First, lets begin with why you might need to consider modifying your mortgage. If you are behind on your mortgage more than three months, and 50% of your income or more is going to pay for you home and other debt, you might be a reasonable candidate. Be aware that it is a long process and you must be diligent with following up, because the mortgage company does not really care if you modify or not.
Once you feel you might be a modification candidate, be prepared to give them all of your financial records. The servicer requests this information to prove beyond a doubt you are unable to make your current payment. Loan modification is not limited to owner occupied properties. All investors who might be underwater, might consider this option before selling.
The program details may vary, however the main goal of the program is to reduce your interest rate in order to lower your payment to a more manageable sum. Interest rates could be reduced to as low as 2%, which is fantastic. If you have an interest only loan, this is a great opportunity to obtain a low interest rate to help pay down some of the pincipal balance. The rate is fixed for five years. The government decided that five years would be enough time for a homeowner to correct any issues with there financing and credit in order to refinance their home into a more suitable mortgage. Typically you can repair credit obligations within 12 months, depending on the severity of the credit issues. Correcting your financial situation may take longer depending on your motivation and job preferences. It would be beneficial to get in touch with a credit counselor, or financial planner to devise a plan to correct your financial position in a shorter time frame.
Now that you have an understanding of the program, the next item, is figuring out exactly what documents the servicerwill need to modify your current mortgage. The list below is not an exact list, because documents may vary between servicers.
1. Locate the contact information for the modification or loss mitigation department. The loan modification department will have a separate fax number to fax the needed paperwork for your odification. Do not get it confused with min fax number. If you do, you can rest assured they will not get the paperwork.
2. Most recent tax returns. If you are self-employed you will need both business and personal tax returns. Be sure to include all schedules.
3. Most recent pay stub. If you are self employed you will need a profit/loss statement and a break down of your income in which you will be reporting on your 1099 depending on what time of year you apply for your modification.4. They will requiring you to fill out a spread sheet that breaks down all monthly debts. For example, car insurance payment, car payments, credit card payments, food costs, etc.
Once you have gathered the information needed to begin the modification, fax the information to the modification department. Follow up with the department 30 minutes to and hour after you faxed the paperwork to make sure they received it. You will need to follow up with them every two to three days to check in. You may find that the initial paperwork may not been filled out completely, or they may need additional information. The quicker you can provide the requested information, the faster the process will be.
Once you have submitted all needed paperwork, and no new information is needed, the modification department will review your paperwork to determine if you are eligible for the modification.
The process to determine if you will be approved for a loan modification could take several weeks. Continue to follow up until a decision is made. If you are approved for a loan modification, they will discuss the modification details and mail paperwork outlining the entire modification for you to sign and return. Once you agree to the modification, you are on the road to recovery.
