Home Loan Modifications

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From early 2009 until the present, I have helped numerous home owners stay in their homes by modifying the terms of their loan. Throughout the last couple years, most large banks (Chase, Wells Fargo, Bank of America) have streamlined their processes and it is now easier to be granted a modification. It is still a paperwork-intensive process so it is important to know what to expect.

First, banks do not have to grant modifications. It is a common misconception that if a homeowner gets all his or her paperwork in on time that a bank must modify the terms of the loan. This is not true. However, if you meet the debt to income ratio and other factors, you will likely be granted a modification.

To obtain a modification you must first be behind on your monthly payments. Banks will not offer a modification if you are current. Often homeowners have purposely missed payments so they can be considered for a modification. This is risky so you should consult an attorney before doing so.

Once you are several payments behind, you can send in a request for modification form (RMA form). This is a ten to twelve page form that includes your personal information, your monthly income and expenses and a list of your assets and liabilities. It is important to provide accurate information as the banks will verify most of the information you provide. The bank will often send you several letters about bringing your account current and will often include the RMA forms in these mailings.

Along with the RMA, you will need to provide three years of signed tax returns, proof of income (such as W2’s) and your two most recent bank statements. You will need to provide additional documentation if you have any unique circumstances (i.e., large deposit into your account, you are self-employed, your salary decreased, etc.) If the process to obtain a modification takes longer than a month you will need to resubmit the most recent bank statement. A good idea is to continue to submit the most updated documents until a final decision is made on your modification. Lastly, you will need to provide a hardship letter explaining why you fell behind on your mortgage. This does not have to be anything specific but it gives you a chance to put a more personalize touch to your loan modification request.

Once you send these documents off you will be appointed a single point of contact to push the modification through. I recommend calling at least twice a week to check on the status. Often the point of contact will come back with a request for more information from the underwriters. This process can take several weeks to several months depending on your situation. Once you get all of the documentation in you will often get a decision within a week or two. If you receive a modification, the bank will lower your monthly payments (and often your interest rate) but will lengthen the time of the loan. You will have to pay back all the payments you made and penalties and interest but it will allow you to stay in your home.
Your other options are a short sale or deed-in-lieu of foreclosure which I will cover in subsequent blogs. Good luck!