Loan Modification - How To Get A Loan Modification

By now, everyone knows what a loan modification is. It's when your lender decides to make a change in your loan...you know, "modify" it. The goal is to help people who are having trouble making their mortgage payments by giving them a payment they can afford. The lender doesn't lose tons of money having to foreclose on the home and the borrower can hopefully continue making monthly payments and relieve some stress!

So, how do you get one? Well, there are basically two ways. You can call the lender yourself or have an attorney (or modification company) do this for you. There are pros and cons to both options.

Let's start with doing it yourself. You will literally have to make phones calls to your lender all the time. You will have to prepare your file yourself and this includes your financial statements. The problem people have doing this themselves is that they do not know their lenders guidelines (all of them have different ones) and they either make it seem like they are dead broke or they act like they have tons of money coming in. This is the fastest way to get denied. Most lenders want your cash flow each month to be around even at the end of the month. So after all your bills are paid, you have maybe a surplus of $100. Every lender is different, you can be negative $200 for some or positive $200 for some, but they are all around this margin.

After you get those in order and you are getting somewhere, your lender might offer you a modification. "We can freeze your current rate for 3 years" might sound good if you are in trouble, but usually they can go lower. This is where experience can save you a lot of money. If you lender is accepting the HAM program (Obama plan), you could cut your payments down to 31% of your net monthly income! This includes your property taxes, insurance and HOA dues if you have them. It is a sweet deal. So, if you do your homework, you could save yourself the cost of paying someone to do this for you, but in the end you might be losing money because you could have saved more each month.

There is an attorney that has a very affordable fee, around $1800. If you are paying $2,400 a month on your mortgage and they can get your payments down to $1800 a month, the service will pay for itself in just 3 months. Plus, you won't lose out on all the time you have to spend on the phone dealing with loss mitigation departments over their heads in paperwork. Attorneys can also do a forensic loan audit on your loan documents, to find errors such as respa violations. Many adjustable rate mortgages (almost ALL of them) have these violations. These errors can be used by the attorney for leverage in obtaining a loan modification.

What's the downside to using an attorney or a company to handle this? Well, it is that you could be scammed. When there is a way to make money, you can be sure that there will be shady characters trying to make a quick buck. These are all the stories you hear on TV, because who wants to hear about a good company that saved someones house when a bad story gets more ratings? You have to be real careful who you choose to represent you if you decide to go that route. In California, they just shut down a bunch of fraudulent companies who were scamming homeowners. One of them was a company that got my Father for $3000. He paid on a credit card, disputed it after they did nothing, but was out of the country when his bank needed more information and he missed the deadline to respond. That was the end of that...$3000 down the drain.

If you'd like a great company to handle this for you, try my friends at Karger and Associates. They charge a reasonable fee that can be split up into payments and have an excellent track record.

Whatever you decide to do, good luck! It is a tough road, but there are many people getting help out there. And remember, if you want to do it yourself, find out your lenders guidelines and get your financial statements in order BEFORE you call them! They will start asking you what your monthly expenses are and you have to be in the window to get approved!

Good luck everyone.