Mortgage Modification: “Why Do it Yourself?”
23 April 2009, Loan Modification Insider’s Mastermind Teleconference with Mike Rockwood & Ryan Rockwood
These questions are the ones I hear most frequently in teleconferences, webinars and one-on-one work with prospective clients.
1. My loan modification application will reveal that I overstated my income on my original loan application, what should I do?
Well, the good news is that you’re certainly not alone; a huge chunk of folks stretched the truth on their loan apps – especially on stated income loans. And while that is a serious issue, this concern should not stop you from getting help. There’s plenty of blame to go around for the situation we’re in; I don’t think you should be on the hook for it. So let the past be the past. Resolve today to take a step toward improving your current situation and saving your home.
2. Do I really want a loan modification or would it be just a band-aid?
A band-aid might be exactly what you need to stabilize things while you seek a more permanent solution. Remember, you don’t need to think of only one modification per loan.
A loan modification isn’t the best solution for everyone. Let me give you a quick formula to determine whether it’s right for you:
Take the total amount you owe on your loan and multiply it by five and one-half percent (.055). Then divide by 12.
Now, that number is your hypothetical monthly mortgage payment after modification. Take a look it – an honest look. Can you afford that? If your answer is “yes”, then you’re a great candidate for a loan modification.
If you answered “no”, then a loan modification would simply be putting off the inevitable. Your only real options are to sell, sell short, or allow the bank to foreclose. Feel free to call me for advice.
3. Why would my lender agree to modify my loan?
Lenders want to keep customers in their homes and paying their mortgages. To take back a home in foreclosure costs lenders at LEAST $50K, not to mention that they have to take the big loss in equity if it sells for less than the amount owed. That’s a loss they have to show on their bottom line now, during very rough times.
Also, remember that the costs of their “raw material” – money – have gone down from about 4% 18 months ago, to almost 0% today. So, financially, it’s advantageous for the lender to modify.
Additionally, the lenders are under intense political pressure to stem the rising tide of foreclosures by granting modifications. The big infusion of cash into the financial markets and President Obama’s new HASP initiative is intended to enable lenders to absorb some of the losses of modifications.
4. Who qualifies for a loan modification?
More people qualify for a home loan modification than you might think! Consider this: anyone having trouble paying their mortgage is a potential candidate for a loan modification.
Especially good candidates are homeowners with adjustable rate mortgages or high interest rates on fixed rate loans. The list of qualifying hardships is long, and includes reduced hours at work, job loss, divorce and illness. See Chapter 2 for more information.
5. How much time do I have to take action?
How soon do you want the reduction in your monthly expenses?! There’s no good reason to delay action. There are tons of bad reasons, like “I don’t have the time” or “I don’t have the expertise” or “I don’t have the nerve” or “I’ll wait until mods get even better – when some government program kicks in.” These are all bad reasons that encourage you to procrastinate.
Almost 7,500 new applications are submitted each day, and they’re being granted right now. The absolute worst thing you can do is nothing! With each passing day, your options diminish. However, no matter how long you’ve been putting things off, the time to act is right now! Resolve now to take the first step today.
6. Will a loan modification have a negative impact on my credit?
A loan modification doesn’t have a negative impact on your credit report. In fact, a loan modification may be the very best way to maintain good credit as long as it makes your monthly payments more affordable. If, in the process, you fall behind on your monthly payments, this will hurt your credit. (See Chapter 9 for more on Credit Repair.)
7. Is there anything I need to know before I contact my lender?
Yes! Here are three steps you must take before contacting your lender:
a) Get my free CD at 60-MinuteLoanModification.com and familiarize yourself with my personal story.
b) Withdraw money from any accounts you have at any banks owned or controlled by your mortgage lender. The reason for this is explained in further detail later.
c) Complete the sections on pages 39 and 40 of my Workbook (it will take less than 60 minutes).
After completing these three steps, you’re ready to contact your lender.
8. My lender wants to “pre-qualify” me on the phone and review my financials before they’ll talk about a loan mod application. Is there any danger to this?
Yes and No. It’s a great opportunity to get an initial response from the lender prior to submitting your application. If used properly, it greatly increases your chances of getting approved. In fact, we pre-qualify all applications for our Elite Express clients.
However, I have two cautions:
a) You must be prepared (see answer to FAQ 7 above) so that you provide the right information.
b) You must refuse to send any application information in writing – only discuss it verbally.
c) Also, (O.K. a 3rd caution) resist the temptation to say too much. Less said is better.
9. Should I continue to pay my mortgage?
That’s a decision you must make for yourself. What I can tell you is that for me personally (and virtually all of my clients), lenders refused to seriously consider a loan modification until after I stopped paying my mortgage. The only lender that seems to be doing ANY mods with clients that are current on their payments is Countrywide. Stay-tuned, though, as this may change.
10. I’m currently attempting to sell short. Could I do a loan modification instead?
Selling Short is a term used to describe a sale which nets less than what’s owed on the home, so a lender can agree to accept less than the total loan amount. It’s easy to shift to a loan modification instead. The determining factors are whether you want to stay in the home and whether you can really afford a modified loan on it.
Short Selling is a good option. We do a lot of short sales and I don’t ever want to discourage someone from considering it. However, it’s not the only option.
11. Should I hire someone from a loan modification company?
The short answer here is no. Let me explain: I suggest you use my Workbook as a resource and complete the process for yourself. I made the process paint-by-numbers simple. Plus, it’s not rocket science in the first place. You’ll also save yourself a ton of dough!
If, down the line, you determine that you need additional help, you can always upgrade to a more comprehensive product from me at a discounted price.
12. My bank says they will consider a loan modification, but only if I bring my account current. I’m way behind. Should I do that?
This is a collections tactic we noticed a lot in the early part of 2008. In almost all these cases, I believe the bank is attempting to take advantage of you. However, it’s common to have the lender require that you make a payment to get the loan to no more than 90 days late.
Of course, every situation is different, but I’ve personally heard from dozens of distressed homeowners who were given false hope they would receive a modification – if they just paid up! One couple actually borrowed $30,000 from their folks to get current, only to be told they didn’t qualify for a loan modification. The bank foreclosed a few months later.
13. My lender suggested a loan modification company. Can I trust them?
Well, I sure hope you can. But of course, I can’t say for certain. If the lender suggested a company, then it’s likely one of the community-based non-profits that have geared up to serve this market. They’ll be helpful and you definitely should use their services. They will not, though, take “your side” in the process. They rely on the lenders for clients, so they’re a captive subcontractor.
Use this Workbook and CD’s to cut through the data and craft a winning application. Use the company to facilitate things with the lender.
The for-profit loan mod companies are less benevolent. They’re earning a lousy reputation, and I don’t recommend you use them. You should Google them to discover if there are recent scams or lawsuits in your neighborhood.
DIY Mortgage Modification Program
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