL of your expenses, the lender is looking for you to have $200-$500 of extra money per month.
4. Most importantly, don't pay for services you can do yourself. If you are behind in your mortgage payments, you may be contacted by individuals or companies that will offer to help you work out a loan modification with your lender or provide other services to you in order to help you prevent a foreclosure on your home.
You must be very careful if you are asked to pay for any of these services in advance, whether in cash, check or by charging your credit card. First, California Civil Code Section 2945, which regulates "foreclosure consultants", forbids anyone who falls under the definition of a "foreclosure consultant", as well as a real estate licensee, from collecting any advance fees for these types of services if a Notice of Default has been recorded against your property.
If your lender has recorded a notice of default, do not pay an advance fee to a real estate licensee, or to any person or entity. California licensed lawyers when rendering services in the course of their legal practice(s) are exempt from this prohibition. There are non-profit agencies that can assist you without charging you a fee and real estate licensees who can represent you for a fee to be paid after they have completed their work.
If you have questions about loan modifications or need help, contact us today.