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One of the most frequent requests I receive is from people wanting to know how they can modify their mortgage with a loan modification from their current mortgage servicer. These folks are usually in adjustable rate mortgages that have exploded, leading to monsterous mortgage payments that have gone delinquent. The process of loan modification is not easy. It takes gumption, resolve and a bit of salesmanship to get the job done. But if you get your loan mod done you’ll receive a loan at a competitive rate that is fixed and secure for usually 30 years.
Update: I wrote this post more than a year ago, and the changing rules around loan modification have made for new benefits and qualification guidelines that may vary from those listed here. For example, many loan modifications are being offered as 5-year fixed modifications and not for a full 30-year term.
Over the next several days I’m going to walk you through the process of getting a loan modification on your own. Be forewarned it involves a lot of phone calls, a lot of bad hold music and a bunch of number crunching. It can be enough to make your head spin.
A Word of Caution
Be very careful if you choose to use a loan modification company that takes a fee up front to negotiate your loan modification for you. They cannot guarantee a successful modification and can end up costing you another month’s mortgage payment in exchange for false hope. The best of these companies have done the modification countless times and will actually try to help you in earnest without guarantee. The worst are scams that take your money with a cursory attempt to help you (if any).
Do It Yourself Loan Modification – A Guide
Because I am a big fan of DIY I was excited to get a copy of the ebook entitled The Mortgage Relief Formula. This book walks you through how to modify your loan on your own – saving costs and headaches of false promises of loan modification companies. This book is wide ranging and covers everything from loan modifications to dealing with debt collectors to short selling your home in 9 days (no kidding).
I have read the book myself and was highly impressed with some of the thoughts and ideas expressed in it. I will disclose right now that I am an affiliate of the book; and should you purchase it I will receive a commission. However, I am confident that if you are in a situation where you are looking to modify your loan or short sale your home you will be happy you have read this book. I will be doing a more thorough review of the text in coming posts because I believe that the concepts in it could help many people who face the unpleasant reality of a crushing mortgage or a home in which they are upside down.
You can see a sample of the type of loan modification information you’ll learn in the video at the bottom of this post. If you like the video you’ll love the loan modification course and book.
The First Step in the Loan Modification Process
The first step is to contact your mortgage company. It is amazing to me that there are thousands of delinquent borrowers who never have the courage to pick up the phone and talk to their lender before heading in to foreclosure. This is untenable. If you are sinking it is up to you to pick up the phone and call the customer service number. Identify yourself and ask to speak with the loss mitigation department. Do not spend too much time with the customer service representative – they cannot help you – save your breath and ask to be transfered to the loss mitigation department.
Before you are transferred ask for the direct dial number to the department. This will save you a step in your (many) subsequent follow up phone calls.
When you get to the loss mitigation department ask who you are speaking to. Get their full name if possible and position title (don’t be overly-aggressive about it – be friendly but firm – say “I am keeping a record of my conversations and would like to ensure I’ve accurately documented this conversation.”) Explain to the person that you have an adjustable rate mortgage and are unable to make the higher monthly payments. You are (or may become) delinquent on your loan and need to modify it or there is a serious chance that you’ll fall further behind and/or go in to foreclosure.
You don’t want to say for certain you’re headed to foreclosure because lenders don’t like wasting time with lost causes – there are enough people out there that have a slim chance of staving off total loss through a loan modification; but you want to over-communicate to them that the problem is serious and needs immediate attention.
They will ask you some basic questions. You MUST be honest, but you want to be frank in your assessment of your financial situation. If you’re the eternal optimist now is not the time to be upbeat about your financial wherewithal. Within the bounds of honesty you must show that you are in a bad financial place.
If they assess that you’re situation qualifies for a loan modification they will send you an information packet along with a worksheet to calculate your monthly expenses. Think of this process as similar to when you qualified for the loan but in reverse. You must unqualify yourself to prove that you are financially incapable of making the increased mortgage payment. You also must prove that a modification is going to improve your situation to a point where you will be an acceptable risk for them.
If they calculate that even after a loan modification you’re still too deep in the red to be helped they will deny you a chance at modifying your loan.
Documenting Your Loan Modification Efforts is Critical
Next you want to create a spreadsheet that acts as a call log to help track your diligence in completing your loan modification. It will also keep your notes in one place. This is a critical document because you will be talking to many different people in the loss mitigation department. While they have phone notes it’s important that you capture conversations on your own so that if you run in to a roadblock or dead end you can use the information you’ve written down in your log to help you keep pushing forward. You can also reference promises, comments or details that may help you overcome objections as you talk to other people in the department.
