On March 4, 2009, President Obama put into effect a set of guidelines for Lenders to follow to help Borrowers modify their mortgages. These guidelines were specifically for the mortgages that were taken under Mortgage Scam 1.0, “the refinance boom” and 1.0 Beta “the Mortgage Broker Crisis” where people where put into mortgages they could never afford, qualified on payments that would change or begin to amortize principle at some later date or required the assistance of other parties to support their financial obligations.
The Governmental response is to create a new program that takes months for the banks to figure out how to implement and confusing to homeowners. This is a recipe for those who think they understand the guidelines or just have a good pitch to once again scam those who cannot or do not understand the ramifications of the guidelines and their actual meaning.
No one will tell you that the STANDARD NPV Test put forth in the guidelines above referenced is NOT Standard. The lenders have the ability to change the default and cure rates to meet their specific needs and therefore tweak the test to deny more or less people at will. They do not tell you, that even though Bank of America or Wells Fargo or any other lender approved the modification, this is a preliminary approval subject to verification and investor approval.
You are not required to get help to do a loan modification. You are able to apply for a loan modification on your own and if you qualify you are entitled to it. Be prepared for hours of frustration, customer service representatives who are rude and collections. It strikes me as absurd that the lenders we deal with on a regular basis continue to attempt collection from clients who are in the process of a modification. The lenders state that the collection and loss mitigation or modification departments do not have access to each other’s systems; however the contact information seems to make it through.
Loan Modifications take hours of work, they require specific information presented in specific ways. Loan Modifications are as much about qualifications as they are about packaging and persistence. Many of the services and advice that a professional can give you in this area is priceless. For example, if you are self employed or have additional income from side work, off the books, rentals, etc… this income does not calculate unless it is claimed on your taxes. Although the income was sufficient to qualify you to purchase the home, it must be verifiable with an IRS-4506T tax form to help with the modification. You may need an accountants letter to explain how certain deductions on your taxes are not actual cost (mileage is a big one) and simply because you take advantage of the tax code your actual take home pay is greater than that reported. In many instances a profit and loss statement is needed to verify the actual take home pay available to use for bills and mortgage payments or a letter stating that you are in good standing at your job and are not likely to be terminated.
The Lenders are so overwhelmed that they cannot keep themselves current with demand. Imagine sending over your 100 page fax to the lender, missing a page or having 2 pages get stuck together or just missing a signature and your entire file is discarded without any notice to you at all. Here you are waiting to hear back from your lender and you are never told that your file was deleted because page 26 of your State Tax Return was missing or because your signature was blurry from the fax machine. All that time, all that energy wasted! Even if you get through the initial document submission there is good chance you will be denied for something incredibly simple and easy to remedy, such as your taxes report earnings insufficient to make your bills (see above paragraph), your credit report says you owe more than you claimed on your financial worksheet, the lender is unable to verify your rental income, or some other minor glitch that requires you to begin again. In many instances, you will never know the exact reason you are denied unless you are constantly on the telephone with the lender getting updates.
Be careful if you decide to get help in this area. Use a reputable company, use a referral from someone and give one of the non-profits a shot. Be advised that they are as overwhelmed as the lenders however. This office suggests you use someone local, with a real brick and mortar office and make sure they are insured and have the ability to service your needs. We suggest you use an attorney as they answer to more regulation, you have additional protections and the Lenders tend to respect them a little more. Even if you choose to use someone other than us, do your homework and make sure you are protected.
