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Lenders have been faced with a large amount of loan modification requests and can be slow responding. At the end of 2006, the housing market took a turn for the worse and many banks became overwhelmed with the amount of servicing issues they faced. They received late payments, needed to make many calls to borrowers to look for payments and began many foreclosure proceedings. On top of it all, there were company mergers and staff layoffs, which made the process move even slower.
The process to apply for a loan modification is simple and straightforward. You will contact your lender and let them know that you are having financial difficulties. Whether your home is in foreclosure, or you are on the verge of missing a payment, the process is the same.
After an interview from your lender to see what the issues might be, the lender will send a packet to your home. The packet describes in detail what they require to even start looking at your loan for modification. You must include a hardship letter and proof of any income that you receive. The income is analyzed by the lender and certain criteria must be met before a modification is offered. Once this information is sent back to the lender, the waiting process begins.
Who You Get to Talk to
When you call in to get information on your loan, most commonly, you are speaking with individuals that do not have any particulars about your specific loan. These individuals have been hired to field the thousands of phone calls that the bank receives on a daily basis and their job is to give you basic information.
Ask to speak with their manager because they may have more knowledge. However, you will never have direct access to the person that is reviewing your loan.
When Does the Decision Arrive?
Every lender has a different specified waiting period, depending on their staff and workload. Many packets will spell out the customary waiting period. The lender needs time to process your paperwork and evaluate the best alternatives.
They will be answering questions like:
- What program provides the least amount of money for them?
- If they foreclose, what is the resale value and cost to sell?
- What are the costs involved in holding property?
- What is the value of the homes in the area?
- Can they find a short term solution to minimize their losses?
What You can do
In order to expedite the process, be sure to complete the application fully. Call the lender with questions before you mail it out, because any missing information will delay the process.
Also, be sure to provide the lender with all of the missing documentation; do not leave anything out. Remember that the lender will not process the application until it is complete. Some of the most common documents a lender will require are:
- Paystubs & W-2s
- Bank statements
- Mortgage statement for all mortgages (include 1st and 2nd liens)
- Hardship Letter
- Picture Identification
- If you have suffered a layoff, unemployment check
- If you have suffered a bankruptcy, copy of filed paperwork
- If you have suffered a divorce, copy of divorce paperwork
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