Q: I applied for a loan modification through the National Assistance Corporation of America (NACA). My loan is serviced by a big box lender, which was bought by an even bigger big box lender during the financial crisis.
Since I put in my loan modification application, my lender has reported my account delinquent to the credit reporting bureaus. I was told the loan modification process would take 30 to 90 days.
I had an optional mortgage insurance payment included with my loan payments and now that insurance has been cancelled. I have to reapply at 58 years of age for insurance but have been unable to obtain insurance and other creditors have dropped my accounts.
The lender stated that they will notify me once the loan modification is complete. What should I do?
A: President Obama’s Making Home Affordable Plan is likely the plan that your current lender is considering for you for your loan modification. Unfortunately, lenders are taking way too long to process the paperwork for their borrowers under any and all loan modification plans.
While you are working with the Neighborhood Assistance Corporation of America (NACA), a HUD-approved counseling agency, you may still need to follow up with your lender to determine the status of your loan modification application.
Keep a log of each call you make, with the time and date of the call, the name of the person you talk to, their position at the company, their representative number, if they have one, and the office location you are calling.
Also, remember to write down what you asked and what they answered. In some cases, loan modifications have been lost or misplaced and need to be sent and resent to lenders. If that’s the case, make sure you keep a copy of all of your documents and verification of how and when you send the documents to the lender. You should also follow up to determine if they have received the documentation.
Savvy borrowers who are trying to work on a loan modification under the Making Home Affordable Plan will closely monitor their file with the lender and call them every day or every other day to make sure their file is looked at.
Unfortunately, not all lenders are created equal when it comes to loan modifications and it’s up to the borrower to be on top of the situation. If NACA is doing your legwork in making sure the loan modification application is being processed, make sure you follow up and know exactly where the lender stands with your loan modification.
If you don’t get a direct answer or you feel that it has taken too long for you to get information from the lender or NACA, call the lender directly to make sure they are processing your loan properly under President Obama’s Making Home Affordable Plan.
As for the cancellation of your mortgage insurance, this isn’t the worst thing that could have happened to you. Mortgage credit insurance is basically an expensive policy for a declining liability. The policy typically pays off your mortgage in case you die. But over the years, as you pay down your loan, you’re still paying very high premiums for less coverage.
Usually there are cheaper options available by obtaining term life insurance. When I have had clients offered mortgage insurance, the cost of that insurance has been up to three times higher than ordinary term life insurance. You might still be able to get term life insurance at an amount that might be quite lower than what you were paying form mortgage insurance. Only you know whether at this time of your life what monthly or yearly expenses you can afford before you obtain your loan modification.
As for your credit history, if you were delinquent on your mortgage before you applied for the loan modification under President Obama’s Making Home Affordable Plan, the lender can continue to report you to the credit reporting bureaus as delinquent until the trial modification has been made permanent. That reporting will hurt your credit history and lower your credit score. If you were current with your payments, the lender must continue to report you as current.
If you were current on your mortgage and the lender has been reporting you as delinquent, you should dispute the information with the three credit reporting bureaus, Equifax, Experian and TransUnion and hopefully you can clean up your credit history and bump up your credit score.
Get more information about the Making Home Affordable Plan and loan modifications