Tips and Tricks of a Loan Modification

Author: Bill Baskin

Is your mortgage causing you trouble? Are you having difficulty making the payments? Has it adjusted and you cannot afford the new payment? Are you unable to refinance to a loan that would better suit your financial situation? Then it is probably time for your to investigate modifying your loan.

1. As a home owner it is vital to identify that the mortgage on your current property is a lawful one. Be sure that there are no Truth in Lending Act Violations or RESPA violations and Lender wasn't fraudulent who originated your loan. Have a professional, experienced mortgage attorney and/or legitimate, credible law firm focused in loan modifications examine your loan documents for these potential violations.

2. Develop and maintain a complete written life of loan history attempting to highlight all phony charges and fees included in your mortgage balance. Also, you should make sure that any inflated appraisal and/or loss of property values are included and calculated.

3. Compare the loan you got with the one you thought you were getting. Are the terms the same? hat is, is your Annual Percentage Rate ("APR") the same as the one you were quoted? Are your total monthly payments the same as you were told they would be? Is there a prepayment penalty, and if so, were you told about this prepayment penalty?

4. If you have ever refinanced, then the first thing you should look at is the "notice of Right to Cancel" which is also called the "Three Day Right of Rescission." You usually has three days after signing loan documents to change your mind and cancel the loan. The borrower must be told of this right in writing. If the creditor fails to properly provide notice of this right to cancel, the right of rescission may be extended for up to three years. When the right is extended for three years you can rescind the loan at any time before three years, meaning that the loan is treated as if it never existed. Essentially, you become entitled to all profits made by the creditor as a result of this loan. This means that the creditor must refund all interest paid, all closing fees, all broker fees, and even pay for your attorney fees. As you can imagine, this amount can be quite significant. The extended right of rescission is a powerful tool to help borrowers who have been victims of predatory lending, and helping our clients exercise this right is often the first step in holding a creditor responsible for illegal behavior.

If it is determined that no laws have been violated on your mortgage, then it's time to approach your lender for a possible loan modification. Here are the factors that will be looked at and addressed:

Hardship causing your mortgage issues
Loan amount
Amount owed
Ability to pay
Equity in the property
Debt to income ratio
Future financial situation

Which approach will best benefit the lender in the long run - to foreclose or pursue a loan workout with you and or modify your loan

A loan modification generally occurs where all parties involved with a problem loan mutually agree to create a new and better loan. The loan modification should concur previous financial issues, ensuring new obligations are met seamlessly.

When applying for a loan modification, make a game plan on how exactly you are going to approach your bank or lender. When working via phone, your lender has at least two levels of employees who talk with delinquent borrowers. The first is usually the collections department, which consists of people who are trained to force money out of you and get you current on payments. The second group should embody loss mitigation specialists. Depending on your lender, some other frequently used labels of these departments include; foreclosure prevention, loan resolution and delinquency customer service. It can be difficult to get through to the loss mitigation department, hence the need for a professional, experienced mortgage attorney and/or legitimate, credible law firm as mentioned above.

Once you get a live person, you need to work your way up to a decision maker. This is sometimes harder to do for a homeowner than a 3rd party authorized professional. Sometimes to get to this point you have to put up with level 1 collection departments through a process of filling out their forms and information. They will ask for you to provide them with items such as pay stubs, tax returns and a multitude of all types of other personal financial information. At this point, some lenders will assign the file to someone higher up in the loss mitigation department.

The most crucial element to this whole process is your budget and if you have done your due diligence, you'll be ready. They will ask you for a detailed list of your monthly expenses. If your financial situation is too tight, you may not get approved. If you have too much extra income you are going to have an outrageous payment plan and should agree to it!

Do your research, be prepared and trust that the attorney you chose to retain to assist you in this matter will do the best they can to rectify your current home loan and financial issues.