As my teenage kids were growing up, whenever they needed advice I told them “Don’t fall asleep on the Railroad Track”.
Silly as it seemed this little statement got their attention and they knew I meant for them to pay attention and look around for when to get out of harm’s way.
I guess I could dispense the same advice to homeowners currently in trouble with their mortgages.
When people are in financial trouble they often look to others for help and advice. Currently we have many Americans in trouble with their mortgages through no fault of their own. It is comforting to know there is help and there are choices.
Don’t Fall Asleep on the Rail Road Track, Consider Your Alternatives and React Now.
The choices to be made are whether or not to ask the mortgage company that holds your loan if they will do what is called a Loan Modification. This type of assistance coming at a time when one really needs some help to hold onto the house until a new job is obtained or whatever is necessary to gain financial strength.
A loan modification is when the lender agrees to work with the homeowner in order to make the mortgage payments “doable” so the homeowner can avoid foreclosure.
Modifications can consist of a variety of different work outs for the loan holder.
- The mortgage company can rewrite the loan so the interest rate is more affordable to the home owner.
- The mortgage company can allow the borrower to skip payments for a period of time, placing those payments on the end of the loan (in reality extending the length of the loan)
- Reduce the total amount of the loan (this is more of a short SALE process than a loan modification)
Not everyone who wants one can qualify for a loan modification. There are requirements that must be meet and there are never any guarantees. The lender has final say on whether or not to grant a loan modification.
Guidelines to Qualify for a Loan Modification
- Do you qualify for Loan Modification? (you must answer “yes” to all the following questions):
- Is your home one to four units? (Single-family home, duplex, triplex, etc.)
- Is it your primary residence?
- Is the balance on the first mortgage less than $729,750?
- Did you get your mortgage before January 1, 2009?
- Do yo owe more on your mortgage than your house is currently worth?
- Are you having trouble paying your mortgage payment?
- Gathering all the supporting documents, you will need (but not limited to) the following:
- Loan documents on all the mortgages to your home
- pay stubs and/or proof of all household income
- statements from all current debt including student loans, car loan, credit cards, etc.
Facts of Life About Loan Modifications
- Not everyone can quality for a loan modification
- It can take anywhere from 30 to- 6 months to complete a loan modification
- Many lenders are overwhelmed and under-staffed
How to Start a Loan Modification
As with most things the person who must start the loan modification is the one who needs it. Yes, this might be a difficult telephone call to make, but if it isn’t made the bank isn’t going to call and ask you first. The first step will be to call the mortgage company that holds the loan and begin the conversation. Be polite, explain the situation and be prepared with the pertinent substainiating information.
- All Loan Numbers
- Income statements, pay stubs
- List of debts
Treat all conversations with the mortgage company like a business
- Get each person’s name and contact information,
- log it into your notes with the time, date and content of the conversation
- Each step of the way, ask “what is my next step?”
- Schedule follow up dates on a calendar and follow up.
- Above all, always be polite. Keeping in mind the mortgage company does not HAVE to help
Start Planning Tactics for Plan B and C
Considering the length of time involved to obtain a loan modification, it is a good idea to be proactive in other escape plans. Remember as time passes the time the bank will allow before filing a Foreclosure Notice is passing too. Each day gets closer to the lose of the house, so planning another strategy is wise.
- Call a Broker and discuss what it will take to sell the property. If there is a short sale involved, getting started with that may be necessary
- Checking out the possibility of refinancing with another lender might work, if there is in fact an income stream.
- Talking to a bankruptcy attorney to determine if that is a possibility is also a plan
It might not be necessary to use any of these strategies if the loan modification is approved. But if it isn’t the options will be very clear as to which way to go. Losing a home to foreclosure is the worst thing a homeowner can do. It damages the credit and once a foreclosure is on record it never goes away.
There are many people who will claim they can get loan modification for a homeowner. Some companies are legit and can do what they say. Many are not. Typically these companies want money up front. They may even guarantee results. If they do, they are misrepresenting themselves. No one can guarantee results unless they are the final decision maker.
Before getting involved with a Loan Modification Company, check their record. Call the Better Business Bureau, Call the Colorado Department of Housing.
How Can I Assist You?
As a full-service real estate broker I work in the Denver Metro area. If you are facing financial issues and need to sell your home I can help. If you are interested in discussing the value of your home and other options, please feel free to call me. I welcome your call.
Hi, I'm Kristal Kraft, the resident blogger here, posting real estate and Metro Denver area information since 2003! You will find me writing about things I feel are important in the home buying process. When it comes to buying and selling homes, there's so much to know. I enjoy providing that information to my clients so they can make decisions based on knowledge and actual fact. You'll find I'm more of a teacher than a salesperson.
My services include: residential property sales, purchases, 1031 Exchanges, new home purchases, REO, foreclosures, short sales.
So if you are in the market to buy or sell Denver real estate, tap into my knowledge, just call me. I welcome your call!