Apply For Mortgage Loan Modification – Do It Yourself ? Learn How
Applying for loan modification is not that complicated. You can do it yourself. The process is quite simple: Find out if you are eligible and if you are, fill out the proper forms and submit them to your bank. If you do it correctly, the bank can’t turn you down. It is as easy as filing your tax return.
You lost your job or the current job does not pay enough for you to afford the mortgage payments. Your house value is under water, so there is no equity left. You have only two options: Foreclosure and you lose the house or a home loan modification program. Federal Government provides a wide range of programs for the banks to facilitate loan modification if you qualify.
I am going to start with a very simple tutorial in finances.
Banks are in the business of making money for its customers, the individuals and business depositors. Savings accounts pay interest and checking accounts with a minimum balance are serviced free of charge. The minimum balance pays for the checking service.
The bank uses the depositors’ funds to make loans to businesses, home and car buyers and so on. All financial institutions including credit unions are performing a very important and essential service to the businesses and individuals. You can buy a car today and pay for it in installments over a three year period; the same for the house. Buy it, move in, and benefit from living in your own home, and pay as you go over a period of 30 or 15 years.
Let me make it clear: You don’t really own your car, nor do you own your house, until they are paid off. However, you treat you car and the house as your possession as you should, because your intent is to take possession.
Think about it. When the bank loans you money, it is not the bank’s money; it is someone’s or even some of your money. The bank has a fiduciary duty to insure that the money it lends returns a profit and certainly not turning into a loss.
Communist societies did not provide money lending facilities of any kind. In order to purchase a motorcycle worth ,500 with a salary of 0 per month individuals had to save money for years, order the bike, deposit the full amount and wait for another year to take delivery.
Fannie Mae and Freddie Mac are quasi governmental agencies that hold most loans the banks have sold. Dealing with the bank regarding your mortgage is the same as dealing with the Federal Government.
Think about filing your tax returns. You must know the law (the rules) and fill out the proper forms with the information you already have. If you use a tax processing agency, you are using their expertise in tax law and the filing requirements. You still have to provide the necessary information yourself. Free software available for tax submission uses a query system to get from you all relevant information. Once the information is provided, the software places it in the proper form and summits it on your behalf to the IRS. It is that simple.
Bankruptcy filling is also governed by the Federal laws. The law is very precise and specific about what qualifies to be discarded in a personal bankruptcy filling. Once you know the rules and the forms, you will submit them to a federal judge and he will make a ruling. It is not really that complicated. An attorney would charge ,000 or more just to fill out the papers. You could have done it by buying a manual for 0.
How to approach you bank for a mortgage loan modification
As I mentioned earlier, any loan modification is subject to some form of Federal Housing Administration (FHA) rules. In the old days, when you could not pay the mortgage, there was a simple exit: You vacated the house and the bank took it over. Not anymore. Due to the government’s involvement, the banks can follow you for the rest of your life to the extent that it can even garnish you bank account or future earnings.
Remember, when you need a loan modification the bank is not your friend. The bank has become a government agent. If you qualify and submit the right information on the right forms, the government reimburses the bank for loses and you are the beneficiary.
Before approaching your bank for loan modification you have to do some important homework:
1. Find out if you are eligible.
This is very critical. You must show hardship such as loss of job, a lower paying job, major medical expense, etc. This information is available from the banks and several government agencies. Do not lie or misled. If you do, it is a federal crime. Don’t do it.
For you to understand what I am saying, I will explain how the Medicaid program works. Medicaid is a health assistance program for the poor provided by the states in conjunction with the federal government. The definition of being poor is no assets and a maximum balance of ,000 cash in the bank. If you had more than ,000 in assets and benefited from health services, the extra (above ,000) had to be used to pay the medical bills. It goes into perpetuity; as soon as you accumulate any money above ,000, the government will make sure it goes to the medical bills until they were paid off.
2. Make sure you submit the relevant information and use the right forms. Many people who applied for loan modification were told by the banks that their files were lost. The truth is that their files were in a holding bin while the bank was trying to reach the applicants for clarification.
3. Now you are qualified for a loan modification agreement. Make sure you can pay according to the agreement. You will be dealing with the government from now on. Depending on the type of agreement, there could be tax liabilities involved. If the bank agrees to reduce the principal on your loan, that will trigger a capital gain tax. Make sure you understand all implications.
4. Do not hire a “Loan Modification Broker” or a similar service that charges ,000 or more and promises to deliver. Loan modification is a transaction between you and the bank. The bank is not interested in it; there is no money for them. You are the only party who can benefit. There is nothing a loan modification broker can do for you better than yourself.
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