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Loan Modification:
How It Works

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The Most Important Thing Is To
Realize That You Have Options
And Not Give Up Hope!

Image thanks to www.homerescuellc.net

The process of a mortgage loan modification is very long and tedious due to the amount of information requested by a lender and the amount of time lenders take to analyze that information. Frequently documents are lost or misplaced and have to be re-sent. It is important to keep in regular contact with your lender to make sure the process is progressing.

Every lender wants to make the right decision so they take their time to analyzing your specific situation. One important step is to keep your bills organized and ready to present for proof of hardship at any time during the process.

Here Are The Four Key Steps We Use To Support Your Loan Modification Request:

Step 1 - Initiating the Loan Modification Request

Determine Eligibility - Using the calculator below, multiple your gross monthly income (before taxes) by 31%. The amount you get will be the amount you pay if you qualify for a mortgage loan modification. If this amount is less than the amount you are currently paying then loan modification can help you. You also need to be able to document a hardship - like death, divorce, loss of income, etc. (You can find the requirements on our FAQ pages.)

Retain Family Mediation of Cape Cod, execute our Modification Representation Agreement and return it with your initial payment. (In cases of severe hardship this fee can be negotiated, See our Modification Agreement.)

Client Intake Form. We will contact you to conduct a Client Intake Interview. This process will help you clarify your goals and objectives while helping us to understand your unique situation so that we can better advise you.

Gather Your Supporting Documents We'll provide a checklist (as well as other forms) of the required supporting documents (e.g., bank statements, W-2 forms) that you'll need to submit with your Request for Modification as well as forms to help you prepare your documentation. We will also provide information on how to obtain necessary documentation.

Attorney Review of Documentation and Preparation of Your Application. We will carefully review all of the documentation you have provided and will suggest additions, corrections, etc. which will strengthen you application. We will then initiate the completion of your Modification Application

Letter of Authorization. We will also send you a Letter of Authroization to sign for submittal to your lender authorizing us to negotiate on your behalf. Your lender will then send an Acknowledgement of Representation.

Submit Your Documents. Once all the required information has been completed, we will submit the package to your lender.

Image thanks to Tom Richardson Jr.

Step 2 - Review & Analysis

After the lender receives your package, their loss mitigation department will review all the information we've submitted to confirm your eligibility for a loan modification.

This review process may take as little as 30 days or several months. It is important to maintain regular contact with the lender's loss mitigation department throughout this time period.

Your lender may request additional information from you and from third parties, such as appraisers or mortgage insurers. We will advise you on steps to take if this occurs.

During this time, it's in your best interest to continue making your home loan payments.

Step 3 - Negotiation and Agreed Solution

If your loan modification request is approved, we'll receive a letter from your lender explaining their offer: i.e. the terms of your loan, the amount of your new trial period mortgage payments and the next payment date. We will review this with you to ensure that it works within your budget and will negotiate on your behalf.

You will then begin a three-month Trial Plan. Making your mortgage payments during the trial period is essential, because it shows us that the new loan terms work within your budget and the your be terminated if you do not make the payments.

Step 4 - Final Modification Agreement

If you successfully make your payments during your trial period, and your documentation is in order, the terms of the Trial Plan will become permanent. We may need to submit additional documentation before a final review. Once the Final Agreement has been signed, it becomes permanent.

Why Do Some Loan Modifications Fail?

It seems so simple that your lender should want to agree to a loan modification with you to avoid all of the potential pitfalls. They save, along with you, in the court costs of a foreclosure or the general embarrassment and financial loss of an auction to sell your home. But why is it estimated that only 4% of all mortgage modifications are being approved for permanent help?

For a bank or lender to make the complicated decision to approve a mortgage loan modification they need proof that their new investment isn't as doomed as the first mortgage. With this necessary step has come many delays including those below:

There is a glut of individuals and families applying for Loan Modification and the lender is having difficulty staying on top of all the applications.

Loan modifications paperwork is routinely lost by the lender during the review process, which either delays the process or results in a failed modification.

Phone calls that you leave for your lender to help you proceed in your mortgage modification are not returned. This can lead to the termination of negotiations and result in another failure. The ball is in the borrower's court to keep things moving toward resolution.