How to Handle Your Own Loan Refinancing: A Step-by-Step Guide
Considering the emotional weight of any given choice, this is the no-nonsense manual for handling your own loan modification.
You have been receiving phone calls from the bank because you are late on your mortgage payments. You consider dialing their number, but then you put it off until tomorrow. You worry more and more each time the phone rings, and you never leave home without checking the answering machine first. It’s difficult to pick up the phone and call someone back; we get it. Debt collectors have a reputation for being unwelcome. So, here’s what we’ll do before you make that first call:
1 Get all your paperwork together. The following is a more comprehensive list of the materials you’ll need to modify your loan:
o Most Recent First and Second Mortgage Statement
o Current year’s property tax statement o Current year’s homeowners insurance statement
o Current proof of flood, wind, and earthquake coverage.
o Most Recent Car Loan Statement
o Current Certificate of Automobile Insurance
Other Recent Loan Statements
o Current Credit Card Statements
o Current water/sewer/gas/oil/telephone bills
o Most Recent Cell Phone Bill
o Most Recent Insurance Statement (Medical, Dental, or Life)
o Insurance-Not-Payed-By-Me Statement of Recent Medical Expenses
o Most Recent Statement of School Expenses and/or Child Care Expenses
o Four-Months Worth of Bank Statements
o Two years’ worth of tax returns
Last two years’ worth of W-2 forms
o Four most recent pay cycle pay stubs
o Proof of Financial Difficulty Copies of documents (such as a birth or death certificate, medical bills, divorce decree, bankruptcy paperwork, etc.) that attest to your financial difficulties.
Once you have gathered the aforementioned materials, put them in a folder for easy access. Staple a sheet of paper inside the folder to keep track of your communications with the bank. All of the above will be used in some capacity by your lender as they work to finalize the loan modification plan that you are part of.
Second, draft a statement of financial status and a letter of hardship. (Example Budget, Example of Financial Difficulty) Lenders will pay the most attention to the financial statement. We need you to fill it out as thoroughly and precisely as you can. The Lender will calculate both your Current DTI Ratio and your Proposed DTI Ratio based on your financial information. Those proportions should also be determined.
Mortgage Payment + Taxes + Insurance on Primary Residence / Gross Income = o Current DTI Ratio
The chances of successfully completing a loan modification increase when the Current DTI Ratio is more than 45%. However, if you have no or a very low income, your Current DTI Ratio may be exceedingly high, and the bank may decide to foreclose on the property.
Mortgage Payment + Taxes + Insurance Premiums * Gross Income = Proposed DTI Ratio
Your projected DTI ratio should be between 31% and 45%, while the exact number would vary from bank to bank. The IndyMac Bank is offering 38% ratio modifications to homeowners. The target modification ratio for Bank of America’s home mortgage customers is 34%.
Determine your expected DTI ratio if your rate is going to change soon. Once again, your chances of successfully completing a loan modification are high if the ratio is above 45%. Your loan modification may be processed before you fall behind on payments with some lenders, while others may insist that you do so. There are other factors besides the DTI ratios to think about while building your case for a loan modification.
The bank will analyze your individual costs. The bank will evaluate your “luxury” spending when deciding whether or not to grant your request for a loan reduction. The bank can demand that the money be redirected from “luxurious” outlays to the principal of the loan. Make sure that you have cut off all the fat in your budget.
The ratio of your revenue to your overall spending will be evaluated. They may request that you put the surplus toward your loan repayment if your income is higher than your outgoings.
Keep in mind that the company’s loss mitigation team will always work to cut costs as much as possible. They will stop at nothing to force you to pay as much as possible toward your mortgage each month without risking another default.
You need to use your own words when writing the Hardship Letter. You should tell the bank that you’ve fallen on hard times and could use some assistance in getting back on your feet. A willingness to put aside funds for a good faith deposit is also important to mention. Don’t forget to factor in your new affordable mortgage payment.
Third, get yourself ready to modify your loan. Maintain a level head while being persistent with the lenders. The bank’s loss mitigation team will be contacted, so brace yourself for hassle. There have been shifts at the loss mitigation division as a result of department expansion, industry consolidation, litigation between the investor holding the note and the government, and the introduction of new legislation. In particular, there is constant growth and evolution in terms of software, processes, and staff. Loss prevention is prone to data loss because of the dynamic nature of the field. Employees in loss mitigation are generally overworked and underpaid, yet they are the ones who collect your information.
Reach out to the loss mitigation team of your servicer. The mortgage loan originator is distinct from the mortgage loan servicer. Loans are often obtained from the mortgage originator. The servicer is responsible for managing the payment collection procedure. You have reached your first obstacle since picking up the phone. The system is known as the “automated attendant.” There are a plethora of workarounds available. Imagine something new. When calling Countrywide, for instance, you can reach a representative by pressing the pound key (#) about twelve times. With some banks, you can get away with this. Excellent; phone access to support staff. Loan modification form. Write a letter explaining your predicament and asking for a loan modification. Don’t bother asking the bank for a loan modification if you don’t have any money coming in. You shouldn’t dwell too much on your adversity. Send it in to your bank as instructed after you receive the shipment. Send the package through mail and two faxes. After a few days, I would call to make sure they received the package. The loss mitigation department will appoint a loss mitigator to your case after they have received the package. It’s possible that several different loss preventers will be employed. Again, be patient but relentless in your pursuit of the loss mitigator; the banks make contact with them difficult.
5. Keep a record of every interaction you have with the lender. Just like previously, grab the folder housing your papers and staple a blank sheet of paper inside. Keep track of all communications with your lender by recording phone calls and taking notes from emails. To move forward with the loan modification, be sure to include the date, the name of the representative you spoke with, the time window in which you may expect a response from the bank, and the next steps to take. Include any documents sent to you by the bank in the form of a fax, email, or regular mail with your packet. Keep careful records of all of your interactions with the lender because they may be riddled with mistakes.
Six, finalizing the transaction. A loan modification approval typically takes 30-60 days. You have recommended a manageable mortgage payment, so you should have some funds set aside to go toward the new modified loan by the time you hear back about approval. It’s standard practice for banks to require an initial deposit before approving a loan. However, you won’t receive the permission unless you show perseverance, consistency, and unyielding resolve in the face of potential banking blunders and poor customer service. It’s not an easy thing to do. You can do it, too; lots of homeowners have.
Real estate expert and consumer advocate Kevin Levonas. To assist homeowners in avoiding foreclosure, he publishes the website loan modification resources [http://www.loanmodificationstudio.com/articles/articleslist.html], to which he and his team of professionals regularly submit articles, a case law library, tools, and other materials.
Read also: The Way To Solve Financial Problems With Personal Life
