Loan Modification For Dummies


Behind on your mortgage payments? Worried about losing your home? Don't panic. This practical, hands-on guide shows you how to apply for and secure a loan modification that will lower your monthly payment and keep you in your home. Your get step-by-step guidance in working with lenders, evaluating offers, negotiating, avoiding scams, and maintaining your financial health.

Prepare for the loan modification process-take stock of your situation, ...

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Behind on your mortgage payments? Worried about losing your home? Don't panic. This practical, hands-on guide shows you how to apply for and secure a loan modification that will lower your monthly payment and keep you in your home. Your get step-by-step guidance in working with lenders, evaluating offers, negotiating, avoiding scams, and maintaining your financial health.

Prepare for the loan modification process-take stock of your situation, determine whether you qualify, evaluate your options, and team up with the right people

Submit a successful application-contact your lender, gather key documents, assess your needs, and prepare an effective hardship letter

Negotiate like a pro-explore different loan modification adjustments, analyze offers, spot red flags, and strategize to get more of what you want

Deal with uncooperative lenders-know your legal rights, audit your mortgage loan, uncover predatory lending practices, and use proof of violations to get a modification

Get the assistance you need-know when to contact your lender, a consumer support agency, a federal agency, or your state attorney general

Remember that you're not alone-read about the real-world experiences of other homeowners who faced foreclosure and avoided it with a loan modification

Loan modification explained in plain English

Proactive, forward-thinking advice

Reviews of foreclosure alternatives

Tips for securing the best terms and lowest monthly payment

Ways to keep the modification process on track and on time

Resources for obtaining low-cost third-party assistance

Hints for leveraging your legal rights

Advice on avoiding the foreclosure trap again

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Product Details

  • ISBN-13: 9780470501993
  • Publisher: Wiley
  • Publication date: 8/31/2009
  • Series: For Dummies Series
  • Edition number: 1
  • Pages: 288
  • Sales rank: 630,495
  • Product dimensions: 6.00 (w) x 9.10 (h) x 0.80 (d)

