Contrary to the recent news, banks are offering loan modifications. However many of the applications are not accepted for these reasons:
1. The application is incomplete. In contrast to the past, banks require perfect documentation. For example, if a person is self employed they will be required to provide a current year to date P&L. Bank statements and Payroll records must be current(past 60 days). Oftentimes the banks won’t review a file without current information even though they are only reviewing the file 90 days after it is submitted. Customers should continue to submit bank and payroll records to the bank until the application process is complete. The banks will not remind clients or call them to let them know their applications are incomplete or their information is outdated.
2. Parts of the file is lost by the bank or servicer. Banks and servicers are receiving thousands of applications per day(most by fax). When submitting an application to the bank, homeowners should write the loan number on each and every documents, so that the banks can put the documents in the correct file. Servicers have available to attorneys methods of submitting applications through web portals. These are not currently available to homeowners.
3. Homeowners are not using the banks forms. Most banks now have websites with preprinted forms to use for the application. If homeowners use other forms for hardship letters or financial statements, the reviewer may not recognize it as such, and deny the application without review.
4. Homeowners are trying to make themselves look as impoverished as possible to qualify. The goal of a homeowner should be to explain to the bank why they can not make the current payment. If the homeowner exaggerates expenses or underreports income, he or she may make themselves ineligible for a modification, when they might otherwise be eligible.
5. Homeowners are giving up. The banks are expanding their programs weekly. Even if a home owner was denied an application last year or even last month, they may be eligible for a program now. It doesn’t hurt to resubmit an application with updated information.
Please call or email me with any questions.