DO IT YOURSELF GUIDE TO MORTGAGE RESOLUTIONS
LOAN MODIFICATIONS
HomeSellerExpress
Inez Tomonelli, #01128795
Roxanne Dodge, #01705469
Keller Williams Realty
3001 Lava Ridge Court, Suite 100
Roseville, CA 956761
(916) 878-7242
[email protected]
[email protected]
Disclaimer: The information contained herein is not to be considered legal or tax advice. Please consult with your own attorney or tax advisor. This information is only presented as general guidance on matters of interest. The application and impact of laws and lender policies can may widely from time to time and state by state. No guarantees can be made as to the basis of the information provided herein.
Falling behind in payments and finding yourself with limited options can be a very stressful time for you and your family. Know that you have support! By requesting this information, you have decided to resolve your mortgage situation. The information contained herein is designed to assist you in negotiating with you lender to modify the terms of your current loan.
At any point, if you feel overwhelmed or need assistance, we are just a phone call away. In the event you are unable to negotiate a modification of your loan because you do not meet the qualifications of your lender or any other reason, we can assist you to sell your home AT NO COST TO YOU. Call us for details at anytime.
YOUR OPTIONS
If you are only a month or two behind in your payments, a telephone call from you to your lender can usually end in a workable solution. If you are 90 days or more delinquent, you may need to explore other options and may need professional assistance. Please contact us immediately to discuss your options and to find the right solution for you and your family. Your financial responsibility and credit consequences must be considered before any decisions are made.
LOSS MITIGATION
The Federal government helped lenders establish Loss Mitigation programs to assist homeowners facing foreclosure. Each lender has their own policies regarding how they will assist a homeowner. They also have different requirements for what they need from the homeowner. Also, every homeowner has unique circumstances and goals.
With any Loss Mitigation program, you will need to provide the lender with current financial information including, but not limited to, pay stubs and bank statements.
REPAYMENT PLAN
If you a two to three months delinquent in your mortgage payment, the best solution may be to negotiate a payment plan to catch up.
FORBEARANCE
If you are three to twelve months delinquent, a special forbearance agreement may be an option. Such agreements can be structured to spread your delinquent amounts over 12 to 24 months.
LOAN MODIFICATION
If your solution requires more aggressive restructuring a modification may be the answer. A modification may lower interest rates or extend loan terms to lower payments.
DEED IN LIEU OF FORECLOSURE
If you are facing long term financial crisis and have attempted to sell your home unsuccessfully, a Deed in Lieu of Foreclosure may be the right option. In such a situation, you will be giving up all rights to the property and “turning it over” to the lender.
SHORT SALE
If you have decided to sell your home, but owe more than the current value, the lender may allow you to sell it for fair market value by accepting less than the face value of your mortgage.
With all the options above and other possibilities, there are several requirements to meet before the lender will consider your request.
THE FIRST STEP
The most difficult step is often the first step. Consequently, most people fail to take it and end up losing their home under the worst of circumstances. By being proactive, you will be able control your destiny and mitigate a bad situation into one that you will be able to quickly bounce back from.
You may currently have missed a few mortgage payments or your lender may already have filed a Notice of default against you and taken the first step to foreclose on your property. In order for you to begin negotiation to keep your home, you will need to remain focused and disciplined. Time is SHORT and NOT ON YOUR SIDE.
Keep track of your duties and the facts as they become available. Your calm persistence will pay off in the long run.
Your best hope, if you want to keep your home, is to negotiate a workable solution that will allow you to catch up on missed payments and continue making payments at a rate and amount that you can readily afford.
Remember, your lender is under no obligation to grant your request or to even make it easy for you. There are NO guarantees as to the outcome of your loan modification request.
This is a good time to evaluate your finances overall. Be realistic as to your ability to make future mortgage payments. The lender will not erase your debt or reduce your payments to extremely low levels just because you need them to or you think they should.
A workable plan must make sense for YOU and the LENDER
One of the hardest choices you may have to make is to walk away from your dream to save your home. With this in mind, remember that the decision to Short Sale your home is not the end of the world. In fact, it may be the beginning of your ability to recover financially and build for the security of your family’s future.
Please keep in mind that as Real Estate Consultants, we will here to help you bounce back, should Short Sale become your ultimate option.
TRUST DEED FORECLOSURE TIMELINE – (California)
Day 2Waiting
Period
Day 1
Notice of default filed
Day 91
Trustee Sale date set
Day 111
Sale
Date
At some point after you miss your mortgage payments, the lender will file a Notice of Default against you. The foreclosure process will now begin. The lender can file this notice anytime after a missed payment, but generally it is filed after at least 3 missed payments, but in some cases as many as 6 or more months may go by before a notice is filed. You will receive this notice via regular mail and registered mail. You will also have a notice taped to the door of your property.
After a notice is filed, there will be a 90 day waiting period, in which time you can bring yourself current or begin negotiating. At the end of the 90th day, the trustee will set a sale date for your property; this will generally be 21 days in the future. On that day, your property will be sold to the highest bidder above the dollar amount to cover the amount owed to the lender.
Time is not on your side. Taking action to protect your rights and negotiating with your lender is a process that you must begin as soon as possible.
