Mortgage Loan Modifications – Can You Do it Yourself?
What Is The Loan modification Formula That Lenders Are Using?
There have been a lot of changes made recently to the formula that lenders use to determine if you ‘qualify’ for a loan modification. Many banks today have developed procedures to facilitate how they handle the thousands of loan modification requests that they receive on a regular basis. The credit crisis, compounded by the utter confusion coming out of Washington’s talking heads, has lead to a huge amount of uncertainty in the mortgage market. Specific solutions offered by the government, including the Hope for homeowner program, and the president’s newest program, the home affordable modification program, have proven to be difficult to implement, complex to understand, and in many ways impossible to succeed.
It is critical for you to take control over your own situation. The government is not going to help. In fact the new home affordable mod program is being viewed as only being able to help 5% of homeowners restructure their mortgage debt. Certainly not enough to stem the foreclosure tide. You can help yourself. I am a banking veteran with over 30 years in banking, finance, tax accounting, and mortgage origination. I have been around long enough to see that these quick fixes being thrown out by government bureaucrats will do nothing to fix the problem. I have also experienced first hand the difficulties my clients have had in just trying to get a bank on the phone let alone help them do a modification. However, a professionally designed system is now available to swing the door wide open for a person to take the reins and complete a loan modification with their lender. No, you don’t need to hire an attorney. Of course, lawyers will be quick to disagree with me, saying that only they can negotiate a good deal for you. This is not lets make a deal. The banks have very specific guidelines and policies that they must follow in order to complete a modification. There is no deal making involved. What IS involved is some calculating to determine affordability, income and debt ratio determination, and a bunch of fairly simple forms to fill out.
You see, most lenders had pretty much settled on a specific formula, which they used as a benchmark to determine whether they would consider modifying a loan. This formula was based on a specific debt-to-income ratio, which was customary in the industry.
That’s until a study done in 2008 that showed that 60% of all loans which were modified at the beginning of that year had re-defaulted! The rate of default for 2009 is higher than that unfortunately.
So the lenders had to make a change to their ‘formula,’ to prevent modifications of loans which were likely to re-default, while still giving a chance to worthy borrowers.
Remember however that nothing is certain except change itself! Because just when the banks had the process of modification of loans perfected, and they thought that their formula was perfect, the President went ahead and changed the formula.
On Wednesday, February 18Th, 2009, President Barack Obama unveiled his plan to help struggling homeowners.
In this plan, up to 9 million homeowners should be able to get their loans modified, either by Fannie and Freddie, or their existing lenders. This is the Home Affordable Modification program that I mentioned above.
However, the plan does not mandate compliance, but rather gives incentives to lenders and servicers to modify loans early.
So what does this mean for you?
Well for starters, you should review the complete guidelines which were released on March 4Th, 2009, to see if you qualify. These guidelines are somewhat difficult to get through, even for seasoned professionals like myself.
Secondly, since the modifications are still not mandatory, you must still know how to package your deal, so the lender says yes.
First, let me tell you that this is not Rocket Science! But you still to have a little “insider” knowledge to make it happen! Research the process and do it yourself!
Wishing you all the luck in your situation…