Foreclosure on a property is a last resort for lenders when an account falls in arrears. Lenders prefer to avoid foreclosure on a property since it benefits neither the lender nor the homeowner and will work with the homeowner to prevent this. With the current economic climate, lenders are becoming increasingly open minded when it comes to helping people stay in their homes. One of the ways a lender can help a homeowner save their home from foreclosure is to do a home loan modification.
Home loan modifications are a lengthy process, requiring much of the same documentation as the application for the original mortgage. Some people may choose to have a loan modification company negotiate on their behalf, while other may choose to negotiate with the lender themselves. Either way, most lenders and loan modification companies will require the same basic documentation. Here is a list of the documentation likely to be needed, with some explanation, bear in mind that there may be variations depending on with whom you are dealing.
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o Hardship Letter
- Signed
- This is a letter that explains the circumstances that led to possible foreclosure and why you are interested in a home loan modification.
- Common hardships listed are unemployment, death of mortgagor or family member, or reduction of income.
o Mortgage Statement
- The monthly statement you receive from the mortgage company. This statement will verify the delinquency status of the account as well as the mortgage information such as account number and original signers.
o 2nd Mortgage Statement
- The monthly statement you receive from the mortgage company. This statement will verify the delinquency status of the account as well as the mortgage information such as account number and original signers.
- May not apply in all cases.
o 2 Recent Pay Stubs
- Demonstrates the change in your financial status.
- Demonstrates inability to make the current monthly payments
- Supports statements in the hardship letter.
o Bank Statements
- Dating back 3 months.
- Supports statements in the hardship letter.
- Decreases in deposits and the average daily balance will support the need for a home loan modification.
- Demonstrates the change in your financial status.
o W-2s
- From the last two years.
- All the pages from the previous two year's tax returns, if self-employed.
- Demonstrates the change in your financial status.
o Release of Information Consent Form
- A signed release that lets the lender know that the loan modification company has the authority to speak for you.
Home loan modifications are a long and involved process. If you don't feel comfortable negotiating with the lender on your own to prevent foreclosure, there are loan modification companies available to assist you. Using a loan modification company can help alleviate some of the stress involved when negotiating with the lender. There is an out of pocket cost associated with using a loan modification company, though there are companies that will guarantee their results - if you do not get a home loan modification, they will refund any money paid to them.
It is important to find a company that is credible and to follow up to make sure they are actively representing your interests. It is not necessary to go through a company, however. Individuals can negotiate with the lender themselves. Either way, a home loan modification is a good way to save your home from foreclosure.
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