GATHER YOUR DOCUMENTS
Having all of your necessary documents assembled in one place will save you an enormous amount of time and headaches as you prepare to negotiate with your lender. You will need most of the following documents. We will discuss them individually on the next page.
Gathering the Following Documents:
• Last two pay stubs, from all employers
• Proof of any other income
• Last two bank statements
• Last two years’ federal tax returns
• Last two years’ W2s
• If self-employed: Profit/Loss Statement for the previous 3 months.
Prepare the Following Documents:
• Hardship Letter
• Household Income and Expense Statement
Proof of Income
Include all pay stubs for all income earners that contribute to the mortgage payment for the past 2 pay cycles.
Proof of Other Income
This includes income from second jobs, home businesses, child support, Social Security, disability, rental income, and other income sources.
Bank Statements
You will need your past two month’s bank statements for all accounts and all pages. If you download statements from the Internet, be sure that all pages are accounted for, that each page has a page number, your name, the bank’s name, and account number. The statements should not reflect large single withdrawals or large opening balances. The average balance should reflect the bank balance of a person in trouble.
Last Two Federal Tax Returns & W2s
Even though some lenders may insist on the entire tax returns, most will be satisfied with the first few pages. Plan on submitting just the first 2 pages and the key schedules. If the lender insists in the entire filing, be prepared to send it in.
You may also be concerned by the fact that you may have obtained a stated income mortgage and did not show your tax returns or pay stubs. Your income reflected in your tax returns and pay stubs may not be the same as the amount you stated in your original mortgage application. This is of very little importance at this time. That was then, this is now.
Profit/Loss Statement for Self-Employed Persons
If you are self-employed then you will need to create a profit/loss statement showing your income and expenses for your business for the past 3 months. It is best to have this professionally prepared but you may have success with a printout from a money management software program like Quicken®.
Personal Hardship Letter
This letter should be hand written in your own words. Be sure it is neat and easy to read. This letter should not go into great detail. The purpose of the letter is to tell the lender, in your own words, what the problem was AND why that problem has now passed.
We have included two sample letters to give you an idea of what works. Your letter needs to be original.
It is important for you to remember that not everyone will qualify for a loan modification. Those most likely to qualify will be able to show that they are able to make the new payments and, second, that a true financial hardship caused their situation.
Monthly Household Income and Expense Sheet
Prepare a Financial Worksheet to show your current income and expenses for the household. This section will help you determine what your income to expense ratio is. Take your time and be thorough, this is an important part. Be honest, it’s important to know how much you really can afford. Please be sure the final copy is neat, if handwritten. Please sign and date the final copy. The lender will look at this very carefully, and you only have one shot at it, so take your time and be thorough.
Many lenders prefer that you use their specific Financial Worksheet; they will provide one for you. In the meantime, use the generic HUD Financial Statement that we have provided, and transfer it to the lenders form if necessary. The lender will take your full gross income, subtract 25% for taxes and then deduct your expenses from this figure. Typically, a lender will want to see that you will have a few hundred dollars left over each month after paying all of your expenses. Your loan amount, income and value of your home will dictate the actual amount, but $200-600 per month is reasonable.
Your total recurring debt (mortgage payments and other loan payments, etc) and home related living expenses like taxes, insurance, and utilities should constitute around 60% of your gross income. These figures are within the estimated range of acceptability. Use these figures to determine your ratios and cut your expenses or increase your income to conform to these guidelines.
CALL YOUR LENDER
You are now ready to call your lender. Call the telephone number on the letters you may have received from the lender demanding payment or call the number on your statement.
• Ask for the Loan Modification or Loan Workout Department.
• Tell them you are interested in a workout plan to save your home (they will
know exactly what you are talking about).
• If the bank representative in the workout department wants to take your financial information over the phone, make sure you provide the EXACT same information from your prepared financial statement, so there will not be a discrepancy later.
The lender will in most cases, sends you a “Loan Modification” package which may be faxed or mailed to you. The package will contain letters and other forms. The letter will request some if not all of the items we covered above. Fill out the form(s) and assemble the documents. The lender will have requested that the documents be faxed to them.
• Organize the package in a neat stack.
• Create an index for all your documents and number the pages.
• Review all the documents. Make sure they are clear and complete. Be sure to include your account number on each document you send to the lender.
• Fax the documents to the lender.
• Follow up to ensure the package was receive and when you can expect to hear back.
• Ask for a direct contact number for future follow up.
• Continue to follow up every week until your situation is resolved.
• Keep the package handy, in case you have to fax it again. The files at the lenders office have a nasty tendency to get lost or misplaced.
The Modification Package
Prepare your package to resemble the following order:
• Fax Cover Sheet
• Cover Letter
• Index
• Hardship Letter
• Financial Worksheet
• Income Documentation
• Pay stubs
• Bank statements
• W-2 or Tax Returns (if required)
THE FOLLOW THROUGH
Once the package has been received by the lender, it make take 15 or more days to have it assigned to an underwriter or negotiator to review your request. After the file is assigned, it may take several weeks for an answer. In the meantime, keep calling and checking. A follow up call every week or week and a half is very reasonable. The most common answer you will get is that they are still working on it and that’s OK. If the process stops for some reason or if the file is misplaced or some document is missing, you want to be on top of it so you can deal with it quickly.