Find out what a professional mortgage modification company offers and what to expect by hiring one. Read about how the loan modification process works.

Loan Modification Process And Mortgage Modification Company Expectations

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Finding a mortgage modification company or negotiation professional to help succeed at the loan modification process usually serves as an intelligent plan. Of course, you must start with knowing how to hire a mortgage loan modification company and avoid scams, but from there exactly what type of results should you expect from a loan modification company? This article explores the solutions you should realistically achieve from a modification company as well as common myths and false hopes about what your expectations should be.

Primarily, a mortgage modification must stop the mortgage foreclosure process, if the lender did not begin foreclosure proceedings yet making sure they do not start ranks as a desirable and achievable goal. Before moving to more topics, take a moment to step back and prioritize, being able to stop foreclosure trumps everything else. In most cases mortgage arrearage gets added to the principal and the loan extended so that it takes a few months or years longer to pay off, but you need not come up with a huge hunk of the payments due at the time of the mortgage modification. When a mortgage modification company provides a consumer with a guarantee, it usually revolves around avoiding foreclosure and moving mortgage arrearage to principal, not any specific terms of a mortgage modification involving future monthly payments. Before hiring a loan modification company think about what would happen if things were just as they were before your first missed mortgage payment but your monthly payment remained at that level. Would you consider that an acceptable outcome for a modification negotiation or would you never afford that check outlay in your monthly budget?

In many instances mortgage rates end up reduced as a part of mortgage loan modification, resulting in smaller monthly home loan payments. Providing a vehicle to lower monthly mortgage payments over the remaining life of the home loan illustrates what sets mortgage modification apart from other mortgage help solutions like repayment plans or chapter 13 bankruptcy. The concept of lowering mortgage payments in general stands as a realistic expectation, even for the majority of homeowners, but not something every consumer and every modification will achieve.

For those lucky enough to indeed negotiate a lower mortgage payment how much of a reduction can the consumer expect? Many factors come into play here, one being the policies of your particular lender. As specific rules at any bank might offer no connections to your individual loan terms this becomes a wildcard that might affect everything else either positively or negatively. With that in mind, start with some basic math. People often think in terms of fixed numbers, which I’d advise against. It makes more sense, even when talking about the general concept of how much a mortgage loan modification might lower your mortgage payment to think of it on a percentage basis. It’s easy to imagine that dropping a $100 off a $3000 mortgage payment causes less pain for the bank than reducing a $300 per month loan by $100. Look at things as if the lender might need to treat all loans the same, if they cut all payments over 30% they might not stay in business too much longer. So where does the lender offer some flexibility? Look at the interest rate of your loan, the bank might lower the percentage even below market rates. What this means to your loan payment becomes a function on the size of your loan and your current interest rate. On a loan starting at 8% with a $50,000 balance and 20 years left with 300 per month in tax escrow and $75 for insurance reserve even cutting the interest rate in half to 4% only moves the payment from $793 to $678. Compare that with a $300,000 loan with 29 years remaining starting at 9% with a reduction to 6%, the payment drops from $2414 to $1799.

Consumers may see ads boasting rates after a loan modification falling to 3% or even 2%, most of these claims fall anywhere from exaggeration to fraudulent advertising. In very rare cases you might see that low a rate, and you might win the lottery too. Interest dropping to 6%–8% would not surprise anyone familiar with modification negotiations. In some situations a modification with a new interest rate in the 4%–6% range might occur, but you should not expect a 4%–6% rate or feel the loan modification company did a poor job if they failed to get the rate down to that level. To get a better idea of what you might expect look at a mortgage payment calculator and see how your payment might change with various interest rate reductions, remember even a successful loan modification does not lower taxes or insurance. If you examine what your mortgage payment might be at improbable low rates like 2% to 4% and even at that level you know you would have trouble making the modified loan payment, perhaps you need to find another foreclosure alternative, like a short sale or a deed in lieu of foreclosure.

At this point, as a home owner, you start thinking “how low will the bank go?” While you ponder that, the lender calculates “how much can I make the borrower pay?” A bank does not want your house, that’s just a foreclosure myth. The goal on the bank side revolves around keeping you in the house and having you make payments, and once they achieve that, the next goal involves keeping those payments as high as they can be. The process at this stage resembles philosophy used in a debt settlement negotiation, where the bank knows a foreclosure or bankruptcy filing leaves them in a bad spot and if lowering a mortgage payment allows them to avoid foreclosure they will do it. On the other hand if the alternative of allowing the foreclosure leaves the bank in a better position, expect less flexibility.

