The best case scenario in renegotiating your loan is to be represented by a loan modification specialist that has the expertise to act in your best interest.

Loan modification specialists are service based.  Retainer fees from loan modification specialists are typically earned upon receipt. Specialists are paid a fee for being retained and that fee is based on the complexity and estimated time involved in working on the case in question.

The bottom line is the firms that specialize in loan modifications work with servicing companies to rewrite mortgage contracts on behalf of their clients.  The banks may not like it but their clients love it.  They typically lower interest rates, extend fixed rate terms, push any past due monies owed to the back of the loan, extend the total length of the term of the loan, and even lower principle balances on mortgages.

The following documentation will be required to start the loan modification negotiation process:

• Hardship Letter - Include dates, reason for delinquency, what you have done to attempt to workout problem in the past; also include any supporting documents for hardship. While our Network Service Reps will be happy to provide guidance if needed, the short and straightforward letter must be in your own words
• Bank Statements - Last two (4) months.
• Proof of Wages and Salary - Employed - Pay stubs for last two (2) months; Self-employed - 1040s for the last two (2) years.
• Federal Tax Returns - First an d second pages (W2s) from the last two (2) years.
• Rental Agreement - If the loan modification is not for your primary residence.
• Most recent mortgage statement
• Monthly Expense Sheet
• All expenses even if you are not paying them: including utilities, food, mortgage payments)

About Mortgage Modification

A mortgage modification plan is renegotiation and restructuring of an existing loan. Most people have done some version of mortgage modification in the past; they just did not know it, for example; calling the credit card company and asking them to lower the interest rate or extending deferred payments. Getting a mortgage loan modified has exactly the same concept but a lot trickier.

Mortgage Modification Combination Options

Missed payments can be paid at the end of the loan. For example, loan payments should be completely paid by June 2010, if a homeowner missed 6-months payment, then his/her mortgage would end in December 2010 instead of June. It can bring the homeowner up-to-date on its payment.

- Homeowners who have adjustable rate mortgage can have their lending company reduce or freeze the interest rate to make the loan more affordable.
- Reduction of principal balance to equal the current market value.

Steps in Getting Mortgage Modification

The first thing that a homeowner should do is to have a brief meeting with their lender or their mortgage modification consultant. If and when the homeowner’s case qualifies for modification, the lender will then request a financial statement breaking down all of the homeowner’s income and expenses. Remember to keep all copies of relating documents in one folder for easy access.

Once this is completed, the homeowner will need to write a hardship letter stating their current financial position and the reason for being delinquent. Do not lie – they will investigate. Supporting documentation such as pay stubs, tax returns and bank statements should be attached with this letter and send to the lender. The lender will then make modification for new loan terms – this could take up to a couple of months.

Free Mortgage Modification Assistance

The second “Save the Dream” event will take place next month in Columbia, SC. The first event which was held in Stamford, CT has assisted over 3.000 homeowners who were looking into mortgage modification. Hopefully, this coming event would have a turnout of the same number or even more. The event will offer free mortgage modification assistance and finding sensible solutions to solve home mortgage related problems.

Mortgage Modification to Save Home

Mortgage modification is becoming the savior of the mortgage industry. This tool has helped prevent a number of foreclosures. This option works because it is a win-win situation for lenders and homeowners alike. The modified terms will bring the monthly payments down and will put the homeowners back to track. The homeowners get to keep their homes and the lenders get to receive their cash – everybody is happy.

Contact a mortgage modification consultant now and take control of your financial situation. It is important to understand that every client is different. What may work for homeowner A may not be the ideal mortgage plan for homeowner B. So, do not base your decisions to the decisions of your friends. Let the experts do their job and propose a plan for you – a new mortgage plan that is customized to fit your financial needs.

Foreclosure is probably the scariest and the most used word nowadays. It is so common that the lending institutions are changing their terms and some are bending their rules to accommodate the new financial scenario. A lot of homeowners introduced themselves to loan restructuring to save their homes. Before considering this option, it is important that homeowners educate themselves about loan restructuring – repayments, interest rate, credit score, etc.

