An interesting statistic: About 400,000 mortgage have been modified since 2008, and during that same time over 2,000,000 homes have been foreclosed upon, according to RealtyTrac. What do those 400,000 families have that 2,000,000 others didn’t? Luck? Partly, but the real answer is stamina and organization.
The Mortgage Modification Process
Homeowners can begin the process in one of two ways. Typically, a homeowner will call the bank (or the bank will call the homeowner) because they are behind in their payments or can no longer afford to make their monthly payment. The homeowner may also choose to go through one of the many programs that assist homeowners in getting mortgage modifications (e.g., NACA).
Either way, the process begins with a homeowner submitting tax returns and other financial information, a statement of hardship, and potentially a proposal for a new loan terms. Then they must wait for the bank's response. This can take several months.
The bank can then respond with an outright rejection, a request for more information or a proposed modification. If the process ends in a rejection, the bank may or may not give the homeowner a good reason. If the rejection stemmed from missing paperwork, the borrower must start the process over and resubmit all of the paperwork. There is typically no end to the number of times an individual can apply, but don’t expect the process to get any easier. If they request more paperwork, it must be provided promptly to remain in the process. Finally, if the bank proposes terms, the borrower can accept or reject the new terms and then move the process forward.
After another 4-6 weeks, a successful modification can be implemented. From start to finish, the process usually takes at least 3-6 months. Properties currently in foreclosure are usually not eligible, so it is important to contact the bank before a payment is missed or as soon as it becomes impossible to make full payments.
How to Effectively Navigate the Modification Process
Consumers must understand that this process will be long, time-consuming and repetitive. Organization will be key. First, borrowers should organize all of their financial information (i.e., 2yrs+ tax returns, W-2, bank statements, account balances, all bills, etc.). Next, keep a list of the person contacted and the information sent. It will be important to note what department they work in, the date, and the time of day the call occurred. This will minimize confusion and keep the people on the bank’s side more accountable.
Don’t let more than three days go by without checking on the status of the credit file. Ensure that the person called is the one working on the file. Do not simply call customer service and take their word that it is being “processed.” Understand the steps it will take to get the file through the system and try to get a contact each step of the way.
Above all, remain calm at all times. Becoming irate or annoyed will only give the people working on the file more incentive to deny the application. Remember, in this situation each person spoken to has the ability to be a stumbling block to the application. Be sure to remain pleasant, say please and thank you, and write positive feedback on any survey for good service that was received.
During the process be sure to keep track of credit ratings and scores because the modification may have a negative affect. Doing all of these things will give a modification application the best chance of success.
Michael Cook - Michael Cook is currently a Real Estate Investment Banker for Wachovia. He and his partnerstarted their own real estate investment ...