As the homeowner thrashes through the mortgage loan modification process they fill out piles of paperwork, much concentrating on their financial position and ability to make monthly payments. Some borrowers get the idea that the less income they display to the bank the lower the new modified payment might be. On the other side of that coin, people forget that just as important as establishing a payment is convincing that bank that you possess the ability to continue that payment through the remaining time on the loan. People always start by saying they want a payment of X, but the more important follow up is “OK, prove you can pay X every month from now until the end of the loan.”

The expectation of a loan modification of any kind might represent an unrealistic leap for some situations. Citizens mistakenly think some law grants them an absolute right to a loan modification, in reality the government allows people the chapter 13 bankruptcy process and in most cases the right to a full reinstatement. The bank must agree to all other foreclosure options. Everyone wants lower mortgage payments, but that does not happen just because you want it. Proving some sort of financial hardship serves as a prerequisite for most mortgage modifications. If the bank rules demand a hardship than no loan modification company, no matter how skilled or experienced will be able to negotiate the terms of your loan for your advantage if you never experienced a hardship. On the other hand, definition of a qualifying hardship might emerge as fairly liberal. Certainly a loss of a job, divorce or medical issue counts, but in many cases an interest rising because of an adjustable rate note or negative amortization loan converting to standard payment may be deemed a hardship as well.

For even homeowners with well documented hardships, only borrowers with a true need for a mortgage modification should expect lower payments from their bank. Imagine a person whose wife knocked him over the head so hard with their prized Ming vase that he ended up in the hospital for six months. Family or savings paid the mortgage during that time and now he asks for a mortgage modification. He tells quite the hardship story, his most valuable investment got destroyed, his marriage ended and he missed work for six months due to a medical issue, but now back on the job he can make his old payment without any problems and still save each month for a new Ming vase. While the bank might find the tale most entertaining, he has more of a chance of seeing the story as a TV movie than he does of seeing his mortgage payment reduced. Mortgage loan modifications exist for people who otherwise would end up in foreclosure, not for people who just want lower payments to budget money toward items other than their house payment.

Let’s use this same example and move to the other end of the payment scale to examine what the bank expects from the borrower. Imagine our poor husband leaves the hospital with brain damage and will never return to work. The bank might show willingness to bend on payments, but they never become a social service agency, if you cannot make payments even at a reduced rate do not expect them to modify the terms of your mortgage. It would not even matter that his wife admitted the sleeping with a Columbian drug lord and hitting him as part of an attempted murder plot serving as the initial move in a plot to overthrow the government, or that the house had been in his family for seven generations built by hand on the National Historic Registry. It comes down to what Johnny Cochran might tell you if he represented the bank “If you cannot pay, you cannot stay!”

In most cases the bank wants hard proof offered along with your claim. Not only might you imagine this part of the loan modification process comparable to the loan application process, but you should go one step further and imagine the criteria even more stringent because you have already displayed a tendency to not make your mortgage payments, no matter what your hardship may have been. For a homeowner who lost their job this means they will want pay stubs from your new job. Promises you can find a new job don’t count. If you work for yourself you will need firm contracts for future work.

The expense side of your personal budget counts too, especially if your hardship did not account for all of the mortgage trouble. Take a person struggling to keep up with their mortgage payments but who never got more than one or two mortgage payments behind. An injury put the person out of work for three months and the house ended up in foreclosure. Even though the person may demonstrate they healed and returned to work, if that just puts them back in a position where they will struggle and miss mortgage payments it may not represent a loan modification the bank wants to grant. The whole point of a mortgage modification for the bank revolves around moving the loan out of the problem category forever. If a modification just delays an inevitable foreclosure they would rather not modify the loan and get the foreclosure over with sooner than later. If they can grant a loan modification with new mortgage payments low enough that they feel confident you will not miss another payment you can still be a viable mortgage modification candidate even if you displayed previous trouble.

Speaking of previous mortgage trouble, how about homeowners who got a loan modification from the bank yet still failed to make the payments or people who tried a do it yourself modification and got denied? Figure this situation like a baseball game. When you lead off you get three strikes, if you fail your team gets two more out that inning, if that gets you nowhere you get 9 innings per game. When you attempted a modification negotiation yourself with a denial you start from the third inning. If you made a modification and crashed out of it you might be in the sixth inning. Someone with a loan modification that did not help, a failed chapter 13 bankruptcy and the foreclosure date a few week away might stand looking at two outs in the bottom of the ninth. So while a previous modification negotiation or a failed modification plan might not leave you without options, it certainly means you need to lower your expectations and that your chances of receiving a mortgage loan modification have been reduced. Each additional failure and the passing of time compound until some people only get to choose between chapter 7 bankruptcy or allowing the foreclosure, both resulting in losing the house.