Qualification for Mortgage Restructuring
The first thing that a homeowner should do is to call the lending company and figure out if they qualify for loan restructuring. In the olden days, only those who are considered delinquent borrowers can apply for this loan, but because of the crisis, lending companies are open for negotiation. Bring all documents pertaining to the loan and all bank documents proving payment capability. There is no guideline on who could qualify or not, it is different with every case. Financial status, monthly income, credit score and other financial aspect affects the application. It is best to talk to a representative personally to work out mortgage loan restructuring application.

Common Mistake People Make
Some people deal with foreclosure by forgetting about it – well, this only work until a notice for foreclosure comes knocking at their door. This is the most common mistake that people make – inaction. Doing nothing cannot solve anything. The loan would not pay its monthly mortgage on its own. Homeowners need to negotiate. The earlier they negotiate the better chance they get on keeping their homes with a restructured mortgage loan.

How Mortgage Loan Restructuring Works
Mortgage loan restructuring can bring down monthly payments to a more affordable price. Though this will mean longer payment terms which will also mean more money will go to interest; well, this is the price the homeowner pays for keeping their homes. Most lending companies are willing to add up default payments on top of the loan, to restructure the terms of the loan to conform to the homeowner’s needs. Do not agree on terms which you cannot follow. If you still cannot afford the monthly dues, say so and renegotiate until you have reached an agreeable number for both parties.

Increase the Chance of Success
Research, research and more research. Before applying for any mortgage loan restructuring or any loan modification option, do your research first and make sure that this is the option for you. Get the advice of your bank and of your friends who have gone through foreclosure and loan restructuring. Remember, you are not the first homeowner who has defaulted in mortgage payments. It is everywhere. Lending companies would more than welcome the opportunity to help you pay them back.

When face with foreclosure and other debts, one must acknowledge the fact and do something about it. Act now! There is no better time than now. Waiting would just blow things out of proportion. There are a lot of options out there that can help you save your home; one of that is mortgage loan restructuring. Consider restructuring your mortgage to help you stay in a home you can afford.

Foreclosure is at its all time highest – this is not news to many as this has been happening for many months now. Homeowners have suffered greatly due to economic crisis, losing their jobs and in the end losing their homes. What was once a structured and organized life is now at risk and on the financial edge. What was once seen as “for delinquent borrowers” only is now the homeowner’s saving grace.

Loan modification
This is where the banker or the lending company agrees to modify the terms and conditions of a current mortgage to make it more affordable. Here are its benefits:

Stop Home Foreclosure
The main objective of loan modification is to help the homeowners by adjusting the terms and conditions to a more affordable mortgage payment plan. Lending companies are willing to assist homebuyers in negotiating with loan modification as they know that delinquent homeowners are willing to pay – they are not bums, they just do not have the capacity to pay. But if lenders are willing to bring down the monthly payment by extending the timeline, then maybe they can agree on something to work things out.

Contrary to what people believe, lenders do not like foreclosing homes – what would they do with foreclosed properties? Sell, yes; rent is too complicated. But in today’s economy, it is hard enough to find a buyer who is willing to offer a decent price on a property. They would rather profit from mortgage payments than hassle themselves with foreclosed property. So, try negotiating with them before giving up.

Lower Interest Rate
Five years ago, when the housing market is at its strongest, it was preferred to get adjustable rate mortgage because there was a great chance that interest rates would go down. But because of what is happening in the housing market these days, interest rates skyrocketed and what was affordable two years ago is no longer affordable this year. Loan modification is the best solution for this.

Lending companies are now offering fixed rate mortgage plans at 30 years. This may seem like a long-term commitment – what if the interest rates go down next year? Well, that is a risk that the homeowner should take. But fixed rate is best because at least one knows that they can afford it. No nasty surprises that can cause home foreclosure.

Lower Principal Loan
Owing mortgage amount that is more than the house’s value is ridiculous but quite common nowadays. That is because the prices of properties have dropped dramatically in the last two years. Having this situation is referred to as being upside down on mortgage loan. Loan modification can help reduced the principal amount which in turn would reduce monthly payments.

Help Maintain Credit Score
Having foreclosed properties is suicidal on a credit score. A drop of 200-300 points can be had when dealing with foreclosure. In business, high credit score brings trust – this is very important. Banks and other lending companies would base their judgment on credit score for future applications. Loan modification can help save face and maintain good credit history.

