Loan Modification - Do it Yourself

November 30, 2008

A loan modification is when your existing lender changes the terms of your existing loan to help you stay in your home.  Loan modifications are becoming more and more common as we move through this real estate downturn, and loan modification shops are springing up across the country to take advantage of this new market niche.  For anywhere from $1000 on up, a company will work with your lender on your behalf to work out a loan modification.  You will have an attorney working with these companies in order to secure the loan modification, but typically there are no guarantees.

The focus of this post, and a few more to follow, is how you can do your own loan modification.  There are some instances when you might need the help of one of these loan modification companies, but in my opinion, most times you can accomplish the same results by working with your lender directly.  The first thing you should do is get the contact information for the loss mitigation department of your lender.  Typically you should be able to call the customer service number on your mortgage statement and ask for the phone number.  This is the department you will be talking with.

Once you have contact information for the loss mitigation department, you should gather up some pertinent information and paperwork.  You will need income information.  Your most recent paystubs if you are W-2, an up to date, signed and dated profit and loss statement if you are self employed.  You will also need a financial worksheet.  This is where you outline all your expenses for each month.  Credit card payments, mortgage, utilities, clothing, food, medical, etc.  It can be helpful to gather all of your bills so you are accurate and do not miss anything.  The final thing you want to have is a hardship letter.  This is going to be the face of your request.  In this letter you need to outline why you are asking for a loan modification, and what solution you are requesting.

This letter is important, so take a little time in putting it together.   Your lender is going to look to see if you can afford the existing loan.  If you cannot, they are going to look to see if you can afford a modified loan.  If you lost your job, have no income and are asking for a loan modification, it could be tough.  But if you lost your job and got a new one that pays less, that shows that you have income coming in, and if your loan were to be adjusted, you have the ability to make payments on the new loan.  They do not want to modify your loan, only to have you back in the same situation 6 months from now.

The second part of this letter is outlining what you are asking for.  Do you have an option arm or neg-am loan that is adjusting and just want a 30 year fixed loan?  Is your interest rate high, and would a lower rate allow you to make payments?  Do you want to short sell your home to get out from under it with no foreclosure ding?  Would you like to give your lender a deed in lieu of?  Decide what you want and ask for it.

In general, I believe you can take the bull by the horns and work with your lender on a loan modification directly.  With the proper tools and a little information, you can be successful in modifying your loan.  Take a look at this group, they have a loan modification package that gives you the information you need to do this yourself, saving thousands of dollars upfront.  In addition, they have been around for a while, and have been doing modifications for their clients even before this current downturn.  Many of the loan modification companies you might hear about have just sprung up to take advantage of the market.  You can also take a look at this posting for a bit more infromation on a  do it yourself loan modification.  Finally, check back in here as I will be writing more posts on loan modifications as time permits.  I will also be putting together some forms that can help you and some contact information for various loss mitigation departments of banks.

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Mortgage reduction loan modification attorneys can also help consumers reduce their mortgage rates and save their homes.  If you have been having trouble doing it yourself, it may be beneficial to look into some of the services available on the market.

Posted in loan modifications