Wednesday, February 25, 2009

Can I get a “Loan Mod”…

In light of the current economic situation with the financial meltdown, mortgage crisis, credit crunch, etc., many people are trying to find answers and figure out what all this means to them. As a debt analyst I talk with consumers and business owners everyday who have fallen victim to the crisis. If we know what’s happening and take appropriate action we can be better equipped to ride out these tough economic times…

One of the first things that people tell me when I talk to them about their mortgage “situation” is the only thing the lender is offering is a repayment plan or they don’t qualify for a modification. When I ask the homeowner who they talked to they usually tell me that they aren’t sure or it was someone in customer service. The most important thing is to talk to the right department; the “Loss Mitigation” department. These are the folks that take on and process cases with potential outcomes that included loan modification, partial claim, short sale, special forbearance, etc.

In a vast majority of cases the loan is in a mortgage backed security (MBS) and not actually held by your loan servicer so unless you are already delinquent by a few months, the knee jerk reaction from the servicer will most likely be negative. This may change with our Government’s “Homeowner Affordability and Stability Plan”. You’ll have to gauge the responsiveness of your servicer and balance that with your personal circumstances. So prior to contacting the lender write down your goals, budget, and backup plan.

Make sure to take copious notes and avoid “making a case” with the person you are talking to. They have heard every story in the book and in most instances they are directed to retain calls in customer service or collections. Once you’ve reached loss mitigation, order a “loss mit pack”. You will need to give some information regarding your situation, hardship, and possibly what you are looking to accomplish. My advice would be to be honest, but vague. Understand that to process loss mitigation cases costs money and if the outcome is a modification or amendment to the current loan contract this will be an additional cost for the servicer as well as the investor. They will want to make sure that their money is well spent.

There are some strategies that can be employed in submitting a case and negotiating a workout plan with the servicer/investor. Affordability is a key factor and time can be your friend. The entire process can take several months. During this time you’ll need to set aside funds. It is also helpful to have someone that can reassure you during the process. I hope this helps.