Friday, June 12, 2009

How to get a loan modification

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traffic cop
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When it comes to loan modifications, if you haven't read DeadlineNews.Com's updates, it's tough to know what's on the up and up. Martin Sumichrast joins us in keeping you up to date.

by Broderick Perkins
© 2008 DeadlineNews.Com
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Deadline Newsroom - Loan modifications ain't quite what they were cracked up to be.

Waiting periods, the ream of required supporting documents, fly-by-night services, outright fraud and loan modifications that end up in foreclosure anyway.

It's enough to scare off the most stalwart consumer, but it doesn't have to.

When it comes to loan modifications, if you haven't read DeadlineNews.Com's updates, it's tough to know what's on the up and up.

To that end, real estate entrepreneur, investor, publisher and author Marty Sumichrast has created a list of tips for homeowners who want to get through the loan modification process unscathed.

DeadlineNews.Com has added input based on its one extensive loan modification research and reporting.

First, a home loan modification, granted only upon the existing lender's approval, permanently reworks some of the terms of an existing mortgage in order to make the loan more affordable to the homeowner. That can happen when the lender reduces the interest rate, reduces the principal, removes a second mortgage or engages in a combination of those efforts, among other approaches to lower that monthly payment.

A mortgage modification is not a refinanced mortgage, which is a brand new loan written to pay off the old home loan.

Here's how to make it work.

• Get professional help. Get a HUD-approved counselor, hire an experienced lawyer or other certified, licensed or recognized loan modification expert before approaching a lender. The idea is to be prepared when you sit down with a lender to make the lender sit up and take notice that you are serious. Counselors, attorneys and others specialized in this field know the process, the bank and the lingo. When interviewing your modification mouth piece, ask if they have experience with your specific lender. Sumichrast says each bank is different. Have the representative explain their process. Choose local help to get state or local licensing, certification or other regulatory protection.

Get organized. A loan modification requires a mountain of paperwork. You have to prove current hardship, but that you also can pay any reduced payment and that your original application wasn't a fraud. You may need financial analysis from a certified public accountant or other financial expert. You'll have to reveal income, expenses and other financial records from when you originally took out the loan and similar current information.

• Don't delay. Don't wait for the lender to contact you because you've fallen behind on your payments. By then it could be too late. The loan modification process can take months and you have to be able to hold onto your home through the process. Showing an interest in your own situation is a good thing. Document all phone calls and letters to your lenders and others regarding this matter. Keep detailed notes of dates, full names and titles of people you've talked with, phone numbers, etc. This allows you to reference promises, comments or details that may help you overcome objections as you talk through the chain of command at the bank.

• Know your home's value. Part of your job is to know the value of your home. Use the Internet, comparison sales, real estate agent information and other data to learn your home's fair market value. The bank needs to know what you home is worth but may not always come up with an accurate number. You need your own data.

• Seek out the "Loss Mitigation Department." With or without professional help, don't approach a loan officer, customer support representative, underwriter or other staffer who isn't in the lender's "Loss Mitigation Department." This is where your modification decision will be made.

• Bring a solid case. Says Sumichrast, "Make sure you have a darn good reason for needing to modify your loan. Note the use of the word 'needing' here. Simply wanting a loan modification will not cut it. Valid reasons for loan modification include personal or child's medical bills, death, divorce, loss of employment."

• Make it personal. The lender will require a "hardship letter," explaining directly and succinctly salient facts that make your case. Your financial statements should back up your claims, but also reveal that you will be able to afford and pay the new, lower, modified mortgage payment. You'll need both a current financial statement and a proposed financial statement that indicates you have the disposable income to meet the new payments.

• Be patient, be nice. The bank employee on the other end of the phone isn't in trouble. You are. Screaming, yelling and cursing won't help your case. Keep cool even if you have to repeat your story again and again to different people.

"Honey will trap more flies than vinegar," Sumichrast says.

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© 2008 DeadlineNews.Com

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Broderick Perkins, an award-winning consumer journalist, parlayed 30 years of old-school journalism into a digital real estate news service, the San Jose, CA-based DeadlineNews Group, including DeadlineNews.Com, a real estate news and consulting service and Web site, and the Deadline Newsroom, DeadlineNews.Com's news back shop.

Perkins is also the first Examiner to cover three beats for the news service:
National Offbeat News Examiner
National Consumer News Examiner
National Real Estate Examiner

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