Example Hardship Letter:

Name: (Your Name)

Address: (Your Address)

Lender Name: (Your Lender)

Loan #: (your Loan #)

To Whom It May Concern:

I am writing this letter to explain my unfortunate set of circumstances that have caused us to become delinquent on our mortgage. We have done everything in our power to make ends meet but unfortunately we have fallen short and would like you to consider working with us to modify our loan. Our number one goal is to keep our home and we would really appreciate the opportunity to do that.

The main reason that caused us to be late is (insert reason here and don’t be too lengthy and long winded) Soon after being late and our income not being nearly enough, we had fallen further and further behind. Now, it’s to the point where we cannot afford to pay what is owed to (lender). It is our full intention to pay what we owe. But at this time we have exhausted all of our income and resources so we are turning to you for help.

(The approximate date of hardship and we believe that our situation is Temporary or will be Permanent.)

Our situation has got better because (reason here) and we feel that a loan modification would benefit us both. We would appreciate if you can work with us to lower or delinquent amount owed and or payment so we can keep our home and also afford to make amends with your firm.

We truly hope that you will consider working with us and we are anxious to get this settled so we all can move on.

Sincerely and Respectfully,

Borrower’s Signature

Date

Co-Borrower’s Signature

Date

One of the items your lender or servicer will ask for during the loan workout or loan modification process is a hardship letter. A hardship letter is a written explanation as to what “event” has caused you to fall behind on your mortgage and it vital in helping you stop a foreclosure.

This letter acts much like an outline or biography of your current “life” issues that are affecting your ability to meet your financial obligations.

Please keep in mind that your are composing the hardship letter for your lender or servicer and because of the foreclosure crisis, they are extremely busy and back logged. So, with that in mind, do not write a book because most likely it will not get the attention of an over worked, $12 an hour loss mitigation employee. Keep it short and to the point. Usually 1 or at maximum 2 pages is more than enough to get your point across.

Here is an example list of hardships that lenders consider during the loan workout process:

• Adjustable Rate Mortgage Reset- Payment Scock (uncommon, but we will see more lenders accept this in the future)
• Illness
• Loss of Job
• Reduced Income
• Failed Business
• Job Relocation
• Death of Spouse or C0-Borrower
• Death
• Incarceration
• Divorce
• Marital Separation
• Military Duty
• Reduced Income
• Medical Bills
• Damage to Property (natural disaster or unnatural)
• Other (Please Specify)

Now that you understand what your lender or servicer is looking for, it’s time to sit down and write a hardship letter. I made it easy for you by giving you a couple templates below that you can use as a boiler plate for your own letter. Make sure you make it unique to your situation.

Remember that your hardship letter is only one piece of the loan workout process, but key in helping you avoid a foreclosure. You will still need to jump a few hurdles with your lender before they will approve you any kind of work out plan.

Are you having trouble with your mortgage? Has it adjusted and you cannot afford the new payment? Were you placed into a bad loan and you can’t refinance into a good one?

The first thing that a homeowner should do is identify that the mortgage on their current property is a lawful one. Meaning that there are no Truth in Lending Act or RESPA violations and there wasn’t fraud involved on behalf of the lender or broker that originated your loan.

#1 Homeowner Tip = Have an experienced mortgage law attorney examine your loan documents for these potential violations.

#2 Homeowner Tip (Courtesy of Legal Aid Attorney, April Charney) The homeowner needs a complete written life of loan history to see all the bogus charges and fees included in their mortgage balance. Also, the homeowner should make sure that any inflated appraisal and/or loss of property value is calculated into the workout.

Red Flags and Things to Look Out For in Your Loan:

Start by comparing the loan you got with the one you thought you were getting. Are the terms the same? That is, is your Annual Percentage Rate (”APR”) the same as the one you were quoted? Are your total monthly payments the same as you were told they would be? Is there a prepayment penalty, and if so, were you told about this prepayment penalty?

If you have refinanced your primary residence, that is, the home your currently live in, then the first thing you should look at is the “notice of Right to Cancel” which is also called the Three Day Right of Rescission. You usually has three days after signing loan documents to change your mind and cancel the loan.

The borrower must be told of this right in writing.

If the creditor fails to properly provide notice of this right to cancel, the right of rescission may be extended for up to three years.

When the right is extended for three years you can rescind the loan at any time before three years, meaning that the loan is treated as if it never existed. Essentially, you become entitled to all profits made by the creditor as a result of this loan. This means that the creditor must refund all interest paid, all closing fees, all broker fees, and even pay for your attorney fees. As you can imagine, this amount can be quite significant.

