• June 30, 2021

Have you been turned down for a loan modification?

Was your lender not interested in modifying your loan? You really are not alone. More than half of those who applied were not interested! Why? Here’s the short answer, it didn’t benefit the lender. I’ve heard it over and over from disgruntled homeowners who have been denied. “Why did they reject me? I lost my job, racked up medical bills, had my salary cut … etc., etc.” My answer, you are focusing on your difficulties. That may not be the deciding factor.

What really motivates a bank to make the decision to approve your modification? Answer; MONEY! That’s it, MONEY! Isn’t that the business they’re in? So why are you trying to make them feel sorry for your personal situation? You have to compare the losses from a foreclosure to the losses from your modification. In the event the bank loses more cash to foreclosure, you have a great chance of getting approved. How will you determine the foreclosure loss? Your first step is to find out what the current value of your home is. There are several websites available for this. Zillow is a very popular site, so I suggest starting there. As soon as you find the current value of your home, multiply that number by 70%. Here is the average sale amount in a foreclosure sale. You may want to check your county’s foreclosure records for a more accurate figure. Now you must add the amount of monthly payments that the bank does not receive during the foreclosure process. It is about 6-36 months of payments. The last figure that needs to be calculated directly in losses is the attorneys’ fees and the filing fees. You can check your county court clerk’s website for these fees. The total of all the figures gives you a fairly accurate estimate of any foreclosure loss. In order for your modification to be approved, you must do so because your bank definitely will. Get in tune with your bank!

The second step is to calculate the bank losses within a loan modification. Many homeowners who receive a modification do not submit a proposed mortgage payment. They allow the bank to determine the new payment, big mistake! If you let this happen, you will be prepared to fail. 90% of all modifications never keep up with your new mortgage payment. How will you determine your proposed mortgage payment? You must prepare two financial statements. The first is your current plan. This statement should include all monthly income and expenses. It must be accurate and have documentation that complements your figures. This statement will reflect why you are unable to pay your mortgage payment. It has to show that you are in or on the verge of red. Now make a proposed plan using some changes to your debt figures. The first change is your proposed mortgage payment. Take your monthly income and divide it by 31%. This is a HAMP guide. Your mortgage payment must be less than 31% of your respective total income. The next change should be concessions on your monthly bills. If you have a cable bill that is a premium package, downgrade to basic cable or eliminate cable entirely. Mobile phone devices or home phones, please dispose of the phone that you don’t mainly use. Reduce anywhere. It is important that your financial statement shows that you have more than fungible income. If you’re still in red, you know what? It will be denied. You are asking the bank to generate concessions, it is only fair that you do it too.

I understand that this would appear to be very overwhelming and time consuming, but it surely has to be done. Time to reapply.

Obama designed some changes to the HAMP program that will help him get approved. In case you haven’t heard yet, here are the most important changes that should be beneficial to you.

1) Tripled the incentives for banks to approve the amendment.

2) You can now modify second mortgages.

3) Income properties qualify for HAMP.

Have you been denied a loan mod? Leave us a comment or ask us a question.

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