Loan Modification Guide


Posted over 6 years ago. Applies to California, 14 helpful votes


Do you need to modify a loan, but don't know where to start? Don't panic. This situation is more common than you might think, but there are key steps you will need to follow to make sure that everything goes smoothly.


Hire Competent Assistance

There are a number of "loan modification" companies who are competing with each other to complete "loan audits" or "forensic reviews" of your home mortgage. You will be told that the company is looking for Truth in Lending Act violations or issues concerning the Real Estate Settlement Procedures Act. Unfortunately, you may not be told is that a nonlawyer is doing the legal analysis or that a lawyer is simply working in-house for the nonlawyers. RESPA and TILA violations are highly technical and require the assistance of competent legal professionals. So, your first step is to make sure that you are hiring a lawyer and that there is a commitment to abide by the rules of professional conduct in his/her state. If a lawyer s not involved in the initial consultation process, be very wary of paying a nonlawyer for legal opinions on mortgage issues. The unlicensed practice of law is a crime, but there are real estate professionals who are able to provide modification services.


Have Necessary Documentation Ready

Before loan modification can be given consideration, you need several items of information. This includes pay stubs, proof of income, a budget, tax returns, default notices, a credit report, and other information helpful in a lender's decision to modify a loan. Make sure that you have visited the FHA's at for free and accurate information on what to expect during the process.


Consider Your Other Options

If you truly cannot afford to stay in your home, or your other debts are preventing you from paying an otherwise affordable long-term monthly mortgage, your options may include bankruptcy, debt consolidation, consumer debt counseling, or other more traditional options. If you are considering any of these options, you will need much of the same information mentioned above. Before you can file a petition in the bankruptcy court, you will need to have completed a debt counseling session with a certified counselor, you will need a certificate of completion from the counselor, you will need a current credit report, a copy of your social security card, three years of past tax returns, and you need to avoid cash advances or the use of credit cards in the months or year before filing.


Do Your Research

You can find plenty of free information on loan modification, bankruptcy, mortgage fraud, and debt restructuring on our website at: . We DO NOT generally offer loan modification services. We provide bankruptcy petition representation, consultation on loan issues, and we try to find solutions for our clients that are realistic. Loan modification happens in about 1% of all requests according to recent data. Don't get yourself in further trouble than you already are in. With respect to any loan modification company, beware of upfront fees. From attorneys, DEMAND a copy of all billing information as to the type of work and number of hours expended on your case. Also, make sure that an actual attorney is doing the majority of the important work on your case.


Be Realistic About Your Situation

If you were never qualified for your original loan, don't expect a lender to be open to modification. The lender wants to be repaid on the loan and will not be responsible for a mortgage broker who assisted you in placing misleading income information on your application. For example, if you are unable to pay interest-only payments, it is unlikely that you would be able to make payments on a traditional 30-year loan. Or, if you cannot afford to pay a 'teaser rate' interest payment, it is unlikely you could afford a loan at a higher fixed rate. Many "loan modification specialists" don't tell you there is little chance a modification will be granted if there was misrepresentation at the loan's inception. While it might not seem so, modifications are actually expensive for lenders and you need to have a good basis for convincing them to incur the costs. Don't feel bad about where you are. There are a lot of other Americans feeling the same pain and looking for real solutions.

Additional Resources

How to Keep Your Home

Mortgage Calculator -- What Can You Afford?

Federal Assistance Information

Description of HOPE Program for Borrowers

List of Lenders Participating in HOPE

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