Did you know that over 80% of loan modifications are in default again within a year? Borrowers have good intentions, but the problem is that what got them in trouble in the first place still exists. And coupled with the fact that there are some lenders out there trying to scam borrowers out of their money which they didn’t really have in the first place just causes more issues. According to DRE Commissioner Jeff Davi, now that so many people are struggling to stay in their homes, foreclosure rescue and mortgage relief scams have risen dramatically. DRE is issuing consumer alerts to help consumers, but that will only go so far in getting rid of this problem in my opinion.
The other issue is that some lenders make more money off of foreclosures than doing a loan modification, so borrower beware! The lender may just be dragging you along until it’s too late. I am not saying this is true in all cases, because there are people who have been successful at doing a loan modification.
That being said, there’s no reason a homeowner can’t complete a “loan mod” on their own if they are cautious. Here are some tips that might help homeowners trying to negotiate a “loan mod” on their own:
(1) Do a reality check on your monthly budget before applying for a loan modification. If juggling credit card payments is the only way you are able to afford your mortgage every month, hoping to drop your mortgage payment low enough to afford all your credit card payments is probably not going to work. If you can’t pay everything, prioritize your debt based on what’s most important to you. If you’ve already applied for a “loan mod,” paying your credit cards from the extra money created by your reduced mortgage payments may lead to a foreclosure if you are denied.
(2) Loan modifications are designed to lower your mortgage payment down to 31% of your gross income. If your mortgage payment is already lower than 31% of your gross, you probably won’t qualify.
(3) If you decide to do a “loan mod,” don’t pay an internet marketing company to do it for you. Your desperation makes you vulnerable to being scammed. Even if you get lucky, there’s nothing they will do that you can’t do for yourself. If you want help, call your local HUD office for the telephone number of a HUD loan modification counselor near you or call 1-888-995-HOPE (4673). They will help you for free.
(4) You might think providing all of the required documentation in a timely fashion is enough, but that just gets your foot in the door. You and the other few hundred thousand homeowners waiting for the same answer. Assume your bank is overwhelmed, will lose your paperwork and not return your phone calls as a means of controlling the number of “loan mods” it has to actually consider. Don’t take it personally. The clients that succeed have a bulldog persistence and aren’t shy about contacting their bank on a regular basis. Keep a copy of everything you provide the bank.
(5) Don’t get any more than 60 days behind on your mortgage unless you are ready to give up your home if you aren’t approved for a “loan mod.” If your bank insists that you have to be more than 60 days behind before being accepted for a loan modification, ask them to put it in writing and file a complaint. Try to bank the money saved by not paying your regular mortgage payment, or the “loan mod” process may leave you in a worse position than you were before applying.
(6) Keeping in mind that most banks have several “loan mod” programs available, you should make sure you’ve exhausted all the alternatives before accepting “no” for an answer.
Posted by: Sheri Negri