| 8 Loan Modification Application Tips, 8 Best Practices For Loan Modification Applications, |
| Articles - Mortgage |
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It may seem obvious, but these 8 tips can help you get "out-of-line" and up to the head of the line!
It may seem obvious, but these 8 tips can help you get "out-of-line" and up to the head of the line! I've argued with banks for two years about loan modification applications and submitted over 200 hundred applications for clients and for my self. I have developed some Best Practices that you won't read about on the government sites or on the bank's own site. Now, with so much press about loan mod failures, I'm often puzzled as to why I still get such a high success rate for clients. I believe a big part of the answer is what I call "file inertia". You will remember the concept of inertia from high school physics class. Mr. Sabin told me "It's the tendency of matter in motion to remain in motion, and the tendency of matter at rest to remain at rest". Similarly, in the huge Loss Mitigation Centers at banks, your loan modification application file tends to stay in motion or at rest. Best to keep it moving! Here's how. Lenders are overwhelmedthat isn't news. A way to get more time to work on the easy files and get management to cut them some slack is for Loss Mitigation Officers to reject as many files as they can for whatever reasons are available. There is lots of incentive to get files off their desk (or computer) and the easiest way to do that is to find some way to redirect it for rework. That's bad news for you because once the file stops, it tends to stay that way! So, your application must, more than ever before, be perfectly presented, perfectly complete, perfectly accurate and perfectly approvable. In shortit must be one of the "easy ones". Items such as missing documents, unsigned Tax forms, expired form 4506-T and inadequate income documentation make it easy to get your file off their desk and over to the fix-it team. Make File Inertia work for you by: One: Income must be well documeted and clearly shown. Include a notary witness on your self-employed Profit and Loss Statements, attache annual award letters for your SSI and EDD income, show how you calculated your monthly gross income and household gross incomes, and show clearly how you calculated your recent (YTD) 1099 income. Two: Include rental properties properly, especially if you are applying for a Making Homes Affordable modification on your primary residence. Three or more properties should always be presented in a separate Schedule. Go to great lengths to be certain they evaluate it separately, like a separate business. Take the net profit or loss over to your personal budget as one single line item. Take care, as these folks are not highly trained and not experienced in financial matters. The issue is not to dilute your Debt-to-Income Ratio with too much income and have to argue about your qualificaitons for HAMP. Three: Be sure your front-end DTI is over 31%. Your application will be rejected if it is not at least this high. It is calculated by dividing gross household income into 1st mortgage payment (including Principal, Interest, tax and insurance and homeowner's assoc dues). Get your income down or payment up to this degree or it's over. Number Four: Your back-end DTI (total indebtedness as percent of gross household income) must be less than 70%. If it is higher, you will get rejected for having too much debt. Number Five: Be sure you check your credit report (get a free copy each year at www.annualcreditreport.com) to be sure all debt items are present and accounted for on your application. Six: Cash flow on your budget should be near zero. That is, after your taxes (5-15%) and debts (31-70%) be sure you show that you spend all your remaining funds. Excessive funds and shortage fof funds will both result in rejection. Don't try to apply logic here! 7. Be in default at least 60 days. That's how long it takes for you to get out of the grips of the bank's "Immanent Default" team. Trust me, you want to get out of their grips as they are masters of delay. Eight: Construct the finished product to be easy to read, navigate and understand. Imagine you are there presenting it in person. Include a cover page and notes extensively. Imagine you are presenting to a young and poorly trained and overworked person without any finance or real estate background. That is the case! Use their forms and do not skip any items or sections. Strike-through any that you do not answer so they don't think you missed it in error. At the bottom of EVERY page (that's right, EVERY page) sign/date and inlcude account number and page number. these tips will enable you to eliminate one of the obstacles that frustrates so many applicants. At least your file will keep moving! A steady and intelligent follow-up scheme is the next step. I'll write about my method next week. DISCLAIMER: This article is provided as information only and is not to be taken as financial advice. Learn more insider tips and tricks. Make your loan modification application sizzle.? Visit Rockwood's site about DIY Loan Modiification at Home Loan Modification Also published at {title}. |