There are plenty of mortgage loan modification myths floating around that are assumed facts, especially with so many upside down mortgages caused by the housing market crash. A lot more homeowners qualify for a mortgage modification than lenders are letting on.
MYTH: You cannot modify a loan if your home is upside down.
FACT: While you may not qualify to refinance if your current loan to value is upside down, that is not a factor for modifying a loan.You are not asking for a new loan. You are asking to restructure the loan you currently have. This does not involve re-qualifying. The same goes for credit score.
However your income and expense documentation does need to demonstrate you can afford the mortgage loan modification you are asking your lender to grant you.
MYTH: You cannot modify a loan unless you are behind on payments.
FACT: While your lender may tell you they only do mortgage loan modifications if you are two or three payments behind, that is just untrue.
What is really happening is that your lender is putting you off and hoping you will continue to make payments. As far as the lender is concerned you have made payments up till now, so if they can brush you off with a quick "no," then they will.
You do not have to be lying on the floor bleeding to get help. You just need to get the lender's attention and get them to take you seriously. The fact that you have made all your payments actually shows that you are a good candidate for help. You will continue to pay on time if you can afford the payments. Lenders can be convinced of this — but you have to get their attention and get them to take you seriously.
It is possible to negotiate mortgage loan modifications where the homeowner has never missed a payment or been late.In fact most of my personal clients are current and their lender previously said they did not qualify.
MYTH: Investment properties do not qualify for mortgage loan modifications.
FACT: I do not know where that idea came from but I will answer that in one word: POPPYCOCK! (Or is that two words?)
Article comments
1 - Candace
It is true that you can modify a loan for an investment property - but you can't do it under HAMP. Federal guidelines for loan modification state the house must be owner-occupied. However, just as you state in the last point, you can still get a modification, it just won't be under the government's program.
2 - jolene
While it is voluntary for the lender/servicer to participate in the government program -- if they choose to participate [which they do in order to get govt stimulus payments] then they have to follow the rules of the program.
Or, rather, they are supposed to, but there is nobody to make them do it, so they don't. So the lender/servicers go on making up their own rules as they go along -- making it a living hell for borrower's who are trying to comply, making borrower's jump through hoops over and over and over again, sucking money out of them for [ha, ha] the 3 month “trial payments” that go on ad infinitum.
Learn about the program. Read the rules. Know your rights. Go to www.hmpadmin.com. Spend time on this site. To get to the Supplemental Directives click “Programs” on the top blue menu bar, at the bottom of that page click “Supplemental Directives.” Read them.
For the HAMP Solutions escalation assistance, from the home page, go to “Resources” on the top blue menu bar, “For counselors.” Scroll down to: “Case Escalation Process,” where it says: “If you believe that a servicer is incorrectly interpreting HAMP guidelines, there is a process in place to help you. Find out the best way to escalate your case so that you get an answer to your concerns.” Click “Access Now”
Skip Step One, which is “First, work through your normal contacts and channels with the servicer. If that does not resolve the issue, elevate your concern to a senior manager within the servicer's organization.” Refer to the above. There is no senior manager who can or will help you.
Go to Step Two, “Contact the Appropriate Escalation Team.” “An escalation specialist will work with the servicer regarding the case and seek to provide you with an initial status within four business days of receipt of the requested inquiry information and borrower authorization. If the servicer is unwilling to comply with program guidance or the escalation team identifies systemic non-compliance, the escalation team may report the servicer to the Making Home Affordable Compliance team.”
The jury is still out on this, whether it is going to be just another servicer front, or if it will actually have some teeth. It is the only thing out there now.
3 - DP
Jolene- Thanks for the advice. Here's my situation in brief: bought my house for 128k when it appraised for 133k in 2007. Now, I owe 124k and it's appraisal has now went to 121k. UPSIDE DOWN... Whats your advice? I've been offered to refi without an appraisal by my lender, but I don't think the $80/month is going to be worth adding the $3k in closing costs to my mortgage. How can I get out of this situation? I'd love to sell it, but I'd have to sell below what I owe... Help Please.
4 - Patricia
Is it true that you cannot qualify for a loan modification if you have a Texas Home Equity Loan?