You did the hard work of applying for a loan modification and making your trial modification payments. Congratulations!
After making that last trial payment, the only thing to do is wait for the bank to send you a final modification offer, then you can finally put your foreclosure nightmare behind you forever and move on with life. Right?
Unfortunately, your permanent modification offer may not come right away. Why is that?
Applying For A Loan Modification
Applying for a loan modification is no easy task. You have to submit a package of documents called a Request for Mortgage Assistance or RMA. Often the servicer will require the homeowner to continually resubmit newer versions of the same documents such as bank statements while the application is under review.
Just getting an application accepted as complete is a challenge. Once it is accepted, it's common for it to be denied.
Trial Modification Payments Not A Guarantee
If an RMA is approved, the servicer will usually ask you to pay three trial modification payments to prove that you are able to make mortgage payments again.
Getting approved for a trial modification and making those trial payments is a major milestone, but it does not necessarily mean that you will definitely be getting a permanent loan modification. Check the language in your trial modification plan agreement. Your servicer may not have guaranteed that they would give you a permanent loan modification after completing the trial payments, only that they MAY consider you for one.
Take a look at the language from a trial modification offer one of our clients received:
So, even after you have made your trial modification payments, your servicer may determine that you are not eligible for a permanent loan modification at all.
If your servicer does want to give you a loan modification after the final trial payment, and there are no issues preventing it, they will send a permanent modification offer within 30-45 days after receiving the final payment. Once you get it, you have to sign and notarize it and send it to the servicer. After it's recorded, your loan is permanently modified and returned to normal servicing.
Issues Delaying Permanent Modification Offer
There are a number of things that will delay the offer of a permanent modification, such as:
Escrow Analysis
After your final trial payment, and before your loan can be permanently modified, a mortgage servicer will need to complete an escrow analysis.
Escrow is money paid into an account to cover things like taxes and insurance. Money from the mortgage payment is put into the escrow account and the lender manages it and pays the taxes and insurance from it.
Taxes and insurance and how they are paid into your escrow could change when you get a permanent modification. There could also be a deferment. It takes time to perform the analysis, and it may not be complete at the end of the trial modification period, which will delay the permanent modification offer. There's nothing you can do to speed this up.
Investor Issues
Your loan servicer is not the owner of your loan. The servicer manages your account on behalf of the investor, who actually owns your mortgage. The investor requires the final modification offer to be sent to them for approval before it's sent to the homeowner. The investor may have a different opinion on how the mod should be structured (interest rate, deferment, etc.) which has to be worked out with the servicer.
FHA and Partial Claim
A partial claim is like a silent second mortgage loan a homeowner with an FHA-insured mortgage can receive. It has to have a note and a subordination agreement. There's a back and forth negotiation involved with the investor and servicer with partial claims. Maybe the servicer recommends a $30,000 partial claim and FHA only wants $25,000. It can take time to get all the numbers right.
Liens
A lien is a notification attached to your title stating that you owe money to a creditor. If there are liens on your home, such as from taxes or homeowner's association, they will have to be resolved before you can get a permanent loan modification.
What Do You Do About It?
These are only some issues that can arise with loan modifications. There are also problems such as the servicer changing in the middle of the trial period, which can complicate things.
If the permanent modification offer doesn't come right away after the planned trial payments, we advise our clients to continue making payments for the amount they had been paying for the trial payments. If you don't do that, you could lose your chance to get a modification.
You should consider getting a qualified attorney to represent you when you're behind on your mortgage payments. A qualified attorney can defend you from foreclosure, help you apply for a loan modification, and give you the best odds of being approved for a good loan modification.
