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Steps For Loan Modification

HandelontheLaw.com Staff Writer

Tuesday, January 28, 2014



Steps For Loan Modification
Loan Modification

Loan Modification is a written agreement between the lender and the borrower that includes such terms as: temporarily or permanently reducing and/or fixing the loan’s interest rate; extending the loan’s time for repayment; extending the time for paying past due amounts; and/or forgiving a portion of the debt, either conditionally or outright. It is normally but not necessarily employed as an alternative to mortgage foreclosure.

First, keep records and copies of all discussions and documents involved, including calls, e-mails, letters and forms. Get a clean notebook for notes about names, dates, phone numbers, and “meat” of each communication, and get an expandable file folder to keep your notes and copies organized in one place.

Secondly, look out for scams. Many homeowners are financially vulnerable and there is money to be made off their desperation, so the vultures are circling. There are federal government programs online, lawyers and legitimate banks to assist you, so look to them for help.

Third, consult/retain a lawyer who specializes in loan modifications. An experienced lawyer can help you avoid scams, complete/submit documentation and negotiate the terms of your loan modification.

Fourth, BEFORE applying for loan modification, fill out a financial spreadsheet to paint a realistic picture of your financial situation and determine a livable mortgage payment. There are many free programs and downloads for financial spreadsheets on the internet, for example, on the government’s “Making Home Affordable" web site here: Making Home Affordable And a Google-provided spreadsheet here: Google-Spreadsheet

Fifth, determine whether you will fall within the target range for mortgage payments. Your mortgage should be no more than 31% of your gross monthly income. The government provides an online calculator to determine whether you fall in the desired range here: Online Government Calculator

Sixth, with your lawyer’s assistance, determine whether you truly want and qualify loan modification or whether it would be better for you to use an alternative, such as deeding the property back to the mortgage servicer, short-selling the property, or using the government’s Home Affordable Foreclosure Alternative (HAFA), found here: Home Affordable Foreclosure Alternative

Seventh, if you are eligible for and wish to pursue loan modification, complete the Request for Mortgage Assistance form provided by the “Making Home Affordable” government program here: Request for Mortgage Assistance Much of the form can be completed online but must ultimately be printed, signed and dated for submission.

Eighth, complete a Tax Authorization form, whether or not you were previously required to file taxes. If you filed previous taxes on Form 1040, you should complete the Tax Form 4506T-EZ, found here: Tax Form 4506T-EZ If you were not previously required to file taxes, complete the Tax Form 4506-T, found here: Tax Form 4506-T These forms can also be filled out online but must be printed, signed and dated for submission. These forms will ultimately allow your mortgage servicer to either obtain a copy of your last tax return or verification from the IRS that you did not file a tax return.

Ninth, assemble your proof of income. A checklist for the documentation you must gather and submit to your mortgage servicer is provided by the government, here: Submit to Mortgage Servicer

Tenth, make copies of all documentation, including your Request for Mortgage Assistance form, Tax Authorization form and documented proof of income, keeping the copies in your own expandable file and sending the originals to your mortgage servicer for review of your application. You can find your mortgage servicer’s address and fax number here: Mortgage Servicer’s or here: Mortgage-Directory or on your monthly mortgage statement.

Eleventh, deal with your mortgage servicer’s “Negotiator” assigned to your account in its “Loss Mitigation Department.”

Twelfth, ASK! Don’t automatically assume that the Negotiator is offering you the best deal you could get. Ask to have your mortgage principle reduced. If there’s a second mortgage with this mortgage servicer, ask to have it written off or reduced. If there’s a second mortgage with another lender, ask to have it paid off. Ask for complete forgiveness or at least reduction of penalty-type payments, such as late fees, origination fees, late payments, any such fees. Ask that unforgiven back payments are added to the back of the loan, won’t accrue interest and will be paid when the loan matures. Ask for a 30 – 40 year mortgage with a low fixed interest rate, even if that rate must increase after a period of time, and ask for a low cap on the interest. Asking ain’t getting but if you ask, at least you’ve got a chance of getting it. Believe me, the negotiator will tell you if one or more of your requested terms are not possible.


DO’S AND DON’TS

DON’T be intimidated by the process or the people.

DO keep records and copies of all discussions and documents involved

DO look out for scams.

DO consult/retain a lawyer who specializes in loan modifications.

DO fill out a financial spreadsheet to paint a realistic picture of your financial situation and determine a livable mortgage payment, using free spreadsheets here: Making Home Affordable
And a Google-provided spreadsheet here: Google-provided spreadsheet

DO determine whether you will fall within the target range for mortgage payments, using the calculator here: Online Government Calculator

DO determine whether you truly want and qualify loan modification or whether it would be better for you to use an alternative.

DO, if you are eligible for and wish to pursue loan modification, complete the Request for Mortgage Assistance form provided by the “Making Home Affordable” government program here: Request for Mortgage Assistance

DO complete a Tax Authorization form, if you filed taxes, here: Tax Form 4506T-EZ
If you did not file taxes, here: Tax Form 4506-T

DO assemble your proof of income, using the checklist here: Submit to Mortgage Servicer

DO make copies of all documentation, keeping the copies in your own expandable file and sending the originals to your mortgage servicer through its address or fax number found here: Mortgage Servicer’s or here: Mortgage-Directory

DO deal with your mortgage servicer’s “Negotiator” assigned to your account in its “Loss Mitigation Department.”

DO, ASK about:
a. having your mortgage principle reduced;
b. having a second mortgage written off, paid off or reduced;
c. complete forgiveness or at least reduction of penalties and fees;
d. having unforgiven payments tacked onto the back of the loan without accruing interest and scheduled for payment after loan maturity;
e. A 30 – 40 year mortgage with a low fixed interest rate, even if that rate must increase after a period of time, and ask for a low cap on the interest.



By Kathy Catanzarite

[Note from HandelontheLaw.com: This article is to be used as an educational guide only and should not be interpreted as a legal consultation. Readers of this article are advised to seek an attorney if a legal consultation is needed. Laws may vary by state and are subject to change, thus the accuracy of this information cannot be guaranteed. Readers act on this information solely at their own risk. Neither HandelontheLaw.com, or any of its affiliates, shall have any liability stemming from this article.]



Source: Kathy Catanzarite - Handelonthelaw.com Staff Writer

Note from HandelontheLaw.com: This article is to be used as an educational guide only and should not be interpreted as a legal consultation. Readers of this article are advised to seek an attorney if a legal consultation is needed. Laws may vary by state and are subject to change, thus the accuracy of this information can not be guaranteed. Readers act on this information solely at their own risk. Neither the author, handelonthelaw.com, or any of its affiliates shall have any liability stemming from this article.





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