The Queen of Short Sales

How to Arrange a Loan Modification with Your Lender

August 31, 2009 | Lenders, Loan Modification, Negotiations

Will my lender do a workout plan?

Your lender does not want to foreclose on you. That’s because your lender is in the business of making money through loans. Your lender typically losses money if they foreclose. Usually they cannot sell your home for what you owe on it while the interest, legal and maintenance costs continue to add up.

Do I qualify for a workout plan?

In order to qualify for a workout plan, your current financial situation needs to be as good as or better than when you purchased your home.

Whatever situation caused you to get behind on your monthly mortgage payments must have been a temporary situation that has since been resolved.

A workout plan, also known as a forbearance plan, must make financial sense to you and your lender.

What steps do I take?

1. Start saving your monthly mortgage payment. Your lender will require at least half of your past due mortgage payments and penalties as part of your workout plan.

2. Contact your lender and notify them that you want to arrange a mortgage payment workout plan. Ask them what documents they will need from you in order to make a decision. It is critical to your success that you keep detailed notes with names, dates and times. Ask the representative for their phone number, fax number and e-mail address if possible. Make notes of what was discussed. The best time to call your lender is first thing in the morning. Remember that your lender could be in a different time zone.

3. Your lender typically requires the following documents from you in order to make a decision:

• Last 2 years of federal tax returns
• Last 2 pay stubs for each borrower
• Last 2 months of bank statements for checking and savings
• A Personal Financial Statement
• A Hardship Letter that explains your situation and what caused you to get behind on your payments. Explain that this was a temporary situation and that it has since been resolved. Include your offer to pay half of what is owed now and ask them to accept one of the following methods to pay off the remaining balance:

a. Ask them to accept additional monthly payments for the next 24 months. This is the most common workout plan that lenders typically will accept.

b. Ask them to add additional monthly payments to the end of your mortgage.

c. Ask for a loan modification to lower your monthly payment by extending the length of your mortgage.

4. Fax your workout documents to your lender. UPS Stores, Staples and Office Max offer fax services. Make notes of the date and time you faxed your workout documents. Your lender can lookup your workout documents by the fax number it was sent from, so make note of the fax number you are sending from.

Note: Write your loan number at the top of each document before faxing.

5. Wait 2 days and then call the representative at your lender. Verify that they have received your faxed workout documents. Re-fax your documents if necessary. Ask the representative if they need anything else from you in order to make a decision and when you can expect the decision to be made.

6. This is another critical piece. Contact the representative every 2 weeks to see if a decision has been made regarding your workout plan. Your representative may be handling a couple hundred workouts at a time, so it is your responsibility to contact them and to keep your workout plan moving towards a decision.

What if I am uncomfortable doing the steps myself?

We can negotiate a workout plan on your behalf. We charge a fee equal to one month’s mortgage payment for our service. While we cannot guarantee that your lender will work with us and that we will be able to negotiate a workout plan, we do provide a written guarantee that we will promptly refund our fee if we are unsuccessful.

What if a workout doesn’t make sense?

If a workout plan does not make financial sense to you or your lender, then we can “Short Sale” your property. We do not charge any fees or commissions if you decided to sell.