Your Questions About Home Loan Modification

Mark asks…

what can you do if the lenders want give you a loan modification?

I need to know if the mortgage lenders can turn you down for a loan modification. What do you do then?

John answers:

As others have said here, yes, your bank can definitely turn you down for a loan modification. Even with times as bad as they are right now, some banks just don’t see the necessity of working with homeowners who are having financial problems.

I won’t get on a soapbox here and start talking about how they caused this problem in the first place, but let’s just say that with their culpability in this mess, you’d think they’d be more understanding.

Anyway, others have pointed out that you’re going to have a much better chance of success if you have someone who is experienced in this in your corner.

That is most definitely true.

Attorneys can be great at this. For one thing, they know where the bodies are buried in all these bogus loans that many banks issued at the height of the mortgage boom.

If your bank turns you down, or even if they accept your request for a loan modification but don’t lower your payments enough, a good attorney will go back, and back, and back again, and negotiate something that truly helps you out, and isn’t just a Band-Aid for the time being.

There are two resources that I recommend you take a look at that will explain this in a bit more detail:

The first resource here is an article that describes a long modification process, things that can trip you up during it, and how to get around the obstacles that a bank is going to throw up in your path.

The second is a short video that also walks you through the process and shows you how other people have been successful in doing this.

But again, I consider hiring a good attorney who can work this out for you. Bear in mind, I’m not an attorney myself, and I’m not particularly fond of them.

But I do know that when something is this important — like when failing would mean that you’re going to lose your home — sometimes you have to hold your nose and work with them.

Anyway, please check out the resources I mention above. And good luck to you.

Nancy asks…

What to do after you’ve been denied a loan modification?

I live in North Carolina. I was in chapter 13 and was dismissed because husband lost job and could not make payments. Had a lawyer that did not want to help. Tried to work with Bank of America for a loan modification but after 4 months was told I did not qualify. What do I do next please help.

John answers:

Loan modifications are hard to get. If the bank has denied you already then that means they probably determined that the home is no longer affordable. If you believe this isn’t accurate then you will need to apply again but with a different approach.

Look at the financial statement that you submitted? Does your income match your expenses or are you showing a large deficit each month? Lenders won’t do a loan mod if you cannot get your budget to balance.

If you want specific advice it is probably best to talk to a HUD approved housing counselor. Bank of America should provide you with list of ones in your area or you can just contact HUD directly. There should be no charge for their services since they are funded by HUD.

David asks…

Does anyone know of a company I can do loan modifications for at home?

I’m interested in getting back into real estate and doing loan modifications. A company where I could do that from home would be ideal especially with leads.

thank you,

PS I live in California, in La Verne about 30 mins from Los Angeles.

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Mandy asks…

What will happen to the equity of your house by 2-4 years from now if the home was loan modified today?

Example: Previous value of house $300K and currently paying in mortgage, current value $200K and applied for loan modification, after 2-4 years from now $400K. Will the $200K additional value be considered as equity or AUTOMATICALLY be added in the owners debt/mortgage?

John answers:

None of the above.

Equity is the current fair market value minus the remaining debt.
Since the fair market value will change due to outside forces, you cannot predict what the equity will look like in the future.

Even if the house value climbs from $200K to $400K and the equity changes from negative $100K to $100K, the loan balance is UNAFFECTED.

The reason you get a loan modification has relatively nothing to do with the FMV. It has to do with your ability to pay the loan as you originally agreed to do. The problem with dropping housing prices is that people who lost their jobs discovered they couldn’t sell or refinance.

If you get a loan modification and now will pay 5 years longer on the loan, your equity position will be less than someone who never had their loan modified.

Charles asks…

I live in southern california and I need a loan modification. Can I just hire any realtor?

I have shopped around and attorneys want a lot of money. I heard that any realtor can get a loan modification done for you. Any thoughts or opinions on this. Money is tight and I need to get this done asap.

John answers:

Take the advice of HUD-approved counselor before you hire a realtor. Home Affordable refinance plans are available. You can refinance requirements and allow more people to refinance their mortgages.

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