Comments on Loan Modifications

A loan modification is an agreement that is negotiated with your lender that changes the terms of your loan.

Convincing a lender to a loan modification is not easy. You must document the reason why it is in the lender's best interest to modify your current loan.

Loan modification examples are a reduction in the loan interest rate, an increase in the loan period from 30 to 40 years, a rollback in an adjustable loan to the initial interest rate, or any other change of terms to reduce the monthly payment.

The sole purpose of a loan modification is to enable the borrower to meet the terms of the new loan for the foreseeable future.

Steps in a Loan Modification

Talk with the Right Person
When you first got behind on your payments, a customer service rep or a person in the collections department contacted you about the reason why you were behind, when you could make a payment and the consequences of missing another payment.

These are not the folks to talk to regarding a loan modification. The only department you want to contact is your lender's loan mitigation, loss mitigation, workout group, home retention department or whatever other name they go by.

Always take notes of each person's name, phone extension, the time you talked with them and the subject of your discussion.

One advantage a professional third party has is getting to an experienced rep who has the power to make decisions. Many times homeowners will get to the right department but end up talking with a first level representative who neither has the experience or power to resolve your situation.

Strategy is Key
When applying for a loan modification, you need a well thought out game plan to have any chance of a successful negotiation.

The representative at your lender is trained to minimize losses and gets paid to extract the maximum amount of money and the best possible terms out of you. If you understand this, then you know you must be prepared, your workout plan must be documented and you must be very careful in what you say and how you say it.

Paperwork
Every lender has a workout package that must be filled out completely. Not providing all the documentation your lender requests is a sure-fire way to get your workout package stonewalled. Another advantage of using a knowledgeable third party is that they may suggest inclusion of documentation that may not be requested by your lender but can have a positive impact on your negotiations.

The crucial element to this whole process is your Budget. Your budget will show a detailed account of your monthly expenses and income. If your budget looks too tight you may not get approved. If your budget shows too much extra income you can bet the lender's workout plan will be pricier than you proposed.

The last thing to remember is you only get one chance. Once you submit your proposal and documentation there's no changing stories, recalculating budgets or coming up with new reasons why you got behind in the first place.

If you want further advice call us, will be more than happy to discuss your situation and possible solutions at no charge.