Table of Contents

Introduction 1

About This Book 1

Conventions Used in This Book 2

What You're Not to Read 3

Foolish Assumptions 3

How This Book Is Organized 3

Part I Getting Up to Speed on Loan Modification 4

Part II Kick-Starting the Process: Applying for a Loan Modification 4

Part III Hammering Out the Details with Your Lender 4

Part IV Dealing with an Uncooperative Lender 5

Part V The Part of Tens 5

Part VI Appendixes 5

Icons Used in This Book 6

Where to Go from Here 6

Part 1 Getting Up to Speed on Loan Modification 7

Chapter 1 Keeping Your Home by Modifying Your Loan 9

Grasping the Loan Modification Concept 9

Reducing and fixing the interest rate 10

Extending the term 10

Reducing the principal balance 11

Dealing with delinquencies 11

Re-amortizing the loan 12

Considering Other Foreclosure Alternatives 13

Do You Qualify? 14

Assessing Your Needs 15

Opting to Work with a Pro or Go It Alone 15

Hiring a pro 15

Dealing directly with your lander 16

Getting Your Ducks in a Row 17

Gathering essential documents 17

Plotting the timeline 17

Logging all correspondence 18

Following the Process from Point A to Point B 18

Preparing and submitting your application 19

Playing the waiting game 19

Making your case during the homeowner interview 20

Structuring a workout plan 20

Reviewing the lender's initial offer 21

Pitching your counteroffer 21

Closing the deal: Now what? 22

Taking Legal Action-Only If Necessary 22

Chapter 2 Taking Stock of Your Situation 23

Understanding How You Ended Up in This Mess 23

The mortgage meltdown: From Wall Street to Main Street 24

Other events beyond your control 28

Common triggers you mayhave some control over 29

Sizing Up Your Financial Situation 30

Tallying your monthly income 30

Computing your payments on debt 31

Calculating your debt-to-income ratios 32

Dissecting your current budget 34

Estimating an Affordable House Payment 37

Basing your estimate on a conservative back-end ratio 37

Basing your estimate on your monthly budget 38

Chapter 3 Evaluating Your Options 41

Negotiating a Work-Out Solution with Your Lender 41

Modifying your existing loan 42

Reinstating the loan 43

Negotiating forbearance 43

Considering principal forbearance 44

Refinancing Out of Trouble 45

Consolidating your debts 45

Refinancing the old-fashioned way 47

Doing a short re-fi 47

Playing the Bankruptcy Card 48

Getting Out from Under It: Selling Your Home 49

Selling for a profit: Do's and don'ts 49

Selling to break even with a short sale 50

Selling quickly to an investor 51

Teaming Up with an Investor to Stay in Your Home 51

Selling your home and buying it back 52

Selling your home and renting it back 53

Ditching the Property 53

Exchanging a deed in lieu of foreclosure 53

Living rent-free through redemption 54

Abandoning the property 55

Redeeming the Property Post-Auction 55

Doing Nothing-A Terrible Choice 56

Keeping an Eye Open for Brand-New Options 57

Chapter 4 Deciding Whether to Team Up with a Pro or Fly Solo 59

Weighing the Pros and Cons of Hiring a Professional 59

Examining the pros 60

Analyzing the cons 62

Identifying Professionals Who Can Assist You 64

Loan modification attorney 64

Foreclosure attorney 65

Bankruptcy attorney 65

Real estate attorney 65

Credit counselor 66

Real estate agent 67

Mortgage broker or loan officer 67

Choosing the Right Individual or Company 68

Locating qualified candidates 68

Doing some detective work 69

Asking the right questions 69

Making an informed choice 71

Avoiding clever schemes and scams 72

Scraping Together Money for Upfront Fees 73

Teaming Up with Your Representative 74

Part II Kick-Starting the Process: Applying for a Loan Modification 75

Chapter 5 First Things First: Contacting Your Leader 77

Checking Out Your Lender's Web Site 77

Clicking your way to something useful 78

Knowing what to expect 78

Tracking Down a Representative Who Can Help 79

Making the initial call 80

Bypassing automated systems 82

Communicating effectively with foreign call centers 82

Taking names and extensions 84

Describing Your Situation 84

Finding Out What Your Lenders Is Willing and Able to Do 85

Checking Application Requirements 87

Listing the items required 88

Getting a shipping address and fax number 88

Asking about timeliness 89

Keeping the Debt Collectors at Bay 89

Chapter 6 Gathering Facts, Figures, and Documentation 91

Digging Up Documents 91

Proof of income 92

Proof of hardship 92

Mortgage statements and related documents 93

Other loan statements 95

Monthly bills and expenses 96

Closing papers 96

Documenting Your Property's Market Value 98

Authorizing Your Representative to Speak with Your Lender 99

Chapter 7 Knowing What to Ask For 101

Recognizing Your Three Main Objectives 101

Curing any default 102

Lowering your monthly payment 103

Keeping your home 104

Establishing a Baseline with Your Current Mortgage 105

Playing "What If?" 107

Test-driving a lower interest rate 107

Spreading payments over a longer term 108

Adjusting the principal balance 109

Mixing it up by adjusting several variables 111

Trying on an interest-only loan 112

Considering the Potential Fallout 113

Assessing the effect on the former loan 114

Forecasting the effect on your credit rating 114

Gauging the effect on your ability to pursue future actions 114

Assessing the tax implications for discharged debt 115

Chapter 8 Preparing and Submitting Your Application 117

Penning Your Hardship Letter 118

Recognizing eligible hardships 118

Answering a few questions 119

Reviewing sample hardship letters 120

Creating Financial Statements 123

