The loan mod to-do list
Part 1: Nuts and bolts of mortgage modification
By Jack Guttentag, Monday, May 4, 2009.
Editor's note: This is Part 1 of a two-part series. Read Part 2.
In recent weeks, I have been inundated with letters from mortgage borrowers who, for any number of reasons, can no longer afford their mortgage payment, though they could afford a lower payment. They seek help on getting their mortgages modified.
I have written several articles on modifications, but, as one letter writer put it, these provide "background but are not specific enough to really help." Ouch! In this article I attempt to make amends by laying out the steps in 1-2-3 order. Because the process is tedious, I have placed some of the boring details on my Web site. The second article in the series discusses where to go to get help, if help is needed.
The steps involved in getting your loan modified are: 1) establish that you would not be better off to refinance instead; 2) deliver the information the servicer requires, in the form the servicer specifies; 3) assure that the information you provide is correct; 4) assure that the information you deliver does not get lost in the shuffle; 5) determine whether you are eligible for special modification programs, which the servicer might overlook; and 6) nudge the servicer as needed.
Modification or Refinance? In general, borrowers should seek a refinance rather than a modification if they can refinance at a significantly lower rate at a reasonable cost. However, you can't refinance advantageously if you are behind in your existing payments, have little or no equity in your property, or don't qualify for a refinance for other reasons such as a low FICO score or inability to document adequate income. If you are still not sure, read Mortgage Modification or Refinance? on my Web site.
Delivering the Information the Servicer Wants: The single most important part of the process is to place in the hands of the servicer all the information about you that the servicer needs to make a decision. While this information is pretty much the same for all servicers, each has its own questionnaire form that it expects to be used.
To help you with this, I have compiled the information required by each of the major servicers, and indicate how to access their questionnaire, in Mortgage Servicer Information on my Web site.
Assuring Accuracy: Having the right form is one thing, but filling it out correctly is something else. A questionnaire with obvious errors may fall to the bottom of the pile, or it may lead the servicer to conclude that you do not qualify for a loan modification when, in fact, you do. Being accurate is a challenge for some borrowers because most questionnaires are not borrower-friendly. But there is plenty of help available, as I'll discuss next week.
Assuring Delivery: Most servicers prefer to receive documents by fax, although some also provide mailing addresses. I am informed that fax is more reliable, and I show the fax number of each servicer providing one. A few servicers, including Chase and Wells Fargo, want borrowers to call them before submitting detailed data, and provide only telephone numbers. They evidently prefer to have their own staff participate with the borrower in compiling the information. ...CONTINUED
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Submitted by Jillayne Schlicke on May 4, 2009 - 10:30am.
Hi Jack,
Thanks for this series. Question:
"Remember that getting a modification is not a negotiation, and you have no place else to go."
That's interesting. If we are to believe all the predatory loan modification "upfront" fee-based companies, it's all about negotiation which is why we're suppose to pay their high fee.
This begs the question as to why anyone would pay a third party.
Now, let's see how many predatory loan modification companies add to the comments promoting their firm.
Jack, I would appreciate it if you could compare and contrast paying a third party modifier v. just simply hiring competent legal counsel if a homeowner is so helpless and in such need of hand-holding, that they feel like they *must* pay a third party.
Research shows us that attorneys typically charge LESS for a loan mod than these third parties and the homeowner receives local, face to face legal counsel at the same time.
With over 50% of loan mods re-defaulting, maybe homeowners are better off talking with legal counsel about their overall debt picture.
Submitted by Ben Nicolas on May 4, 2009 - 4:12pm.
Dear Mrs. Schlicke,
If a borrower can find a licensed attorney that has experience qualifying borrowers and knowledge of local real estate values that is actually going to work with a loan mitigation department for an hourly rate that compares to what mortgage brokers & "loan mod" companies are doing it for I think you are right the option of working with a reputable attorney is not inadviseable. Based on what real estate attorneys in LA county charge though I don't think thats possible. Most "loan mod attorneys" in southern california are just get rich quick predators renting their licenses out to ex sub-prime loan offices to make extra $$ and help brokers circumvent the CA foreclosure consultant law. For more details of my opinion of this topic go here:
http://www.ietrealestate.com/blog/mortgage-broker-vs-attorney-who-can-i-...
Regarding what choices borrowers have, I posted an article on my site that I think does a great job of laying out all possible options and most importantly, the credit implications, for distressed borrowers without equity here:
http://www.ietcapital.com/credit-advice-before-after-short-sale-forclosu...
Submitted by Mary McDaniel on May 8, 2009 - 4:10pm.
Cathy McDaniel
Great comments. Behind the scene issues...regarding the "Making Home Affordable Plan" Freddie Mac/Fannie Mae, only 2 of the 7 private mortgage insurance companies are participating at this time. So even if you meet the program guidelines, you still may not be able to refinance or receive a loan modification today. Call your mortgage servicers today. Don't wait.
Hey, how about the investor backing the loan? They do not have to participate either even with the government incentives and the mortgage servicer does not have to tell you who they are, however send the servicer a written request in compliance with and under the Real Estate Settlement Procedures Act, 12 U.S.C. Section 2605(e), demanding that a chain of transfer from them to whomever may possess any interest in the security as of this date, be promptly sent to you, including all information necessary to enable you to communicate directly with the current owner of any such interest. The servicer must respond within 60 days. When you learn who owns your loan, contact them direct for refinacing or a loan modification.
It is time for all participants behind the scene of the mortgage work together to prevent another foreclosure. Short sales are include.