So you got this far and mortgage modification sounds like the best way for you to stop foreclosure, you find a mortgage loan modification company, avoiding the scams, and you ask “How does it proceed from here?” Process and timing questions rank the most frequently asked questions about loan modification after inquiries about specific financial items like expected payments. Understand that the mortgage loan modification process involves at least three players, the loan modification company you hired, the lender and YOU. Do not expect that just because you paid a negotiator to help you that they will do everything. They will ask you to fill out papers, sometimes stacks of them, sometimes more than once. The bank needs these things to issue a decision and you need to fill them out to start. Figure the modification company will review them and even work with you on appropriate changes before you submit anything to the bank. This may sound minor, but the review of these financial statement stands out as one of the prime reasons you want a professional mortgage loan modification company rather than attempting a negotiation with the bank yourself. You may not understand how the bank wants things filled out, you may not understand what the bank is looking for and you may not know how to interpret your own information. I’ll go a step further; unless you have done 100 modifications I assure you that you do not know the best way to fill out these financial forms. When it comes to something on paper in front of a bank officer it’s like they tell you at the police station, “Everything can and will be used against you”, so you want it properly prepared the first time and done both in an honest way but also the way to get you the best chance for a loan modification. This part of the loan modification process should start from a day to a week after hiring a mortgage modification negotiator.

From the time you submit your first set of papers to the bank until you hear any follow up from the lender, let alone a commitment for a modification, depends on your bank and the relationship with the loan officer that your mortgage modification company has with the bank. This marks another reason to find a professional mortgage modification company, you probably don’t have a personal contact in the loan modification department at your bank, a larger experienced mortgage modification company will. Even with good connections, banks wallow in piles of modification requests. While things vary bank to bank, in most cases files closer to a foreclosure auction date will garner more attention. So if you do not even have a foreclosure date yet, do not expect people to jump at solving your problem. Anywhere from a few weeks to many months might fall within expectations at this stage in terms of an answer from the bank, sometimes even years. If you got to the stage where the bank will not accept payments, you should be saving the money you would have otherwise paid them. How to allocate cash in the middle of a foreclosure or during any financial crisis can prove to ultimately be your savior or your curse. During this long waiting period expect to hear from the mortgage loan modification company every one to three weeks or so even if it’s just to say hello and nothing has changed. Feel free to call them if they have not called you, but calling too often just makes you a pest.

With many lenders, homeowners find the mortgage loan modification process and the home foreclosure process disconnected. Consumers expect that while the mortgage modification awaits the decision on the part of the bank that they cease any further foreclosure proceedings. Most times this emerges as a critically false expectation. The foreclosure process and the modification process run in parallel at this stage, sometimes without communication between the two. Avoid people becoming one of those homeowners who desperately call for help the day before a foreclosure sale crying that they thought their lender put a hold on the foreclosure during modification negotiations only to learn the modification got denied and the foreclosure process never stopped. At that point you use chapter 13 to save your home or lose the home. Many borrowers these days find they do not qualify as people who should file chapter 13 bankruptcy, so essentially they end up with no way to stop foreclosure.

Only in a perfect will world your mortgage loan modification company would track all of this for you and keep you up to date on everything, you need to stand as your own advocate. Expect that you need to carefully note all foreclosure proceedings, dates, and legal requirements. As the foreclosure dates gets closer you need to find a bankruptcy lawyer and you must hire the bankruptcy attorney if a chapter 13 can work for you. Use the chapter 13 calculator right now, learn if chapter 13 might be an option. If you already have no time for reading call 877–219–3201 right now and find a bankruptcy lawyer near you. When it comes to the larger picture you must take control. You hired the mortgage negotiation firm to get better terms on your mortgage, that is all, so don’t expect more. Furthermore, your job includes making sure mortgage modification represents the right idea in the first place. Loan modification companies hired experienced sales teams, sometimes even high pressure ones. Their main job involves enrolling homeowners, your main job at that point remains to figure out which foreclosure prevention option works for your situation regardless of how good a mortgage modification company or bankruptcy firms sales techniques might be.

When your mortgage loan modification company calls you or emails you be responsive. They may need more forms filled out or need more information. People want these negotiations wrapped up quickly, but often they themselves cause delays. In the end they need you to approve an offer from the bank. Not only should you not expect a mortgage loan modification company to make all of these decisions on your behalf, you should not want them making these choices that may affect your personal finances for the next 30 years.

For many the day you’ve imagined finally arrives, the loan modification company calls with an offer from the bank. If your new proposed monthly mortgage payment comes in where you hoped it would or less, great, but how do you proceed when the lender offers a higher payment than you expected. In some cases you can enter into a bit of a back and forth with the bank, other times the lender offer represents a take it or leave it proposal. A good mortgage loan modification company should tell you where things stand and in terms of the possibility of returning for more negotiations or if you arrived at that take it or leave it stage. Let’s figure for this discussion negotiations finished and you need to accept it or reject it.

