With the economy in shatters, many people are finding themselves facing dire circumstances, some people are facing prospects of foreclosure. As a result, the Loan Modification business has started to take off. The businesses typically consist of professionals, many of whom were mortgage bankers, that charge from $1,000 to $4,000 to help you get your existing loan modified (working with your bank to revise the terms of your loan). Keep in mind, there is no existing legislation for Loan Modification (as of this writing); though the attorney general requires the negotiating services to place collected fees into an escrow account and to provide a refund policy (full refund not required). There is no ceiling on loan modification fees.
With this in mind, it's extremely important to familiarize yourself with the steps needed to submit your own loan modification request, which is made directly to the banks. I'll give you as much information as I can to help you make the decision whether you should seek a loan modification specialist, or try to do it yourself. The people in the following situations are probably the most eligible to get a loan modification approved by their banks:
- Customers with existing late mortgage payments
- Customers with loan about to adjust (or rates that are currently set higher than market rates)
- Customers with personal hardships
- divorce
- co-borrower who is sick or disabled, hindering household debt
- Customers with negative amoritization loans (your principal amount can go up)
- Customers whose home loans are greater than the value of their property (LTVs > 100%)
The forms/information that you'll need to compile as part of your loan modification package include:
- Hardship Letter - the reason for you being delinquent on your loan payments
- Letter of Explanation of all Income - the income that will be utilized to make your modified mortgage payment. If you have income from various sources, even if not easily documented, you'll need to provide information and sources of such income.
- Financial Worksheet - Borrower/Co-borrower information, property information, income, assets & liabilities, and expenses.
- Information Worksheet - Borrower and Property Information, Loan Details, and Proposed Modification
When going through a loan modification specialist, there are several other forms to complete and sign, including authorization to release credit information, modification authorization form, service agreement, service fee agreement, and payment form. The loan specialist provides the benefit of walking you through the forms and working with your bank.
In either event, it's worthwhile for you to go through the exercise of completing these forms yourself so you're better prepared, no matter what you decide.
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