The right way to Begin the Process of Seeking a Loan Modification

I came across an old Wall Street Journal Op-Ed piece from January 2010, “Why Mortgage Modification Isn’t Working” (Jan 20, 2010) in which the author notes that only 1% of mortgage modifications under the federal HAMP program had been successful. Since then, a lot of press and a lot of attention has been given to the problem, but although there has been some progress, it does not appear that major changes have taken place.

As of this writing (November 2011), the road to mortgage modification success is bumpy, uneven, winding and difficult. A recent survey I conducted among colleagues revealed that some are granted relief while others equally or more qualified are denied without rational explanation. My own experience as a foreclosure mediator confirms this. But with the right guidance, a healthy skepticism and realistic expectations, the process is still worth undertaking, for those whose financial situation makes them viable candidates.

If you believe a mortgage modification is worthwhile for you, here is a quick list of pointers:

1. Start by doing your homework and getting the help of a qualified lawyer to advise you about the process and your options and likelihood of success.

2. Applying for a loan modification is like applying for a loan. You have to qualify. You need to shed credit card debt and other expenses that are not necessary. Your target is simple. You should have at least 30% of your gross income available to spend for housing costs. And that number has to be able to support the reduced payments you are likely to get if successful.

3. So for starters, you need to collect together a lot of financial information. You need to develop a realistic and accurate personal budget, much like the one that we ask our clients to prepare for us. (Link to our Budget forms here)  You need to assemble your financial information. You need to become organized.

4. You need to be patient and be prepared to spend time and money in this process. Much of the preparation you can do yourself but your chances of failure or wasting time and money are much higher without professional guidance.

5. You need to carefully consider the long run, and where you will end up even if successful. Far too often we see people chasing a loan modification and in the process putting themselves in an even worse financial position. Success is not measured by a loan modification on terms that you cannot pay, nor by emptying your retirement account or depriving your family of basic needs to save a home you cannot afford. Consider that in today’s world there are other ways to get a fresh start. The goal should be to end up financially stable.

6. Be careful to avoid falling prey to schemes and schemers. Loan modification is a process in which the lender wants as much of your money as it can get, and where fear and hope can make you vulnerable. Before paying anyone to help you, check out their credentials. Be skeptical and ask hard questions. Avoid those who promise success but charge high fees.

With over 30 years of experience helping people we are not new to the process of helping people get debt relief and take control of their lives. For those who qualify, seeking a loan modification is an important option to consider. Let us help you develop a plan that is right for you.

SRN November 26, 2011

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