Loan Modification is the primary option that the homeowners are looking forward to help them in these troubled times. American goverment is also promoting loan modification to help people facing financial hardships save their home from foreclosure.
Loan Modification process takes time and effort. Hiring a loan modification specialist is always an option but it doesn't always come cheap. That is why many people want to do it them selves is called a Do it Yourself Loan Modification process.
Do it Yourself Loan Modification is obviously cheaper, gives you better control of the outcome, and carries a lower risk of fraud. But it still pays to play it safe and make sure you do things right. If you're considering a DIY loan modification, here's a quick guide to help you make the right decisions.
Know your lender's policies.
Each lender has its own take on dealing with delinquent borrowers. For one thing, not all companies will accept applications before the interest increases or shifts to an adjustable rate. Some will only approve borrowers who have been delinquent for at least three months. Before showing up, make a call or talk to a representative to see if you qualify. Simply being informed can tell the lender that you're serious about getting back on track.
Request a loan modification package.
Most lenders have a written loan modification package that includes everything you'll need for a do it yourself loan modification, including a rundown of their policies and loan modification requirements. Call your bank and see if they can mail you a package. That way, you can fill out the forms at your own pace and have time to think over your answers, rather than do it hastily in front of a waiting representative.
Make an accurate financial report.
While a good hardship letter can help, lenders really just want to know that the hardship's over and you can start paying them again. So make a detailed report of your income and expenses, and back everything up with tax forms, pay stubs and W-2s. If you’ve lost income due to illness or job loss, make sure to note whether it's permanent or temporary.
Stay calm.
A typical loan modification representative has to deal with hundreds or even thousands of troubled borrowers every day, each one with a sad story to tell. The last thing they need is an irate caller who demands immediate service - it's the best way to get your paper to the bottom of the pile.
Document everything.
Major lenders have had recent trouble keeping up with vast volumes of loan modification applications, and among the main problems is when files get lost in processing. To avoid delays, record every call, letter and fax you send and receive, complete with the dates and titles. This is especially important for Do It Yourself loan modifications, as you don't have an agent to organize things for you.
Do It Yourself Loan Modification: FAQs
Is it your best option?
No two homeowners are in exactly the same boat, so it's hard to tell whether or not a loan modification is your only resort. Some people would fare better with a short sale, while others are better off refinancing. With a self loan modification, you don't have an expert to help you go through your options. At the very least, get to know what other solutions there are, so you know where to go in case your loan modification doesn't work out.
Can you afford it?
How do you know you'll be able to afford the loan modification itself? Again, since you don't have an expert guiding your every decision, you'll need to think over every step you take. Take the time to assess your finances and what terms you can afford, so you can set your goals properly. Don't forget to consider processing costs, your current debts, and other bills you’ll be paying alongside your mortgage.
How much will it cost you?
There are always costs associated with loan modification, whether you do it alone or with a professional team. Even when you come to your bank asking for financial help, most lenders will take every opportunity they can to make money - and the little costs do add up. Before even calling your bank, ask around and see how much it really costs overall, including the fees for paperwork and information requests.
What are your goals?
There's more than one way to go about loan modification, and it's important to know which approach works best for you. Do you want a lower interest rate, an extension of your term, or part of your principal waived? Your choice can affect everything from your credit record to your long-term financial plans. Before starting a DIY loan modification, set your goals right and plan to do it within a reasonable time frame.
Will you be able to keep up?
Finally, you need plan out your finances for after getting your loan modification. Although it may take up a big chunk, mortgage isn’t the only thing you pay for every month. Take an hour or two to write down all your monthly expenses and compare them with your current income. Most banks evaluate applications according to debt-to-income ratio, so doing this can also help your chances of getting approved.
Risks in Doing It Yourself
If you're thinking of doing a DIY loan modification, here are some of the risks you need to be aware of:
Long response times: Recent studies have shown that the average loan modification entails up to 50 hours of phone time, most of it spent on hold. Without a lawyer or representative who can get you directly to the Loss Mitigation department, you’ll often find yourself on queue with thousands of other callers. When time is of the essence - as is often the case when you're facing foreclosure - such delays can end up costing you your home. Try going directly to your bank’s office to see if you can apply in person.
Decision making: Loan modifications take a good deal of time and planning, and that's where professional help comes in handy. Unless you've had previous experience, a DIY loan modification will involve tricky decisions that can make or break your case. For example, how do you know what terms to ask for? Which goals make the most sense considering your financial situation? Even with a do it yourself loan modification, it helps to at least consult a professional who can steer you in the right direction.
Difficult negotiations: Bargaining with your lender is often the trickiest part of a do it yourself loan modification. Working with a lawyer adds credibility to your case and allows you to make stronger arguments, and that can make all the difference. A lawyer can also bring his market knowledge to the table, citing lending laws and violations that can help tilt the odds in your favor. With a Do It Yourself loan modification, your resources are limited, and you can be sure your lender will use it to their advantage.
Unfair deals: It's not uncommon for a lender to make offers that don't really improve your situation - at best, they'll only delay foreclosure by a few weeks. Banks are at least twice as likely to do this with borrowers on a do it yourself loan modification plan, as they often don't have the market knowledge to tell a good deal from the bad. With a good team on your side, you can negotiate for better terms and keep trying until you get the mortgage assistance you deserve.
Resources:
Loan Modification News
Obama's Making Home Affordable Program
