Loan Modification: Do I Qualify for a Loan Mod?
Added August 11, 2009 by Ilyce R. Glink
Summary: Loan modifications are hard for homeowners to figure out. Many get mixed signals about whether they qualify for a loan modification from their mortgage loan servicers. You might be told you do qualify for a loan modification one day, and then in the next letter told that you do not qualify for a loan modification - even though your financial situation has gotten worse. Find out whether you qualify for a loan modification by contacting a HUD housing counselor. And, call back your own mortgage lender frequently to check on the status of your loan modification.
Loan Modification: Do I Qualify for a Loan Mod?
Q: I'm in loan modification hell. I have been trying since January to get a loan modification from my big box lender. At one point, the lender sent me a letter saying that I was prequalified for a loan modification. Now they say I don't qualify for a loan modification. I don't understand what's going on with loan modifications in this country. I live in Arizona. My house payment is almost half of my income. My home is worth a fraction of what I paid several years ago. The story from my mortgage lender is always the same: I should call back in 45 days to check on the status of my loan modification. That seems like a long time to wait to hear about whether or not I qualify for a loan modification.
I have heard that people who hire an attorney are getting great results with loan modifications. I know a family who had several hundred thousand dollars of mortgage principal forgiven and he is a single man without the children and responsibilities that I have. Is hiring an attorney the only way to get cooperation? Do you know if my lender is helping anyone with loan modifications?
A: Although this is the first time I have heard from you, I hear from more than a hundred homeowners each week who are frustrated or fed up with the pace their mortgage lender has struck with their loan modifications. It seems as though everyone is on the slow track.
My sense is that mortgage lenders do not have the capacity to provide good customer service to the massive number of borrowers looking for financial assistance. Admittedly, mortgage lenders have had to invent their loan modification departments from the ground up, with a program that didn't go into effect until April and has changed significantly since them. Getting enough team members in place and up to speed with the correct technology has been a slow process that has hindered the numbers of loans being modified.
Even so, it would be nice to think that lenders can move a little faster, particularly when some of the biggest mortgage lenders have also received billions of dollars in financing from Uncle Sam.
What can you do to speed up your own loan modification?
One thing to do is to contact a HUD housing counselor. You can also call the toll-free Homeowners for Hope Hotline at 888-995-HOPE. The folks who answer the phone are also HUD housing counselors and they will use a backdoor channel to get someone from your big box lender on the phone to do a quick evaluation.
But even if you do qualify for a loan modiication, it is taking months for loan modifications to happen. You'll have to be patient, but not not a doormat.
I personally don't think you should wait 45 days before contacting your loan servicer. You should call every few days so that they know you are serious and that you won't let it go. (You've heard the cliche: the squeaky wheel gets the oil.) If you get someone on the phone who isn't well-trained, hang up and try again. Some of the luck is just getting someone on the phone who knows what to do.
Attorneys and others who charge you upfront for so-called loan modification services often don't do anything but cash your check. Loan modification scams are on the rise and I would be skeptical of anyone who says they can do something for you that you can't do yourself. What I have heard from my highly-placed sources at the Treasury Dept. is that attorneys can't do anything for you other than fill out the forms. But my sources say that the forms are easy enough that almost everyone should be able to do it themselves.
If cash is so tight that you can't make your mortgage payments, you probably shouldn't spend $1,000 or more to do something you can do for yourself, for free. If you're confused by the information the lender is requiring, contact a HUD housing counselor. If you want to get an idea of the paperwork you'll need, there is a list of documentation you should have ready on the MakingHomeAffordable.gov website. I suggest you begin to gather all of that information so that when you're asked for it, you're ready.
Finally, it's possible that for some reason you may not qualify for a loan modification. If that's the case, then you need to think about a Plan B, which might include walking away from your home and starting over elsewhere.
Loan Modification Resources
Homeowners for HOPE Hotline: (888) 995-HOPE
READ MORE ABOUT LOAN MODIFICATIONS
Making Home Affordable Mortgage Modification
Mortgage Loan Modifications: Do You Have to be Late to Qualify?
Loan Modification Can Lower Your Monthly Mortgage Payment with a Willing Lender
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Additional Topics
(View All Topics)FHA loans HUD consumer advice credit history credit score foreclosure home loan ilyce glink loan modification mortgage mortgage lenders mortgage loan personal finance advice real estate advice refinance mortgage
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Comments
Attorney Rep says
Attorneys do much more than fill out forms - they sit day after day and negotiate the process which is extremely time consuming, anything up to 7 months, something most consumers don't have the patience for. In addition each note holder/bank has a variety of investors which have to be consulted on each application, the consumer is not going to know this. And what if the applicant does not qualify for the Home Affordable Program but MAY for the conventional program being offered by most banks, this takes more paperwork etc and some HUD reps probably wont deal with because they are in tuned with HOPE i think you need to speak to a few attorneys to find out exactly what they do and what they know before you say "dont " use one, my company has saved numerous homes form foreclosure, some the day before, because sadly the process goes on even if your in negotiations, does a consumer know what to do then?? I seriously doubt it
Ilyce says
Thanks for the comment. My sources at Treasury and the Federal Trade Commission and the FBI say that attorney loan modification scams are prevalent - in addition to having many homeowners be scammed, they believe that paying someone to do this when you can do it yourself isn't the best use of money. They don't believe you need an attorney. If you're helping people, that's great. But there are so many who are taking homeowners' money and doing nothing. The big lenders say they work with attorney-represented homeowners and non-represented homeowners in the same way. So, unless they're not telling the truth, it seems a bit difficult to justify the added expense. But, I'm happy to hear from homeowners who have completed loan modifications with attorneys as well as those who have done it themselves.