Many people in New Jersey who are facing a foreclosure have turned to a loan modification in an attempt to save their home. The loan modification can be done on your own or with the aid of a third party, such as an attorney. You do not need to have anyone do this for you. However, if you do choose to have a third party attempt the loan modification on your behalf, be sure to use someone from your home state or within a reasonable driving distance from your home. I have personally witnessed my client’s horror stories of them paying a company on the other side of the country thousands of dollars only to have absolutely nothing done for them. By nothing, I mean not even submitting a loan modification package on their behalf.
Some lenders will initiate the process by sending a cover letter along with a loan modification package to the client before a request has been made. In most instances, however, you must start the process. You may do so by either calling the lender directly and asking them to mail the package to you or you may go online and download the modification package directly from the lender’s website.
It is very important that you fully complete the entire package. I have seen loan modifications returned by a lender due to a single box failing to be checked off. If you are unsure of something found within the loan modification package and you are completing it on your own, call the lender and ask them about it. While it may be difficult to get the lender on the phone, it will ultimately save you a great deal of time.
Be sure your loan modification package contains a Dodd-Frank Certification and a 4506-T form. If your package does not include them, it is very easy to locate both forms via an online search. For example if you typed either documents name while doing a “Google” search, you will immediately locate them.
Once the loan modification package is completed, you must submit it to the lender along with the number of other documents. Generally, any loan modification package that I submit on behalf of a client will also include the following in addition to the several page loan modification form itself. They are as follows:
- Two (2) months of bank account statements;
- 60 days proofs of income;
- Last two (2) years of tax returns (signed and dated);
- Recent Mortgage statement;
- Hardship letter (signed and dated);
- Two (2) utility bills and
- Credit card statements which have outstanding account balances.
After you have submitted all of the supporting documents along with the loan modification package, you will need to follow up with the lender no less than once per week. You need to be sure the lender has all of the needed items. You will also want to monitor the overall status of your submission. While each call into the lender can be both timely and frustrating, it needs to be done.
The initial goal is to have your loan modification sent to underwriting. Once in underwriting, the lender’s underwriter will closely scrutinize all submitted documents. Your papers may remain in underwriting for as long as thirty (30) days. Once your package leaves underwriting you could be given a denial, a trial loan modification or a request for additional items to be provided.
If a denial is given, you may either accept the denial or appeal the denial. The appeal would need to be based upon an error on the part of the lender. The time within which to appeal a denial is usually limited to thirty (30) days from the date of denial. Successful appeals are few and far between.
If you are approved, you will be offered a three (3) month trial. Once you have successfully completed the three (3) months of trial mortgage payments you will be offered your permanent loan modification. Upon signing and returning the final loan modification package to the lender, your foreclosure will be dismissed.
A loan modification can be sought before a foreclosure complaint is filed. Most lenders, however, will not consider a modification unless the mortgage account is at least two (2) months or more behind. A loan modification application can proceed to the three (3) month trial payment stage in a matter of weeks or it may take as long as several months to get to this stage. It all depends on the lender in question and how quickly you can get all of the necessary items over to the lender.
Patience and constant communication with the lender is needed in order to put yourself in a position to receive a loan modification. If you have been denied a modification in the past, you may seek a loan modification again. However, some lenders will not entertain a loan modification if you have previously received one on the same property. Other lenders have a policy which dictates how much time must pass between loan modifications. Don’t be afraid to ask you lender about their loan modification policies before you begin what can be an exhaustive and frustrating process.