When you have a problem with your mortgage, it can be very challenging to get your loan servicer to work with you to fix it. Applying for a loan modification, many homeowners feel like their bank actually wants them to fail so they can foreclose on their home.
To state the obvious, when you're contacting your bank it's because something's gone wrong, such as divorce, illness, or loss of income. Maybe all three at once. Something's caused you to be unable to pay your mortgage and be at risk of losing your home to foreclosure. It's an awful situation to be in.
Fortunately for you, there's this amazing thing that could permanently lower your monthly payment to an affordable portion of your income and enable you to keep your home. It's called a loan modification, and it works by changing the length of your loan term, interest rate, and/or reducing principal. It costs nothing to apply and there are no closing costs.
If you apply for a loan modification with your loan servicer you may find that, rather than provide excellent and friendly customer service and promptly approve your application, they give you the runaround like they think they're the band Blues Traveler.
Some common complaints about applying for a loan modification:
Being Asked for the Same Documents Numerous Times
You go to all the trouble of sending in the required documents for your request for modification assistance (RMA) only for the bank to say they lost them or need a more current version. It used to be more common for the bank to (conveniently?) lose entire applications. They were overwhelmed with the unprecedented number of defaulting loans and loan modification applications and inadequate staff to handle all of it. There have been improvements since the early days, but asking for paperwork resubmission can still be an issue. You should keep a record of when you send each document and to whom so you have proof.
Not Expeditiously Processing the Application
While you're anxiously awaiting a decision on your application, hoping you'll be able to save your most valuable investment, your lender is moving slower than a snail in peanut butter. There are rules to address this and make servicers process applications in a reasonable amount of time. If you submit your request for modification assistance 45 or more days before a foreclosure sale the servicer must tell you within five days if it is complete or not. If it's not complete they have to tell you what you need to do to complete it. If you send in a complete RMA 37 or more days before a foreclosure sale, they may not conduct a foreclosure sale until your application is reviewed and you're notified of a denial and why, or you reject their offer or don't keep up your end of the agreement, like not making trial modification payments on time.
Incorrectly Calculating Income or Other Financial Information
Your servicer will be looking at your income, the amount you owe on your loan, and what the property is worth on the market when evaluating your application. They will be asking two questions. Can you afford the home with modified terms? And is it more profitable to foreclose or work with the borrower? The most important factor in determining if you can afford the home is how much income you have. But calculating income for some, like the self-employed, is not a black and white matter. There are differences of opinion about what is and isn't a business expense and how to calculate profit and loss statements. Borrowers sometimes have to fight to have their servicer recognize all of their income to show that they can indeed afford the home and are deserving of a loan modification. If your servicer uses the wrong values when determining whether it's better for them to foreclose or not, you can appeal the denial on those grounds.
There are many other complaints, including never speaking with the same person at the bank twice, having to deal with customer service representatives who are overseas and speak English as a second language, and feeling that the bank is generally just stringing you along rather than trying to help you.
What can you do about it? If you feel like you're not getting the results you need, you can:
Register a complaint with the CFPB. The Consumer Financial Protection bureau is an independent government agency responsible for consumer protection in the financial sector. Since the bureau's inception, mortgages have been the cause of more complaints than any other financial product. You can register a complaint with the CFPB if you believe your servicer has broken rules or laws. They are obligated to address your complaint. Sometimes shining a light on a problem is a help.
Hire a lawyer. When your mortgage servicer doesn't work with you the consequences can be disastrous. You could lose your home, have your credit ruined, and have to move your family. With so much information to know about real estate law, loan modification rules and regulations, and how a borrower can be protected from foreclosure, it helps to have an experienced professional on your side. A well-qualified lawyer can defend you from foreclosure and help you prove to your bank that you deserve a loan modification with the best possible terms.
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