Why Is My Loan Modification Being Ignored

and What Can I Do About It?

First let’s look at the big picture. The severe strain on the credit markets since 2007, especially on mortgage lending, has negatively impacted the entire U.S. and world economy. What followed was a nearly worldwide drop in the value of real estate.

Consider the consequences of both of these factors.  They have bred unemployment, lower income and foreclosures.  No wonder there has been an alarming deterioration of family relationships.  That family financial strain has contributed to a huge reduction of qualified new borrowers and a huge increase in the incidents of existing homeowner insolvency. That is the foundation for today’s mortgage servicing nightmares.

Mortgage Loan Servicing Units (Servicers) cannot hire and train enough people to fully handle the problem and help all borrowers responsibly. Do they know it? Do they care? Yes, but there are things you can do that would have a positive influence on the progress of your modification. This article will offer helpful pointers as well as give you a better understanding of the harsh realities that you and your servicer are facing. 

You want your mortgage loan modified but can't seem to get the help from the servicer that you’d hoped for.  Since the servicers are swamped, they cannot manage the defaults responsibly to get you the assistance that they themselves would also benefit from. With that important clue in mind, you should heed the following advice:

1- Keep in regular contact with your servicer.  Because they have so many files, they may only call you once every week or two.  They make calls on each file as often as they are able so you should not be afraid to contact them when necessary.  You should show them you’re interested, involved and thus motivated to complete your mod.  That encourages them to work with you.  Don’t be the squeaky wheel, but instead, the tire that keeps its air.  In other words, be persistent but not annoying.

2- When asked for documentation, supply exactly what you are asked. Be careful to sign and date where necessary, follow directions, and fax, email or call to confirm they have received what they had asked for.  You may be told by one person that your file is complete and then another person might tell you that it wasn’t received or wasn’t completed properly.  Get the name of every servicer associate you contact.

3- Yelling, complaining, whining or threatening the modification associates will not get you positive results. They are given bonuses for their production totals so they do indeed want to help you. If you send in what is needed or requested; if you are cooperative and patient; your chances of being successful with your mod improve, and most likely, will also yield a speedier resolution.

4- The terms of your modification are a direct result of what you send in. If you try to cheat the system and it is discovered (as it usually is) you will either be denied or you will have much more difficulty getting the mod completed. Your revised mortgage payment will be determined either by reaching a debt-to-income ratio that conforms to investor requirements or you are simply offered a request to bring your loan current so you can get back on track. There are no negotiations. You either qualify or you don't. It's largely based on gross income which consists of your salary, hourly wage, social security monthly benefit before any deductions, your average income for your business earnings per month, etc.

5- If you do not occupy the property as a primary residence, you cannot get a government modification. If no one occupies the property you cannot get a mod at all. Rental properties, second homes, investments properties, or properties on which you used your credit to help a relative or 'friend' buy are generally considered in the same category. If you still think you are eligible for a modification you will need to show documentation of a rental agreement and cash flow corresponding to that agreement. If you committed fraud to purchase the property (straw buyer, claimed it was a primary residence when it wasn’t, etc.) you have nothing to be afraid of as long as you are honest about the current situation.

6- The government mod program is based on providing a modified loan where your payment of principal, interest, taxes, and insurance is at least 31% of your gross income. It's a great deal. Don't blow it. If you don't make your payments on time, you will no longer qualify for the Government mod and you will never be able to apply for it again. If you don't qualify in the first place, it may be that you make too much money, or not enough. If the investor limitations do not allow for you to get the payment that meets the government mod parameters, you may be eligible for the servicer’s own mod programs, which can be decent - definitely much better than your current situation.

7- Call the servicer if you realize you can't make a payment on your qualifying payment plan or if you can't make the first payment on your modified loan. Will the mod be cancelled? Probably, but you better call and find out. If there are exceptions that can be made, your communication will be your only chance of getting that exception. A late payment does not always disqualify you, but a late payment with no call may mean a cancellation of your modification before the payment arrives.  Stay in touch!

7- If you forget to include a document, or portion of a document, or do not disclose your true situation, this will usually have a negative effect on your modification. Some income documentation is not needed and, in fact, might cause you more grief in the form of a higher modified mortgage payment! Leaving income out will most often disqualify you from either qualifying for the best program, or, keep you from qualifying at all. If you are making payments yet your income can’t be verified, you will need to reveal your sources.

8- There is no such thing as a “stated income” mod – you have to show proof of your capacity to make payments. That proof consists of making at least 3 consecutive payments on the loan (could be a lower payment than your actual loan payment) and you must show documentation that reveals your income. If you make less than you did when you initially secured the loan, you will probably be in better financial shape upon successful completion of the modification.

9- You can use other income sources in the home, such as a relative living with you that helps pay the bills or pays rent. A situation like that usually has to be documented, just like the verification of your income with a paper and money trail (pay stubs and bank statements).

10- Your modification can include a forbearance amount that is non-interest bearing.  As an example, that might mean your modification delays $100,000 now, though you will owe $100,000 ten years from now.  A larger forbearance can help you qualify. Let’s say you can only afford payments of $1000 per month. To arrive at this amount, your mod might entail putting $50,000 in forbearance so you can make your payments based on what you owe minus the $50,000. So instead of making payments on the total amount you owe, you are now making payments on what you owe minus the forbearance amount.  The new reduced total is often at a new reduced interest rate as well.

11- Points to think about:

• Everything about your loan is recorded.  Anyone can look at the notes on the file and see what has happened with your loan, including details about the overall communication and cooperation.
  
• The servicer can prioritize your loan (if you are cooperative) or give you personalized service (if you have actual trouble, ask for a Supervisor), but, they cannot make exceptions or negotiate. It's not their money and they are audited on what they do. There are Government and Investor guidelines or requirements that they have to adhere to, otherwise, the person you talk to can be fired....
  
• If you can’t afford the property now because of unemployment, illness, or other uncontrollable hardships that are hopefully/probably/likely temporary, ask for a payment plan so you can be evaluated after you have time to resolve that hardship. The servicer does not want your property.

 -         Most important points to remember:

o       Keep in contact (at least once a week)

o       Keep making payments

o       Provide everything that is asked of you (and don’t leave pages out of taxes or bank statements even if they seem benign)