At this stage I’d love to provide you some magic formulas to determine how to proceed, but between bank’s varied criteria and people’s individual personal finances this becomes a decision that people need to make on their own. Let’s explore two approaches and see which you feel matches your own circumstances.

A. While the proposed payment came in at more than you hoped for, with some minor to serious budget adjustment help, you accept the deal, begin the new payments and keep your home.

B. You decide either because you really don’t want to stay in the house or because no matter how you calculate it you feel you cannot afford the proposed payment that you would rather leave your home.

Start looking at the second option. You may have already gone over the options for moving a thousand times or perhaps this marks the first time you faced this possibility head on. Are you ready to throw in the towel and pack your bags? If that’s the way you feel it’s OK, you owe no one any obligation to save the home. Short sale and deed in lieu of foreclosure options allow you to help your credit report a bit and avoid a mortgage deficiency, otherwise you end up looking at either filing chapter 7 or allowing the foreclosure. If you still would rather retain the house you can make the A. option above work. Most people in the middle of this dilemma ask what about this or how about that, but most of the time the criteria that left you with these choices mean you ran out of other options. Sure, a chapter 13 filing will stop your home foreclosure, but chances are calculating your chapter 13 payment reveals a monthly payment even higher number than the lenders offer.

The point of that paragraph was not to make anyone feel badly about their situation, it hopefully put the options in the proper prospective. You may well have expected or wished for a lower offer from the bank, but no one put that on the table. If you want to keep the house you must work even harder to figure out a way to make the bank’s mortgage offer work. Look beyond budgeting if you can and consider non–working adults in the house finding work or those now working taking a second job. Examine what packing your luggage really means, you may look at a $1000 offer after dreaming of a $600 payment, but if a rental in your area would cost $1500 that modification proposal looks even more reasonable, you need to live someplace. In extreme cases the answer may emerge as moving to another neighborhood, another city or moving in with relatives, but you need to know your next step and be willing to take it if you reject the loan modification offer. No one ever set a requirement that you will be happy with a mortgage loan modification offer, only that if you accept it and pay it each and every month that you get a foreclosure alternative.

For expectations after a mortgage loan modification look to yourself first. The bank provided a second chance, do not expect a third, make your new mortgage payment and pay it on time. Read about which bills to pay if you can’t pay everything, the home loan should be the most important, pay that before other obligations if you want to keep the house. Should you expect help from the mortgage loan modification company with a problem later during the modification? While some might welcome a call and others aid you begrudgingly, most mortgage loan modification contracts will not offer a provision for unlimited long term follow up and such treatment should not be a part of your expectations.

A time when the consumer ends up out of sync with the mortgage loan modification company happens in cases where the consumer rejects the deal negotiated from the bank. In the homeowners mind nothing got accomplished and they may feel they owe no fee, the business who put in many hours to arrange an offer thinks they did their job and expect payment in full. While I suppose some exceptions may exist, if the loan negotiation company brought you a valid modification offer they earned their fee, if you reject the offer that’s your right, but it does not entitle you to a refund or to withhold payment. An instance where no loan modification offer ever materializes presents a different case. Look to your contract to know what to expect here. Some mortgage negotiation companies offer a guarantee that if they never produce a modification proposal from the bank of any kind that will not charge a fee. If you want that feature you need to lock it in at the agreement stage. Otherwise, expect if the loan modification company put in the effort to negotiate a deal, even if it never happened, they earned their fee. Think of it like an insurance policy, if you never have an accident or a fire you do not get your money back.

Homeowners reading this at the start of the foreclosure process or before they miss their first payment may ask why they should pay $1000–$4000 to a loan modification company if they may end up paying for nothing. For some it may be their best option, for others their only option, but for certain homeowners the answer might be they should not enter into modification contract with a negotiation company. Look at how much money you have available to help your situation and figure out what you can afford to lose. Keep in mind that in certain instances even when a mortgage loan modification negotiation fails it ends up delaying the foreclosure process, in essence meaning the money lost on the modification company can be thought of as rent in exchange for the extra time you got in the house without paying a mortgage. Despite that, look at what you need out of a modification and if you require payment reduction down to a specific dollar amount and cannot afford to spend the proposed fee without achieving your results you need to consider not entering into a contract with a mortgage modification company at all.

Does hiring a mortgage loan modification company represent the best foreclosure prevention choice for you? For most homeowners a mortgage modification stands as their best option to keep their house, and using a professional loan negotiation company offers the best chance for a successful modification. Therefore, most people will find, as long as they can avoid loan modification scams, that a loan modification company provides the best route to modified mortgage contract, stopping foreclosure and lower monthly mortgage payments.