How to Do-It-Yourself Loan Modification

I have received a few emails from home owners asking me where to even start on asking their lender about a mortgage loan modification. The key word lies within the question....ASK!

The first step is to call your mortgage lender's customer service department and ask for the "Loss Mitigation Department". Do not even bother trying to explain yourself to the customer service representative. They will eventually send you to the Loss Mitigation Department anyway. So cut to the chase.

Once in the loss mitigation department, introduce yourself, give your loan number and other identifying information and then immediately ask "who am I speaking with?" and "what is your direct line in case we loose connection". Write this information down as well as the time and date. Communication Documentation is absolutely needed on your part!

Proceed to explain you are or may soon be delinquent on your mortgage and NEED to modify it before it becomes further delinquent or possibly go into foreclosure. Do not say "I was wondering if..." or "I would like to see if I qualify...". Be firm, yet polite. The Mortgage Loan Modification process is, simply put, a Negotiation Process. If you lay down and show weakness in the beginning, they will walk all over you. After all, the banks are looking out for their best interest, not so much yours. The point is to show that you are trying to be a responsible borrower, being PRO-ACTIVE, not RE-ACTIVE and show this is a serious issue to you.

The Loss Mitigation Department will note that you were inquiring and should send you or send you to (Internet) a Loan Modification Application Package. This will include a checklist of financial document they will want to see (bank statements, W2's, pay stubs, etc). They will also ask you to fill out a personal finance statement (what $ comes in per month, and what goes out). You want to show that you are hurting, yet still able to afford your payment if they modify it. They will also ask that you complete a Hardship Letter. This explains your actual financial hardship, what happened that brought you to this point.

After you complete this application package send it back immediately. Once again, noting time, date and who you sent it to and how. Follow up with and make sure they received it. You would be surprised how often they "never received" your information.

Once they have confirmed they have received your package, be patient. It will take anywhere between 30-120 days. However, keep calling and asking for an update every 4-5 days. If they call you and ask you for more information, send it to them immediately. DO NOT FORGET TO DOCUMENT EVERYTHING! Then you can always reference who told you what and when.

Once they present an offer to you, make sure it will actually benefit you before you sign anything! If you think it is a sub-par offer, tell them. Once again, be firm yet polite. This is where you will negotiate. Push as hard as you think you can, but don't expect the world. They still need to profit a little!

Good Luck!

Bi-Weekly Payments / Mortgage Loan Modification Alternetive

I have had a few questions as of late about bi-weekly payment options. Are they good? Are they bad? Should I do it on my own? If my lender turned me down for a mortgage loan modification becuse I wasn't late on my mortgage, and my home is underwater, what do I do? Here is my take on Bi-Weekly payment plans......DO IT!

Bi-Weekly payment options have been around for a long time. By making half of your mortgage payment every two weeks, you will be able to apply one FULL mortgage payment towards your principal each year! The way it works is, approximately every (6) months you will have a month where your every other week payment schedule will hit three times that month. Therefore, at the end of that one month, you will have paid an extra half payment.

Now, by immediately applying this half payment towards your principal balance, the interest that accrues on your next payment will be less because there is a smaller principal balance. Therefore, the portion of your monthly payment that goes towards interest will be smaller, and the portion paying off your principal balance....HIGHER! By simply paying an extra half payment every (6) months to your mortgage, you can eliminate approximately 7-8 years off your mortgage! Therefore, saving you tens of thousands of dollars in interest.

80% of home owners over the age of 60 still have a mortgage! Do you want to retire and still have the biggest debt you owe hanging around? No! Enjoy retirement! You have worked far to long and hard to retire and still have a huge mortgage payment hanging over your head!

The time has never been better to start a bi-weekly payment program. Our home values are dropping rapidly and many are underwater as far as what they owe on the house compared to what it is worth. If you are in this scenario, you are essentially trapped! Can't sell or refinance. You have to stay put until you have enough equity to you can "wiggle" out. The only viable solutions are selling your house on a short sale, a mortgage loan modification or paying your equity down as quickly as possible with a plan such as bi-weekly payments.

Can you do this yourself? You definitely can. But like most home owners, you have probably tried it in the past and failed to continue to make your extra payments for what ever reason. It takes financial discipline in which many do not have. Almost like diet plans. We all try and eventually, most fail due to whatever excuses. That is why contacting a bi-weekly payment service provider will be your best move. A personal trainer if you will.