Painting a current financial portrait 123

Projecting your post-modification finances 125

Signing, Sealing, and Delivering 127

Arranging your documents 127

Signing on the dotted lines 128

Labeling every page 128

Copying the entire packet 129

Submitting your application 129

Chapter 9 Keeping the Process on Track and on Time 131

Knowing What to Expect 131

Documenting the Process for Your Records 132

Recording conversations 133

Keeping copies 134

Cross-checking the "facts" 135

Following Up with Calls and Correspondence 135

Keeping in touch by phone 135

Sending or faxing a letter 137

Remaining in the loop via e-mail 137

Dealing with Lender Delays 138

Negotiating an Extension or Adjournment 139

In the Meantime: Exploring Other Options 140

Part III Hammering Out the Details with Your Lender 141

Chapter 10 Discussing Loan Modification Scenarios with Your Lender 143

Looking at the Situation through Your Lender's Eyes 143

Practicing the Three C's of Working with a Loss Mitigator 144

The first C: Communication 145

The second C: Composure 146

The third C: Credibility 146

Making Your Case during the Homeowner Interview 147

Preparing for your interview 148

Presenting your case 148

Examining the MHA Initiative 150

Refinancing your loan 150

Modifying your loan 151

Structuring a Loan Modification 151

Making the house payment affordable 152

Catching up on deficiencies and penalties 153

Addressing interest-rate issues 153

Request Denied: Now What? 154

Chapter 11 Evaluating Your Lender's Initial Offer 155

Deciphering a Loan Modification Agreement 155

Checking the reference to your former mortgage 156

Analyzing the unpaid balance 157

Acknowledging the promise to pay 158

Inspecting the monthly payment details 158

Wading through any interest rate adjustments 159

Inspecting any term extension 160

Capitalizing or waiving penalties and other fees 161

Steering Clear of Common Traps 162

Dismissing the take it or leave it threat 162

Waving off legal waivers to your legal rights 163

Warning! Shifting interest rates 164

Ducking repeated defaults 164

Chapter 12 Negotiating a Better Deal 167

Recommitting to a Reasonable Solution 167

What's fair for homeowners 168

What's fair for lenders and investors 169

Reminding Your Lender What You Can Afford to Pay 170

Reminding Your Lender What It Stands To Lose 171

Estimating the lender's losses in foreclosure 172

Calculating the lender's losses from a loan modification 173

Gaining a strategic advantage with what you know 175

Not Taking "No" for an Answer 176

Applying Some Subtle Legal Pressure 177

Consider mentioning the B word: Bankruptcy 177

Bring up concerns about predatory lending 178

Have an audit performed 178

Part IV Dealing with an Uncooperative Lender 181

Chapter 13 Brushing Up on Your Legal Rights 183

Knowing Exactly What Your Lender Must Disclose 184

Disclosing loan terms and costs 184

Disclosing other important information 188

Using the TILA and HOEPA to Your Advantage 190

Identifying noncompliance issues 190

Pushing for a resolution 191

Leveraging the Power of RESPA 193

Identifying RESPA violations 193

Recognizing potential penalties for violations 194

Getting Special Treatment: Military Servicemembers Only 194

Chapter 14 Auditing Your Mortgage Loan 197

Recognizing Common Signs of Predatory Lending 198

Inflated interest rate 198

Inflated appraisal 199

Doctored loan application 200

Approving an unaffordable loan 201

Equity stripping (loan flipping) 203

High-risk loans 203

Discriminatory interest rate 204

Excessive or unwarranted fees 204

Stiff prepayment penalties 205

Requiring mandatory arbitration 206

High-pressure sales tactics 206

Recalling and Documenting the Experience 207

Combing Through Your Loan Documents for Fraud Flags 208

Comparing the GFE to the HUD-1 208

Inspecting the Universal Residential Loan Application (1003) 209

Examining your mortgage and promissory note 210

Hiring a Pro to Do It All for You 211

Anticipating the Lender's Response to Any Legal Claims 212

Chapter 15 Applying Some Legal Pressure 213

Filing a Formal Complaint with Your Lender 213

Filing a Complaint 217

Taking action at the state level 217

Filing with federal regulators 219

Contacting professional associations 220

Following through on your complaint 221

Filling a Lawsuit 221

Ordering a mortgage audit 222

Getting up to speed on the procedure 222

Securing professional representation 223

Calling the Cops 224

Part V The Part of Tens 225

Chapter 16 Ten Tips for Long-Term Success 227

Get the Best Deal You Can 227

Get Credit Counseling 228

Try Modifying Other Loans, Too 228

Prioritize Your Debt Payments 229

Slash Discretionary Spending 229

Pay Yourself an Allowance 230

Haggle Over Every Purchase 231

Moonlight to Earn Extra Income 232

Put Everyone to Work 232

Check Your Progress 232

Chapter 17 Ten Common Loan Modification Myths 233

My Bank Wants To Take My Home 233

My Credit Score Is Too Low 234

I Can't Qualify until My Loan Is in Default 234

I'm Better Off Declaring Bankruptcy or Walking Away 235

I Can Negotiate Myself For Free 236

It's Too Late to Modify My Loan 236

The Lender Doesn't Have to Negotiate 237

Upfront Fees Are a Scam 237

I'll Lose My Home If I Don't Qualify for a Loan Modification 238

I Can Modify Only the Loan on My Primary Residence 238

Part VI Appendixes 239

Appendix A Resources 241

Major Lender Web Sites and Customer Service Numbers 241

Consumer Support and Federal Agencies 245

Consumer support 245

Federal agencies 247

State Attorneys General 251

Appendix B Glossary 255

Index 263

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