Mortgage Loan Modification
What financial information or documents do I need for this process?
Here is a basic list of documents that are needed for this process:
□ _______ Current driver’s license or state identification card.
□ _______ Two most current and consecutive pay stubs
□ _______ Income tax and W2 statements for the most recent two years
□ _______ Hardship letter
□ _______ Notice of Default letter (if applicable)
□ _______ Most recent mortgage statement or coupon stub
□ _______ Two most current social security statements (if applicable)
□ _______ Two most current AFDC, Aid or support statements (if applicable)
□ _______ (Business or self-employed) Tax returns for the last three years
□ _______ Contributing parties’ pay stubs to verify income.
□ _______ Cancelled checks for room rent
It is the process of working out a permanent, equitable, and fair solution between you and your lender that eliminates or reduces current debt you have incurred from a bad mortgage.
What if I can no longer afford my home?
If you are certain that you cannot afford your home there are still several options that will minimize your credit damage and forgive the debt. They include returning the property to the lender or selling it to a third party.
Can you help me with my loan type?
Yes. It does not matter what type of loan you have. Out-of-court resolutions of government and non-government mortgage delinquencies for every type of lender are possible. This includes banks, credit unions, thrifts, FHA, Rural Administration, VA, CalVet, Fannie Mae, Freddie Mac, etc.
Will I continue to accrue late fees and interest on my account?
Your individual program should allow you to catch up on any late payments, and all interest and fees will be restructured into your new payment. Before you have a modification however, it is unlikely the lender will allow for stoppage in the accrual of these fees.
What does a loan modification cost?
Fees can depend upon the complexity and urgency of your situation. For example, does your home have a sale date imposed on it? How late are you on the loan? Certain factors require more work. Obviously, doing it on your own is free, but comes at the cost of your time and can possible result in a failed attempt. Professional firms will have a variance in fees, but ALL should NOT REQUIRE advanced payment. Work must be done prior to payment.
What is an advance fee and when is it due?
Advance fees are those collected prior to work being completed. It is against the law in California to collect fees for loan modifications in this manner. Check with your state for the latest legal updates. Many firms will do work in stages and bill you at the completion of each stage. This allows you to receive tangible evidence of progress while also being fair to those working for you and allowing them to be compensate for what hopefully is a job well done.
Consider this an extremely open-ended question. Your specific situation will have a lot to do with how long it takes. Some people have had the process last over a year. Others have seen a result in two weeks. It's going to vary case to case, but a typical modification process will probably last about 60-180 days. It's a wide range, but really impossible to narrow down without the details of your case.
Why should I use a law group instead of doing it myself?
Loss mitigation professionals have extensive experience in negotiating loans and working with lenders. Banks can be unwavering in negotiating with the consumer directly.
Yes. Many, many people try it on their own first. In fact, it seems most people only go to a professional after seeing how difficult the process can be working it on their own. It’s up to you and really depends on how much time you have to devote to the process. Do your research before choosing a course of action and call one of the several non-profit counseling services like HOPE NOW at 888-995-HOPE or the United States Department of Housing at www.hud.gov to see if that solution best suits your needs.
When does the loan modification process begin?
You could say it's beginning right now as you research your options. Truly, though, it starts once your lender receives a loss mitigation package. This is going to include a number of items such as income and expense information, loan details and hardship letter. You'll find it much easier to do with the assistance of a professional loss mitigation firm, but you can try this on your own as well.
In this process, time is your enemy! Solutions are much easier to achieve for those that are proactive and are eager to fix the problem. Too many homeowners let their mortgage situation get so bad that options become more limited in terms of what can be done.
I tried this, but my lender won’t budge. Can I still get a loan modification?
Yes. Most lenders act this way until a professional gets involved that knows how to get the bank to settle. Industry relationships and expertise as well as a thorough knowledge of the process go a long way toward securing desirable results for homeowners.
If I file for bankruptcy, will it save my home?
Bankruptcy is a good tool for certain people. In the case of keeping your home, it probably isn't going to help. The American Bar Association has reported that 96% of homeowners who declare bankruptcy end up losing their home to foreclosure. So, it seems that if you declare bankruptcy you will likely end up with BOTH a bankruptcy and a foreclosure. But, bankruptcy is an important tool in debt relief and may still be a smart option.
I filed for bankruptcy. Can I still get help?
Yes, but your mortgage needs to have been discharged or dismissed from your bankruptcy to negotiate with your lender.
Debt Settlement
Can you guarantee a 40% negotiated settlement?
No. The national average for settling debts is 40%, but some banks will settle for much lower, some higher. The final settlement offer will be the first time you will know your savings. Nothing will be accepted until you personally agree to the settlement. Actual settlement amounts, necessary savings and the period required to reach your goal may vary based on creditors actions and other factors that may affect or prevent the realization of your goals.
Can I stop late fees and interest from accruing on my account?
Any creditor can add interest or late fees to an account. However, your individual program will reflect those fees and/or interest and is typically incorporated into a settlement program. Your negotiated balance should still be far lower than any accrued fees and interest. However, if you are not granted a settlement offer, you may be on the hook for everything owed.
Will debt settlement stop legal action against me?
Creditors have the right to use legal means to collect a debt. Creditor lawsuits are NOT COMMON but they do happen. It's also a common tactic of collectors to threaten you with a lawsuit. Despite any legal action that may or may not be taken, your account can be settled before, during or after the suit.
What if my creditors won't settle?
It is extremely rare for a creditor not to settle. Due to the fact that you have a legitimate financial hardship, creditors realize that a settlement is in their best interest because if you file for bankruptcy, they can be left with nothing. Creditors lose billions of dollars per year from consumers filing bankruptcy.
Why should I let a 3rd party handle this as opposed to doing it myself?
Similar to loan modifications and other financial relief programs, there is no substitute for experience. Debtors can be a feisty bunch and simply respond differently to 3rd party representation. When you try to take it on yourself, they will treat you differently. Success is a lot harder to come by on your own.
Are my creditors going to continue to call me when I enroll in a debt settlement program?
Your debt settlement company should demand your creditors stop contacting you. It usually takes about 30-60 days for them to stop contacting you. In the meantime, keep a creditor log of every phone call or letter that you receive from a creditor and report it to your consultant. However, it cannot be guaranteed that the phone calls will stop or that the creditors and collectors will stop collection activities.
What are the Fees for debt settlement?
Typical fees involve you paying somewhere around 15% of the total debt you are settling. This fee is rolled into your settlement offer which allows you to pay it over the same length of time you are paying off your debt. Remember, you will be settling for far less than you owe, so with our without a fee, you are coming out way ahead.
Will I owe money to the IRS for my reduced settlement?
Creditors are required to report canceled debts exceeding $600 to the IRS and you are supposed to report the same as income on your annual tax return. However, the IRS permits you to write off any “income” from canceled debts up to the amount by which you were “Insolvent” at the time. Therefore, unless you have a positive net worth, then you ordinarily will not be obligated to pay taxes on the forgiven amounts. Additionally, if you do not qualify as insolvent, non-principal amounts such as fees accumulated on the account may be deducted from the amount reported. Consult a tax professional for your specific situation. Refer to: www.IRS.gov Publication 908