These companies will have your payment taken directly out of your checking or savings every two weeks. It will be a little strange at first, breaking your habit of paying monthly. But after a few months, you will be accustomed to it.

Make sure the company you choose applies your extra half payment towards principal IMMEDIATELY! Some companies will hold the half payment for 6 months until they receive the other half before making your extra payment. This doesn't help you as much because your principal balance is still untouched and accruing interest at the full amount for 12 months, until the extra payment is applied. Look at your accruing interest like the snowball effect. Try to smash that snowball as frequently as possible!

There are fee's associated with this service. You can expect to pay between $395 - 1% of your gross interest savings. For example, if were saving $80,000 in interest over the course of the program, you would be billed between $395-$800. There are also ACH direct withdrawal charges that can be expected between $3 - $5 / payment.

For the few dollars it costs to get started on one of these, it is far worth the long term savings! A guaranteed investment if you will, countering interest!

Click this link to go to a Bi-Weekly Saving Calculator. See how much you could save!

Bi-Weekly Mortgage Payment Calculator

I am an authorized Bi-Weekly consultant for the Bi Weekly Mortgage Association. Contact me with any questions or scenarios you might have. I am here to help!

-ED

Recent Foreclosure Updates

Hardship Examples

Here is a list of example hardships that lenders may consider during the Mortgage Loan Modification process:

• Adjustable Rate Mortgage Reset- Payment Shock


• Illness


• Loss of Job


• Reduced Income


• Failed Business


• Job Relocation


• Death of Spouse or Co-Borrower


• Incarceration


• Divorce


• Marital Separation


• Military Duty


• Medical Bills


• Damage to Property (natural disaster or unnatural)

President Obama's Loan Modification Plan

Here is a brief overview of the housing plan that President Obama has put into place. The plan is to rescue the struggling housing market by modifying distressed mortgages, Mortage Loan Modifications, which will keep struggling home owners in their homes to help establish a floor to the recent declining real estate values. The President has set aside $75 BILLION to fund this plan. I will try to break down some key pieces of this plan.

The plan is to focus on mortgage payments, rather than mortgage balances. By lowering rates and extending terms, the home owner’s payment will come down. Foreclosures happen mainly because home owners cannot afford to make their payment, not because they owe more than what their home is worth.

Mortgage lenders/servicers are to bring the monthly payment to no more than 38% of what the borrower’s gross monthly income would be (DTI). The government would then help reduce the payment even further down to no more than 31% (DTI). Once again, by lowering your rate (as low as 2%) and/or extending your term (as high as 4o yrs), the payment should drop to this level. If further action is required to reduce payment to fit these ratios, servicers would forebear loan principal at no interest. However, loan servicers are not required to reduce loan principal. These modified payments are to remain in place for 5 years.

There are cash incentivizes available for both loan servicers and borrowers if the Mortgage Loan Modification is completed successfully. Servicers will get $1,000 for each Mortgage Loan Modification and can make an additional $1,000/yr for up to 3 years if the borrower continues to make their payments on time. The borrowers can get up to $1,000/yr knocked off their loan principal loan balance for up to 5 years if they continue to make their modified payment on time.
The plan is made to help primary home owners, not investors. Only owner occupied, primary residences, with mortgage balances up to $729,750 are eligible. A serious financial hardship also needs to be present. These financial hardships will be verified by the borrower completing an affidavit of financial hardship or hardship letter as well as supplying income documents. Only loans originated before January 1, 2009 are eligible.

Now that the plan has been announced, millions of borrowers are going to start calling their lenders to see whether or not they are eligible for Mortgage Loan Modification. The mortgage lenders and servicers may not have the capacity to handle these inquiries. Even if they can keep up, the file/document organization and proper communication by these loss mitigation departments may also suffer from the high volume. Therefore, the Mortgage Loan Modification process could be slow, agonizing pains in the you know what. If you can handle it and have plenty of time and patience, give it a shot. However, the assistance of a Loan Modification Service may be worth looking into. Also, you may not qualify for the Obama plan, so having legal representation will help you explore ALL options that are available.

Mortgage Loan Modification FAQ's

Q: What is a Mortgage Loan Modification?
A: A permanent change in one or more of the terms of a homeowner's mortgage. No refinancing, appraisal or credit check is generaly needed.

