Microsoft Word - Developing a Case for a Loan Modification

Thisinformationismadepossibleby NewYorkStateHomes&CommunityRenewal

andNeighborWorks®America,andwasdevelopedbytheNewYorkStateCoalition

forExcellenceinHomeownershipEducation(CXHE)andEmpireJusticeCenter.



Whatisaloanmodification?

Aloanmodificationisanagreement

betweenalenderandaborrowerthat

changes(modifies)thetermsofaloanto

makethemonthlypaymentmoreaffordable.

Changesmaybemadetotheinterestrateor

tothenumberofyearstheborrowerhasto

repaytheloan.Aloanmodificationmayalso

becalledamortgagemodification,loan

restructuring,orworkoutplan.



HowdoIgetamodification?

First,callyourlender.Ifyouthinkthatyour

mortgagepaymentistoohighandyouare

havingtroublemakingyourpaymentsand

areindangerofdefault,callyourlenderor

housingcounselorimmediately.Asktotalk

withsomeoneaboutaloanmodification.

Youwillmostlikelybetransferredtotheloss

mitigationdepartmentorother“servicing”

department.Be

patient;youmay

needtonavigatea

phonetree.Work

yourwaythrough

untilyoureacha

lossmitigation

specialist.Make

sureyouare

speakingtothe

rightdepartment.Ifyouendupinthe

collectionsdepartment,theywillfocuson



collectingyourdebtandnotonmodifying

yourloan.Ifyoucannotreachtheright

department,hangupandtryagain.



Takenotes.Writedownthedetailsofevery

conversationyouhavewithyourlender/

servicer.Includethedate,time,whoyou

talkedto,and

whatwas

discussed.Donot

writenoteson

scrapsofpaper.

Useanotebook

ortabletjustfor

thispurpose.Also,puttogetherafolderand

keepcopiesofeverythingthebankoryour

servicersendstoyou.



Gatheryourpaperwork.Youwillneedto

gathercertaindocuments.Askyourlender

foralistofwhatyouneedorchecktheir

website.Typically,you’llneed:

 Lastthreemonthsofbankstatements

 Lastthreemonthsofpaystubs

 Pasttwoyearsoftaxreturns

 Proofofhardship:papersshowingproof

ofdisability,divorceorseparation,lossof

ajoborotherincome,copiesofmedical

bills,etc.

 Createarecordofotherexpensessuch

asutilities,medicalbills,childsupport,

carpayments,creditcards,studentloans,

etc.,andnoteifthesepaymentsare

beingmade.



Writeahardshipletter.Whenputting

togetheracaseforalender,youmayneed

towriteahardshipletter.Thepurposeisto

givedetailsonwhyyou’rebehindonyour

H ELP FOR N EW Y ORK S TATE H OMEOWNERS C ONCERNED A BOUT F ORECLOSURE



DevelopingaCaseforaLoanModification

Calloften!Thesqueaky

wheelgetsthegrease.

Eachtimeyoucall,your

filemovestothetopof

thepile.Ifyoudon’t

hearbackfromalender

afteraweek,callagain.

Behonest!Tellyour

lenderaboutyour

situationandbeupfront

aboutyourfinancial

hardship.

DevelopingaCaseforLoanModification 2

Watchoutforscammers!

Unfortunately,thereare

crooksouttherelookingto

takeadvantageof

homeownerswhoneeda

modification.Callyour

servicerdirectlyfor

assistance.Ifyouarelooking

toanothercompanyforhelp,

checkthemoutwiththe

BetterBusinessBureauor

askalocalhousing

counselingagencyorlawyer

iftheyknowofthecompany

andifitdoeswhatit

promises.Also,youcanvisit

loanscamalert.orgfordetails

onhowtospotascammer

andseealistoftrusted

resources,plusinformation

onhowtoreportasuspected

loanscammer.

mortgage.Yourlettermustbeclearandto

thepoint,andlimitedtooneortwopages.

Thisletterisyourchancetoshowthatyou

are

aresponsibleindividual,butthatyouare

experiencinganunusualhardship.Explain

whyit’sinthelender’sbestinterestto

modifyyourloan.Alinktoasamplehardship

letterislistedattheendofthisfactsheet.



Prepareabudget.Setupanemergency

budgetforyourfamilythatwillgetyou

throughthisdifficulttime.Seethecrisis

budgetfactsheetforwaystodothis.

