There are few things as scary for a parent as losing their home, but a mortgage loan modification can help struggling homeowners get their heads above water. While the exact number mortgage loan modifications applications filed is unknown, it is estimated that possibly fewer than 2 million modifications have been completed. If you’re one of the millions who needs help holding on to your family’s home, here is the information you need to know to make the most educated and financially sound decision for your family possible.
What exactly is a mortgage loan modification loan?
A loan modification takes place when a borrower can no longer pay their mortgage according to the original terms of their loan. Through this process, one or more terms within the loan are changed and often the loan payments are reduced to an amount the borrower can pay and the term length extended. This is done, most often, to avoid foreclosure.
In 2009, President Obama unveiled his Making Home Affordable Program, part of which included the Home Affordable Modification Program which is supposed to reduce mortgage payments for homeowners who were struggling.
According to Making Home Affordable’s website, the homeowner must meet certain requirements before qualifying.
• You occupy the house as your primary residence.
• You obtained your mortgage on or before January 1, 2009.
• You have a mortgage payment that is more than 31 percent of your monthly gross (pre-tax) income.
• You owe up to $729,750 on your home.
• You have a financial hardship and are either delinquent or in danger of falling behind.
• You have sufficient, documented income to support the modified payment.
• You must not have been convicted within the last 10 years of felony larceny, theft, fraud or forgery, money laundering or tax evasion, in connection with a mortgage or real estate transaction.
How do homeowners qualify?
Homeowners who are interested in pursuing a loan modification need to contact their loan provider immediately to inquire as to whether they participate in a modification program. They may participate in the Home Affordability Modification Program (HAMP), offer other types of modification, or provide different foreclosure avoidance alternatives. However if they participate in HAMP, homeowners will have to act fast. The program ends December 31, 2012.
Homeowners can also call 888-995-HOPE (4673) for information about The Making Home Affordable Program and to speak with a HUD-approved housing counselor (assistance is available free, 24-7, in 160 languages) or their local HUD-Approved Housing Counseling Agency for guidance.
What information will homeowners need to provide?
Before the homeowner meets with a loan modification officer they will need to get this information together:
- Monthly gross (before tax) income of their household, including recent pay stubs if they receive them and/or documentation of income received through other sources
- Most recent income tax return
- Full asset information
- Second mortgage information
- Credit card account balances and minimum monthly payments
- Account balances with monthly payments on all other debts, such as student loans and car loans.
You will also need to bring a letter describing the circumstances which caused their income to be reduced or their expenses to be increased ie: job loss, divorce, illness, etc.
Blogger Jacqui Stewart, from Single Parent Retreat, recommends that applicants “be fully prepared and ready to get documents ready to go. The application does not ask for everything they need.”
What type of oversight is there?
With little oversight to make sure regulations and laws are followed, many homeowners are being taken advantage of by scammers or just aren’t able to get their loans processed in a timely and efficient manner.
Teisha Powell, attorney, whose law firm handles foreclosure defense, litigation, property law, and bankruptcy, radio talk host, and author of The Homeowner’s Guide to Surviving Foreclosure offers these tips:
Hire an expert- If you feel overwhelmed or are worried about being taken advantage of, by the modification process, then seek those who do it for a living. Lawyers that handle real estate are the best start; some lawyers have been doing these modifications for over 4 years now and have a system in place for helping homeowners get the approval smoothly. It might be worth the couple hundred dollars to get the answer you are looking for with less hassle.
Stay Safe from Scammers
- Keep excellent notes. Anytime the homeowner talks to someone on the phone or in person it is important for them to keep detailed and clear notes of each conversation. Homeowners should also save all email, digital, or hard copy conversations.
- Do not pay for help. Help is available free and homeowners should be leery of any businesses or people who are requiring fee for counseling services.
- Beware of people who pressure you to sign papers immediately or who try to convince you that they can “save” your home if you sign or transfer over the deed to your house. Do not sign over the deed to your property to any organization or individual unless you are working directly with your mortgage company to forgive your debt.
- Never make a mortgage payment to anyone other than your mortgage company without their approval.
What should you do if you suspect you are a victim of a scam?
If a homeowner believes they have been the victim of a scam, they should file a complaint with the Federal Trade Commission (FTC). To do so, visit the FTC’s online Complaint Assistant or call 877-FTC-HELP (877-382-4357).
For more information on avoiding a scam make sure you check out HAMP’s anti-spam page.
Real World Experience
Melissa Brodsky, blogger and consultant, has written extensively about the trials of trying to get a mortgage modification loan. In an effort to help fellow parents who are working this out for themselves, we sat down to discuss her experience.
What steps, if any, did you have to follow in order qualify? We had to fill out and fax SO MUCH PAPERWORK.
Was this process easy or difficult to follow? It was easy yet time consuming. Every single time we thought we were finally done filling out or finding more papers, Bank of America asked for more.
What was the overall experience like? Honestly, horrible. Only because this was the 5th time we’ve gone through it. If they had just honored their original agreement, we’d be modified already.
Have you had any problems since completion? February 1st was when our 1st “trial load mod” payment was due. We called it into our contact yesterday morning and they still haven’t taken it out of the bank.
When you look back would you have done things the same? I’m not sure…
What do you wish you had known before starting that you know now? Buy a house with cash. Try to avoid the big banks whenever possible.
I reached out to Bank of America for an interview, but these requests went unanswered.
© Andy Dean – Fotolia.com
Have you applied for, received or been declined for a home mortgage modification? We would love to hear your story about the process and any advice to others in the comments!