Determine your eligibility for a loan modification.
Many homeowners could be eligible for a loan modification ... even if not behind on payments. Between the federal government programs and lenders' own inhouse programs, many homeowners could be eligible for assistance to help them stay in their homes. The trick is to determine what type of "hardship" you've experienced which has made your mortgage payments unaffordable. If any of the following apply to you then you might be a good candidate for a loan modification: (1) You have an adjustable rate mortgage which will increase your monthly payment beyond your ability to pay; (2) Your household income decreased (lost job, fewer hours, lower paying job, business decline, etc.); (3) Your family experienced a medical hardship (illness, surgery, death); (4) Major repairs on the house; (5) Your property value is much less than the amount of the loan(s) against it; and/or (6) Your mortgage payments are more than 1/3 of your gross monthly household income.
Consider using an attorney who does loan modifications regularly.
I don't do my own car repairs ... and for good reason ... I don't have the same tools, knowledge or experience that the professionals have ... so I use their services and get a much better result than if I had attempted to do everything myself. The same can be true when trying to get a loan modification. Several of my clients were to the point of tears from dealing with the frustrations and confusion they got from their lenders. A loan modification lawyer can help insulate you from those issues and let you worry about other more important things. I've obtained loan modification for clients after they've told me they tried on their own with their lender for several months without any favorable results. There is something to be said for the rapport and network an attorney has built with the folks he/she regularly deals with at the lenders.
Submit the required information and documentation.
You should submit all the information your attorney and/or lender asks you to submit for your loan modification application. If for no other reason, you should do it just so your lender cannot say "You didn't send us everything." Even if you do submit everything that was asked for, please note that with the volume of loan mod requests each lender receives it is possible that your information may need to be submitted more than once because it was misplaced/lost. Generally you'll need the following: (1) A hardship affidavit and/or letter; (2) A Letter of Authorization (if using an attorney or third party); (3) Income verification (pay stubs, bank statements, tax returns, P&L statements, etc.), and (4) A Monthly expenses budget. I usually like to also submit evidence of the property value (appraisal, tax assessment) and a recent utility bill (to show the homeowner is occupying the property).
Be patient. It can take several weeks to hear anything.
The process for a loan modification can take several weeks ... or even months. For example, I submitted the loan modification application and support materials for one of my clients in February 2009 and the loan modification was finally approved in early August 2009. It seems to take some of the larger lenders longer, but I've noticed that it's not uncommon to have to wait for 3-4 months while the loan modification application is under review.
If you were denied, try again!
Even if you were denied for a loan modification last year or earlier this year, you might be eligible now under one of the federal government programs or under your lender's inhouse workout program. Your personal situation could change from the time you submitted your application, and if you were denied based on what you submitted six months ago then that might not be a reflection of reality right now. What's the worse your lender can do if you submit another application ... tell you 'No'? So what, they'll get over it. Submitting another application based on new information might be enough to put you over the top this time. It's worth a shot.
If a loan modification is not going to happen, consider your alternatives.
If you're flat rejected for a loan modification and you cannot afford to make the monthly payments then you eventually will need to consider your alternatives ... because you will likely face a foreclosure sale. For example, you might consider filing for personal bankruptcy (Chapter 7 or Chapter 13) which could help keep you on the property a little longer (Chapter 7) or maybe even help you keep your home (Chapter 13). You might also consider a deed-in-lieu-of-foreclosure or a short sale. It would be a good idea to talk with an attorney who is knowledgeable in these areas to determine what might be a good path forward according to your situation.
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