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  • Chase is one of many banks offering its clients private Loan Modification Programs

    Chase is one of many banks offering its clients private Loan Modification Programs

    If you are struggling to make your mortgage payments but still have a regular income and could afford mortgage payments if they were a little more affordable, you might be a candidate for a loan modification. This series of articles looks at how bank’s loan modification programs can help you save your home from foreclosure. We are using CHASE’s loan modification program as an example, but the principles apply to most loan modification programs.

    As we explained before the only reason banks are willing to lower your mortgage payments or otherwise improve your mortgage terms is if you can prove you have a real financial hardship and you will be forced to foreclose on your mortgage if your payments cannot be reduced. You also need to prove you have enough income to pay for reduced mortgage payments. Your objective when applying for a loan modification is to prove you can’t afford your current payments but could afford modified (i.e. lower mortgage payments).

    If you can’t prove you have a financial hardship, your bank will see no reason to reduce your payments. If you can’t prove you can afford reasonable mortgage payments, your bank might decide foreclosure is their best option after all. Remember, banks offer loan modifications because foreclosures are more expensive than loan modifications not because of a specially charitable disposition. You need to provide evidence that you will be a reliable borrower if only your payments can be reduced. This evidence is provided in the second step of a loan modification: the eligibility review.

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    Loan modifications have four basic stages:

    1.) The initial conversation with a loss mitigation agent.

    2.) The eligibility review.

    3.) The trial period plan.

    4.) The final agreement.

    In the eligibility review you must provide detailed information about your personal and financial situation. Your first step is to complete a homeowners information package. The package is composed of three sections:  the Documentation checklist

    The Documentation list is a list (fancy that!) of all the documents you must provide to your bank so they can review and verify the information you provide. Documentation lists include recent bank statements and tax returns, W-2s and proof of additional income from you and any co-borrowers that appear on your mortgage. Required forms will vary depending on your situation. For instance if you are self-employed you will need to provide additional documents. The documentation list includes all the information you need to fill in the form correctly, so read it carefully. Remember all borrowers will need to sign and date all the forms and don’t forget to send both the back and the front of the forms when faxing documents.

    The key is to supply your banker with proof of all the income you receive, whether it is a wage packet, a pension, alimony or any other regular deposits that appear on your bank statements.

    Your next step is a request for modification of RMA. You will find more information on this in our next article.

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