How to qualify for a Loan Modification

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How to qualify for a Loan Modification
[July 23, 2008] by Foreclosure Help
Filed under: qualify for a loan modification

Do I qualify for a loan modification

In many instances a homeowner is set up on a forbearance plan prior to completing loan modification which allows a mortgage company to monitor the financial condition of a homeowner during the special forbearance period to be sure the homeowner will be able to make payments to the lender. There are important documents required that are reviewed by a mortgage company.

Hardship Letter:

To qualify for a loan modification homeowner must have a valid hardship. The hardship must be documented and given as many details as possible to support your case. A hardship letter is very subjective and pretty much a formality in the process of getting a mortgage modification. There are a few hardships that are considered voluntary and do not qualify, quitting a job or reducing the amount of hours worked are typically not accepted. The hardships are documented and if there is an additional default the homeowner can not use the same reason for default otherwise their previous hardship was really not over and in many instances the |homeowner is denied a loan modification.

Financial Statement:

The financials are used to determine the homeowners ability to pay. This is usually the first form reviewed by the mortgage company negotiator. This document must clearly indicate monthly income and expenses as well as current assets and liabilities. This is what makes and breaks the entire loan modification review. This document also shows whether or not the mortgagor will be able to make payments if the mortgage is modified. There must be a surplus income at the end of the loan modification or else the plan will be denied. The plan must be affordable. If a homeowner is severely over-leveraged with debt there is little chance that a loan modification will cure the delinquency. Monthly expenses are reviewed to determine what bills are necessary and what are unnecessary. Necessary expenses are food, utilities and gas and an example of unnecessary are entertainment expenses, expensive phone plans and unsecured debt. Household expenses mortgage payments, utilities, and taxes take up most of the monthly budget. Do not make expenses look unreasonable will be a red flag to get further detail. The negotiators will always look for assets that can be liquidated.

Proof of Income:

The proof of income is usually a paycheck stub, a P&L Profit and Loss Statement if self employed, or checking account statement showing paycheck deposits. The proof of earnings is required to prove the homeowner has steady income. The mortgagor must also give frequency of pay. The proof of income must correspond with the income shown on the financial statement. Resolve any discrepancies

Part One in our Loan Modification Help series

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