Last week I shared an overview of the most common types of modifications. Today, I'd like to share some tips to keep in mind as you work with your servicer to modify a home loan.
You should know that you will almost always be asked to prove two things:
1. That you are in financial hardship. Spouse lost job, medical crisis, missed a few payments, etc. The reason for this is that mod programs are meant to help people who need help; they aren't intended for people who can afford their mortgages but just want to pay less.
2. That you have the ability to repay the modified loan. The fact is, if you can't repay the loan with a reduced payment, then you can't afford to stay where you are. There is no deal out there that will pay for your home for you.
You'll have to submit documents to substantiate your modification application. Make sure to keep a copy of all documents, and be prepared to submit this paperwork more than once.
Be persistent! Servicers are BURIED right now with modification and other requests. Call them to see if they got your documents. Call them to see if you completed them correctly.
Be meticulous! If you leave something blank, you'll go to the back of the line.
Be patient! The servicer really is your best friend in this situation.
A final word on mods: I recommend staying away from organizations that charge a fee to do any of this work for you. A broker can't get you to the front of the line and can't get anything done that you couldn't accomplish by being honest, persistent and cooperative. The servicer knows how to work with you and is going to do everything available to help you. A call from someone else on your behalf is not going to help here.
Paying someone else a fee is, at best, a waste of money and, at worst (and commonly), a complete rip-off. If you want to read about what's going on in that regard, read this New York Times article about companies set up to take money from people in exchange for NOT getting them a modification. Unfortunately, in this industry, expecting some people not to try to take advantage of the consumer is like asking Mickey Mouse not to use that squeaky voice - it isn't going to happen, because it isn't in his nature to use a different voice.