Loan Modification Process

By Jocelyn P. Porteria

jporteriaUnder President Obama’s Home Affordability and Stability Program, a lot of homeowners were able to keep their homes and modify their loan for more affordable monthly payments. Where do you start?

Go online or pick up the phone and contact your lender. The Department is usually called Loss Mitigation or Work Out Department. Be ready with your personal information for verification purposes. You will be asked series of questions and financial information such as monthly income from all sources, household and extra expenses, and explanation of hardship. From your conversation and information provided, they will tell you if you maybe qualified subject upon receipt and verification of requested documents.

Documents Required:
Most lenders will ask for your 30 days pay stubs or last two, 2 months of bank statements, last two years of income tax return, financial statement, hardship affidavit. Upon receipt, you will receive a confirmation from them and will be advised that it may take up to 30 days to process your request.

Pre Approval Letter:
You will receive a packet with instructions and detailed information on how to go on with the loan modification. They might ask for updated information of the documents previously submitted.

What to Do Next:
Counseling one of the requirements is you will have to work with a HUD approved counseling agency to assist you in developing an action plan and support to be able to work on household budget and reduce debts. Your lender will provide you of contact information.
Trial Period based on the documents submitted, you will have a three months trial period of the new monthly payment. The monthly trial period payments are based on the estimates of the income information you provided. This may change or you may not be qualified if your documentation does not support your claim. It is very important that you will make the payment on time and not less than the specified amount. Otherwise, your loan will not be modified.

The trial period is just the first step. Once it is finalize, you will receive a loan modification agreement.
Past due amount- contrary to what most people say, you do not need to be in default before you can qualify for a loan modification. If you are in default for more than 30 days, you are hurting your credit scores. Once approved, any past due amount at the end of the trial period will be added to your balance including unpaid late charges. However, if you fulfill all the terms during trial period, all late charges will be waived.

Borrower Incentive- If your monthly mortgage payments including principal, interest, property taxes, insurance, condo or Homeowners Association fee is reduced through the Home Affordable Modification Program by six percent or more and you make your monthly mortgage on time, you will accrue a monthly benefit to be added on your principal on or after the first through the fifth anniversary your loan modification goes into effect.

Loan Modification is free- there are no fees under the Home Affordable Modification Program. New affordable payment is the result of a lower interest rate. That means your balance will not be more than what you owe now and will reduce eventually as you are now making payments including principal. Your monthly payment will not change as long as you own your home and have not refinanced. Read and follow all the instructions carefully and pay attention to details. Modification process may vary depend on the lenders’ processes but the principle is the same.

If you do not qualify, your lender usually suggests short sales where you can sell your home in the current market value and the balance will be forgiven. They maybe able to explore other options available to help you keep your homes or ease your transition to your new home.

(Note: Jocelyn Porteria is a Realtor® licensed in VA. She earned a designation of ABR, Accredited Buyer’s Specialist and a CDPE Certified Distressed Property and Short Sale Expert. For more info, call her at 571-432-8335 or email at[ad#tindahan300x150]

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