Do I qualify for a mortgage loan modification?
Do I qualify for a mortgage loan modification? Is the Bank impossible to work with? Read more for a list of strategies used to maximize the likelihood of loan modification approval.
Loan modifications have been a hot subject over the past few years. Unfortunately, there has been a lot of confusions, miscommunication, and deception related to the subject. To make matters worse, banks make it near impossible to communicate with them effectively in order to resolve your mortgage issues—leaving most distressed homeowners to drown in a sea of frustration.
As you may know, after the mortgage meltdown and the resulting financial crisis, several government programs were initiated to assist homeowners that could no longer afford their mortgage. Most notably, the HAMP (Home Affordable Modification Program) under the Making Homes Affordable Act was put in place in 2009. In a nutshell, save certain exceptions, the HAMP program attempts to reduce your mortgage payment (inclusive of property taxes, homeowner’s insurance, and condo or homeowner’s association payments) to 31% of your household monthly gross income. So for example, if your household monthly gross income totals $3000, your new mortgage payment should total around $930—including principal, interest, taxes and insurance (“PITI”).
However, as many of you may know, dealing directly with a bank to process the paperwork can seem like mission impossible—banks will lose documents, claim you never sent documents, argue that the documents you sent in a timely fashion are now expired, the list goes on and on. In fact, due to banks failure to properly evaluate homeowners and service loans, they were sued by 49 of the 50 U.S. states (google National Mortgage Settlement) resulting in one of the largest legal settlements in history.
That being said, none of this matters much unless your specific mortgage loan actually gets modified. I can’t emphasize enough how important I think it is to hire a competent attorney to assist you. Sadly, banks will treat attorneys differently than the actual homeowner. Banks tend to be more careful when there’s an attorney on the other line and usually facilitate the entire process—quite frankly, in fear of getting sued. Unfortunately, the entire country has also seen numerous loan modification lawyers and non-lawyers claiming to be loan modification experts take advantage of homeowners by charging exorbitant fees and doing very little to assist the homeowner—ultimately diminishing the likelihood of the homeowner’s loan modification approval. It is of extreme importance to sit down with an attorney (not a paralegal or assistant) and thoroughly discuss the methods and strategies the lawyer will employ in order to carry out the process. The lawyer should also give you a complete overview of the numbers involved in the loan modification process (mortgage balance, number of missed mortgage payments, interest rate, household income, expenses, etc.).
A good lawyer will not simply take your case blindly. There are numerous strategies available in order to maximize the possibility of approval. Remember one thing, the bank is not evaluating you for a loan modification because it feels bad for you and wants to help you out—the bank only cares about making money and is reviewing you under a financial magnifying glass to determine whether giving you a loan modification is profitable for them. Not everyone will qualify for a loan modification—that’s a fact. I’ve had clients with a $500,000 mortgage loan balance tell me that the maximum they are willing to pay for a mortgage is $600/month—certain expectations are completely unrealistic and must be thoroughly discussed with your attorney in order to avoid false expectations.
The first thing you and your attorney should discuss is what your target or ideal mortgage payment is (from a realistic viewpoint). That number is then evaluated to make sure that that figure is economically feasible for the bank—like I said before, there’s no chance a $500,000 mortgage will result in a $600/month mortgage payment that includes principal, interest, taxes and insurance (at a standard interest rate, it would take over 500 years to pay the bank back under those terms).
Once you can agree on a monthly figure, then a creative plan of action must be established to get the bank to approve your application. Sometimes more gross income is needed in the way of family member contributions, spousal income, self-employment income, renting out a room in the house, having your kids contribute part of their part-time paycheck, etc. For those of you that are self-employed or work as independent contractors, a slew of other issues arise that need to be specifically addressed by your attorney in order to establish a pattern that properly reflects your actual income. The next step is to properly evaluate and list your monthly expenses. I’ve seen homeowners list tons of unnecessary expenses (that should be avoided) under the misguided idea that, “Well, if the bank knows how many monthly expenses I have, they’ll approve me.” Remember, the bank is not trying to help you—it’s trying to make money while abiding by government program regulations. Don’t give them a valid reason to deny you. The entire application needs to make sense for the bank.
In conclusion, find a good attorney to assist you. You can call our office for a free consultation and loan modification evaluation, or call anyone else you find to be competent. But make sure that a concrete and realistic plan of action is in place, otherwise you’ll be throwing away your money and end up more frustrated than before.
For a free consultation and loan modification evaluation, call us at (305) 200-8748 or email your questions to info@ciezalaw.com