On your spreadsheet you’ll want to capture the following: date, time, number called, person spoke to (be sure to get the full name of each person) and detailed notes of the conversation.
Not only does this keep you organized, it helps document your efforts to improve your situation should the lender initiate foreclosure proceedings. You’ll have it available to all parties to show you’ve made a good faith effort to work out an amicable and fair resolution to the problem.
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“Top 10 Deadliest Loan Modification Mistakes”
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Next: Get your Loan Modification Approved by Properly Completing the Monthly Expense Worksheet
In the following video we show you what you’ll need to understand about getting your loan modification approved or accepted by a lender by properly documenting the elements that make up your monthly expenses. The lender will calculate your monthly expenses using a similar worksheet to determine if you qualify for a loan modification. You’ll want to do this ahead of time so you understand what counts and what doesn’t count in your loan modification monthly expense calculation.
Loan Modification Tips Video: Secrets Revealed
Here is the transcription of the video:
Hey it’s Richard Geller, getloanmodificationsecrets.org. I’ve been a tremendous fan of Morgan’s and Blown Mortgage for quite a while. I’ve been reading the blog for about a year and a half, and I’m a huge fan. And what I did was, Morgan got in touch with me and I said I’ll make a video that will help your people with loan modifications.
And what I did was look at what mistake people make who are not getting loan modifications granted, the big mistake. And also, I have people that I teach in my home study course I teach you how to do loan modifications not just for yourself but as a business doing loan modifications for profit. And I find that people make the same mistake if their in the business of doing loan modifications. And so if you’re a mortgage broker, in the mortgage business a Realtor® an investor, or looking for a home-based business, or whatever, this is gonna help you a lot and is really quick and will give you some vital information to get loan modifications approved at a really, really high rate.
And what I’m talking about here is the ratio that lenders look at, the major ratio, the debt to income ratio, DTIR if you’re in the loan business, debt to income ratio, what you do is, I’m going to show you how to calculate it in this and we’re going to go to a screen shot of my computer and I’ll show you how to calculate it correctly and what not to do and there are a few little tips in here that if you pay really close attention there are a couple of tips in there worth their weight in gold beyond debt to income ratio if you already know what I’m talking about.
So, pay attention to this, I think you’ll get a lot out of it and what I’m going to do at the end is hyperlink to more information about my Loan Mod Magic course and you can try it out if you’re interested and if you’re not interested that’s fine too. I think you’ll get a lot out of it. Great! Thanks so much and here’s the screen capture video.
This is Richard Geller, and this is the key to getting your loan mod proposal accepted by a lender. And if you miss this stuff you’re just going to be lost because the lenders are going to be applying this criteria and you’re not going to understand what they’re doing. If you get this you have a good chance of getting your lender to accept your loan mod proposal or your client’s loan mod proposal.
Want to caution you here you want to stick to honesty here. What we’re talking about here are facts and packaging facts in the best way possible. But what we’re not talking about here is lying or misrepresenting information. We never want to encourage you to do that. You want to be very honest with the lenders.
What we’re going to do is look at monthly payments that count. Now, credit card minimum payments absolutely count. That is an area where if the debt to income ratio doesn’t work you might be able to get your client to contact their credit card companies and lower their minimums. Also, some lenders don’t look at all credit cards. Many of them just look at what’s on the credit report. So, although you really want to be complete and honest the lenders may only look at what’s on the credit report. And so some credit cards, like business cards don’t show up on personal credit reports necessarily.
Car payments, definitely count as long as it is used for personal use. If it’s a company car or used for business it doesn’t count. You want to count your hoped for mortgage payment. Whatever the mortgage payment you’re hoping to get. They also count property tax and property insurance. As long as those are expressed as a monthly amount those count. So those are examples of monthly payments that do count. Very easy to understand so let’s go to the next section which would be expenses that don’t count. Even though these are real expenses the lender doesn’t count them.
First of all, food. You need to live, but the lender doesn’t care about that as it pertains to debt to income ratio. Your cable bill, your daycare, how much you spend on a car or truck that’s used for business is not going to go in to your debt to income ratio. Tuition expenses. Let’s say that you borrowed money from mom and you have to pay her back. I’m sorry mom, it’s not on your credit report you don’t have to pay it back, it doesn’t count in your debt to income ratio. None of this counts. So let’s look at a typical scenario to see how it might work for you or your client.
So I’ve got a sample financial dealio here. Let’s look at that. SO first of all we’re talking about two credit cards here. We’re talking about $12,000 all together and minimum payments of $120 and $280. So as far as the lender is concerned these minimum payments…
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