After observing the struggle of today’s homeowner, I began working with attorneys and homeowners on a personal level to help them navigate the loan modification process with lenders. Through this process, I’ve gained inside knowledge of tips and tricks that I want to share with everyone.
Faced with an impossible choice of giving up their home or working with near-impossible bank constrictions, homeowners are facing foreclosures, short sales and looking for help with loan modifications. As I’ve said many times before, borrowers aren’t really worried about the fluctuation of their home values. Most realize that the value of their homes has significantly decreased. Bottom line, borrowers care about their monthly payment.
Most homeowners don’t want to lose their home. They still have good credit and don’t want to walk away just because they “bought at the high of the market”, and in the short run, may have made a bad deal. Those thinking about trying for a loan modification are in for a tough time, as my first-hand observation of the process has exposed what homeowners need to arm themselves with:
- Get Help – This is the most important thing a homeowner can do to advocate for themselves. Hire an experienced lawyer (not some fly-by-night loan modification company.) This will make the bank stand up and take notice. Attorneys specializing in this field know the process, the bank and the language to use. When interviewing an attorney, ask if they have experience with your specific lender. Each bank is different, each has unique in’s and out’s. Have the attorney explain their process. If they don’t want to share what they do, then they are not for you.
- Get Organized – Loan modification is about paperwork, if you don’t have it, you’re not going to get the modification. If you are unsure about the state of your finances, ask a nonprofit counseling service to help you put together this financial analysis for free. The counselor can also help to negotiate with your lender. Consumer Credit Counseling is a good place to start. Bottom line, keep good records.
- The Squeaky Wheel Gets the Loan – Communication with your lender is key. If you are falling behind in your payments, don’t wait for the bank to contact you. Reach out to them directly. Showing an interest in the process can only bode well. Document all phone calls and write letters (see #2 above), keep a file of everything. While they have phone notes it’s important that you capture conversations on your own so that if you run in to a roadblock or dead end you can use the information you’ve written down in your log to help you keep pushing forward. You can also reference promises, comments or details that may help you overcome objections as you talk to other people in the department. In your notes capture date, time, number called, person spoke to (be sure to get the full name of each person) and detailed notes of the conversation.
- Be Honest with Yourself – Too many homeowners are waiting until they are so far underwater that there is no other way out. There is no sense trying to “wish” yourself out of this situation, if you have a financial problem, deal with it head-on and BEFORE things get too far gone. Part of being honest is assessing what you want. Know that there are several options. If you have an ARM with a higher interest rate than what is current, ask for an early adjustment. If you have a temporary financial situation and know that it will be resolved, ask your lender for forbearance, or postponement of payments.
- Do Your Homework – Part of your job (and this will be a job) is to know the value of your own home to arm yourself with the right knowledge. Go on the internet and see actual sale prices of homes in your neighborhood that compare to yours, if you see a “for sale” sign in the front yard of a house, take the flyer. Talk to real estate agents that work in your area. They will be able to pull comps for you and offer an idea of fair market value of your home. This information will prove valuable when negotiating with your bank.
- Get To The “Loss Mitigation Department” – If you are trying to go it alone, get to the “Loss Mitigation Department” of your bank as soon as possible. Ask specifically for this department, as these are the decision makers for the process. Dealing with customer support reps, which is by default where you get sent with a first phone call, won’t get you anywhere.
- Have A Darn Good Reason – Make sure you have a darn good reason for needing to modify your loan. Note the use of the word “needing” here. Simply wanting a loan modification will not cut it. Valid reasons for loan modification include personal or child’s medical bills, death, divorce, loss of employment.
- Make it Personal – Your bank will require you to write a “Hardship Letter”. What is the bank looking for in a hardship letter? Be personal and direct. Tell your story, but make sure to integrate key facts and timelines. The more information you can provide, the better chance you have to succeed. Also, know what you are asking for. The tricky part is to make sure that your financial statements clearly demonstrate that while you cannot afford the current payment and it is a hardship, you will be able to afford and pay the new lower modified mortgage payment. Make this simple to do by providing a Current financial statement and a Proposed financial statement, making sure you meet the disposable income requirements too.
- Be Patient, Be Nice – Remember it’s your loan and not the bank employee’s on the other end of the phone. Most times, the person on the other end of the line is overworked and underqualified. As much as you may want to scream, DON’T. It will not advance your cause. Also keep in mind that most times when you call back you will not get the same person twice. As the homeowner, it is really frustrating to have to tell your story over and over. However, remember that honey will trap more flies than vinegar.
- Remember, “The Fox Runs For His Dinner, The Rabbit Runs For His Life” – You, the homeowner, are the rabbit in the process and despite the fact that this is most likely a very stressful time, it’s your life on the line. Put all your effort into making this happen, your hard work and tenacity will most likely get you closer to your goal. Treat it like a full time job and be extremely persistent. It will pay off.