The extended right of rescission is a powerful tool to help borrowers who have been victims of predatory lending, and helping our clients exercise this right is often the first step in holding a creditor responsible for illegal behavior.

If it is determined that no laws have been violated on your mortgage, then it’s time to approach your lender for a possible loan workout or loan modification.

The factors they will look at are:

1. Nature of Hardship Causing Your Mortgage Problems
2. Ability to pay
3. Amount Owed
4. Equity in the property
5. Future financial situation
6. What is better for them. To foreclose or pursue a loan workout with you and or modify your loan. Meaning which approach will best benefit the lender in the long run.

A loan workout or loan modification generally occurs where the parties to a problem loan mutually agree to workout the problem by creating new and better loan terms. The hope is that the new loan will enable to the borrower to meet their obligations.

When applying for a loan modification, make a game plan on how exactly you are going to approach them. These people are trained in minimizing loss for their company and they get paid to by getting the most amount of money out of you as possible or declare that your case is un workable and foreclose on you. That is how they mitigate loss. If you understand this, then you’ll know that you have to approach them and all conversations very carefully.Everything can and will be used against you.Your lender has two platoons of employees who talk with delinquent borrowers. The first is the collections department, which consists of people who try to pry money out of you and get you current on the payments. The second group consists of the loss mitigation specialists. These departments go by different names, depending on the servicer, including foreclosure prevention, loan resolution and delinquency customer service.We’ll use the most common name for the department: loss mitigation, or loss mit. It can be difficult to get through to the loss mitigation department if collection agents are discouraged from transferring calls. This is one of the benefits of having a helper, such as an attorney or a housing counselor. The first will intimidate bill collectors and the second might have contacts within the loss mitigation department.

The trick with any bank and getting a work out done is learning to navigate their phone system so as to increase your chances of getting a live person. Over the years I’ve learned some tricks that help, sometimes you hear options that you know will lead to a person like when it says “to speak to a representative press ___” but sometimes they don’t give you these options. So, you have to think, what options WOULD get a live person. For example often anything that involves new clients signing up will get a live representative…because they always want new business. You have to be a little savvy though; you can’t just tell the sales guy you called them so you could get a warm body to answer the phone!

Once you get a live person, you want to be working your way up to a decision maker. This is sometimes harder to do for a homeowner than a 3rd party. Often with the homeowner they get stonewalled at the first level, and sadly the first tier in Loss Mitigation is really a glorified collections department. They are paid hourly employee’s who have very little if not zero motivation to go the extra mile and help you get some needed comfort and relief while resolving your problem. Often they just compound the problem by being rude and demanding, telling people things like “just pay your bills”. So it’s essential that you get beyond these people and to a specialist.

Sometimes to get to this point you have to put up with the hourly employee’s through a process of filling out their forms and information. Providing them with items such as pay stubs, tax returns and a whole host of financial information. Once everything is provided, then some lenders will assign the file to someone higher up in the loss mitigation department.

The MOST crucial element to this whole process is your Budget and if you have done your due diligence, you’ll be ready . They will ask you for a detailed list of your monthly expenses. If it’s too tight, you may not get approved, if you have too much extra income you are going to have an outrageous payment plan. Don’t agree to it!

The 2nd MOST important thing you can do is DO NOT SPEND YOUR HOUSE PAYMENTS. Often people stop making their payment because they are falling behind on other bills, or they can’t quite make the whole house payment. Over the years more often than not, the people I met with still have an income coming in each month, they just can’t meet all their obligations, so while the house is falling behind they take advantage of the fact that they aren’t paying the house payment in order to catch up on other debts. THIS IS NOT WISE AT ALL. Sock away as much of that money each month as you can. Its crucial, here’s why;

If you don’t pay your mortgage for 3-4 months and your lender decides to negotiate a repayment plan or a loan modification, then they will want what is called “good faith” money for you to come to the table with. Typically this is from 30-75% and sometimes 100% of what you owe in delinquent fees and attorney fees. Often I speak with homeowners who spend all their money and have nothing to work with. If that is the case, then don’t expect them to work with you or you better have a REAAAALLLY good explanation and proof as to why you have no money to bring to the table.