Lenderswillappreciatethatyou’vethought

thisthroughandhaveafinancialplan.



Whatdolenderswant?Remember,itcosts

lenderstoforecloseoncustomers.Theydo

notwanttoforeclose;they

wantyoutomakepayments

ontimeandstayinyour

home.Itisworththeirtime

toworkwithyoutomodify

yourloansoit’saffordable

toyouandsoyoucanstay

truetoyourdebtobligation.

Thelenderwillwanttosee

thatyouareemployedand

willingtomakepaymentson

time.



Qualifying.Yourlendermay

haveseveralmodification

programstochoosefrom,

andeachonewillhave

differenteligibility

guidelines.Herearesomeof

thecommonquestions

lenderswillask:

 Isthehomeyour

primaryresidence?

 Doyouhaveajob?

 Howmuchdoyouowe

onyourhome?Doyou

owemorethanthehomeisworth?

 Isthemonthlypaymentmorethan31%

ofyourmonthlyincome?(Usea

calculator:multiplyyourmonthlyincome

by0.31.Ifyourmortgagepaymentis

higherthanthatnumber,thenyouare

payingmorethan31%).

 Areyoucurrentlymakingmortgage

paymentsontime?

 Whendidyougetyourloan?Wasit

duringaperiodofhigh‐costlending?

 Doyouhavemorethanoneloanonyour

property?Ifso,whatistheamount

owed,lenderandtermsofthatloan?

 Whyareyouhavingdifficultymaking

payments?Wasthereanincreaseinyour

loanpayment?Hasyourincome

decreased?Doyouhaveahardshipthat

hasincreasedyour

expenses,suchasa

medicalproblem?



Considermeetingwitha

housingcounselor.A

counseloratanonprofit

housingcounselingagency

canhelpdetermineifa

modificationispossible.

Thesetrainedprofessionals

haveaccesstothe

informationyouneed,can

helpassembleyour

modificationmaterialsand

buildyourcase,andhelpyou

steerclearofscammers.

Housingcounselors

canalso

helpyouwithcrisis

budgeting,creditcounseling

andothermethodsof

avoidingforeclosure.There

areanumberofwaystofind

ahousingcounselor;please

seethereferencelistatthe

endofthisfactsheet.



DevelopingaCaseforLoanModification 3

Considerhiringalawyer.Manyhomeowners

worrythathiringalawyeristooexpensive;

however,thereareattorneyswhodopro

bonoworkandnonprofitlegalaidprograms

thatofferfreeorinexpensiveservices.Fora

listoflegalaidofficesinNewYorkstate,visit

www.lawhelp.org/NYorcallthestatebar

association.



What’snext?

Whatifthelenderapprovesmyrequest?

Onceapproved,yourlenderwillfacilitatethe

processforthemodification.Follow

directions.Itiscriticalthatyoubeginmaking

paymentsimmediatelyandontime.



Whatifthelenderrejectsmyrequest?

Ifthelenderrejectsyourrequestfora

modification,don’tgiveup;youmaystillbe

eligibleforasuccessfulmodification.Callthe

lenderimmediatelyandaskfordetailson

whythemodificationwasdenied.Some‐

timesit’sasimpleissuesuchasamissing

document.Findoutthereason,fixthe

problemandsubmityourrequestagain.



Movingon.Ifyouarecertainthatyour

modificationwillnotbeacceptedandthere

isnowayyoucanaffordtostayinthehome,

therearestillwaystoexitthehomewithout

foreclosure.Seethefactsheetonthistopic

forideas.Anumberofoptionsarecovered

includingdeed‐in‐lieuofforeclosure,short

saleandrentaloptions.

Resources

 Findacounselor.Visitthesewebsitesto

findaforeclosurecounselornearyou:

 www.findaforeclosurecounselor.org

 www.hud.gov/offices/hsg/sfh/

hcc/fc/

 www.995hope.org

 NewYorkStateBarAssociation:

http://www.nysba.org/

 NewYorkLawHelp:

www.lawhelp.org/NY/

 ExplorefederalprogramssuchasMHA,

HAFA,andEHLP:

http://www.makinghomeaffordable.gov/

pages/default.aspx

 Samplehardshipletter:

http://www.loansafe.org/forum/loan‐

modification/135‐examples‐hardship‐

letter.html

v1.0,09‐12