Q: How do you qualify?
A: If you are in any financial hardship such as, but not limited to, the following: Loss of Income, Facing Foreclosure, Late on Mortgage Payments, Owe more than the Home is Worth, In an Adjustable Rate Mortgage (ARM) that has or is about to begin Adjusting and/or Cannot Sell or Refinance your Home.

Q: Is a Mortgage Loan Modification for you?
A: If you are in danger of losing your home due to a foreclosure, and have had no luck trying to sell your home, you need to take action now if you wish to keep it! Mortgage lenders have plenty of foreclosed homes on their books right now that they cannot sell. If they do sell these foreclosed homes, they sell for mere pennies on the dollar. They don't need any more liability! If you can prove that you can maintain a new modified loan plan with that lender, they want to work with you so you STAY IN YOUR HOME!

However, you do not need to be facing foreclosure, or late on any mortgage payments for that matter, to qualify for a Mortgage Loan Modification. If you present any financial hardship, you stand a good chance for a successful Mortgage Loan Modification. Therefore, if you have an Adjustable Rate Mortgage or Owe More than your Home is Worth, you show a financial hardship. Even if your payments on are on time, there is a potential that in the future, your ARM may adjust, resulting in a higher payment. You are demonstrating financial responsibility by showing to the lender that you are trying to be PRO-ACTIVE rather than RE-ACTIVE. You wish to work with them now, to modify and prevent any potential possibilities of a future hardship.

Q: Is this a process you can do on your own?
A: You can most definitely try to complete a Mortgage Loan Modification on your own. However, this can be a very tedious and time consuming project. You first need to contact your lender's Loss Mitigation Department and find out the exact process with that particular lender. Then it will take many phone calls, plenty of patience while on-hold, great communication, a ton of follow up, firm negotiating skills, and sheer determination. However, it can be done.

Q: Are there reputable Mortgage Loan Modification services out there?
A: There are many services out there that will assist you in completing a Mortgage Loan Modification. These companies will charge an upfront fee for their services of course. The average fee for a stand up Mortgage Loan Modification firm is approximately $2,500. There are many good guys out there...however, with every good guy, there are plenty of Scam Artists out there too. Therefore, due your homework! A good start is to check the Better Business Bureau.

A good Mortgage Loan Modification firm will be represented by a Law Firm. These firms will have actual licensed attorneys working, as your legal representative, and fighting like pit bulls to get the best mortgage loan modification possible. Also, all money that is collected from you should be held in a third party escrow account. Therefore, they cannot take your money and run. You should also only use a firm that offers a Money-Back-Guarantee. If they cannot help you out, there needs to be an out for you. They only get paid their entire fee if a successful Mortgage Loan Modification has been completed.

Q: How does a Mortgage Loan Modification affect my Rate/Term (results)?
A: Each and every Mortgage Loan Modification yield different results based on the borrower’s financial situation and the lender involved. That being said, I have seen some amazing modifications in the past few months. I have seen rates modified down to as low as 3.5%, terms from a 30yr Fixed to a 40yr Fixed, and I have also seen the greatest of all (IMO)...principal balance reductions of up to 33% of the original loan amount!!! This is incredible! Some lenders will just forgive this amount with no deficiency judgment or tax implications to the borrower!

Q: Will this have an adverse effect on my credit rating?
A: No. A mortgage loan modification will look much like a refinance on your credit bureaus. It will show the end of an old loan, and a new loan takes its place.

Q: How long does a Mortgage Loan Modification take to complete?
A: The process can take anywhere from 15 - 180 days. The average time is approximately 60-90 days. It all depends once again on the borrower’s situation as well as the lender you’re working with.

Q: What is Loss Mitigation?
A: Loss Mitigation is a third party helping a homeowner, a division within a bank that mitigates the loss of the bank, or a firm that handles the process of negotiation between a homeowner and the homeowner's lender. Loss mitigation works to negotiate mortgage terms for the homeowner that will prevent foreclosure.

Introduction

Hi, my name is Ed Alf. I am a licensed and trusted mortgage professional here in the great state of Wisconsin. It has been almost 10 years since I first got on board this vicious real estate roller coaster ride, and have no intentions of getting off anytime soon. This is my chosen profession, and I choose to keep moving forward and help anybody I can get through these difficult times.

Recently, many of my past and present clients have been asking me a lot of questions about Home Loan Modifications. I do not know everything about them, however I do know my fair share.

I will be using this blog to share what I currently know about these Home Loan Modifications and will keep you posted as I learn more.

Thanks,

-ED