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  • Lenders will need to calculate your income and expenses when assessing your eligibility for a loan modification

    Lenders will need to calculate your income and expenses when assessing your eligibility for a loan modification

    This series of articles is looking in detail on how loan modification programs work. Learn what documents you will need, what forms you need to fill in and what lenders are looking for when selecting for potential candidates for a loan modification. Remember banks only will give you a loan modification if they feel you have a real financial hardship and you will be a reliable borrower once your loan modification is complete. Once you collect all the documentation required in your loan modification’s documentation list, your next step is to fill in a Request for Modification, also known as an RMA.

    The RMA requests basic information about your current loan, the reasons for your financial hardship, a summary of your income and expenses. Click here to download a sample RMA from the Making Home Affordable Program.

    The RMA will query you on your loan I.D. number, the servicer that manages your mortgage, your names and those of all co-borrowers on the mortgage agreement. You will also need to provide the Social Security Number, home phone number and date of birth.

    What state are you in? Please select an item.

    Behind on your mortgage payments?: Please select an item.

    Estimated mortgage balance owed? Please select an item.

    Who is your lender? A value is required.

    First Name: A value is required.

    Last Name: A value is required.

    Primary Phone Number: A value is required.

    Secondary Phone Number:

    Your Email Address: A value is required.

     

    The form also asks if you want to keep the property or sell it. Unless you are planning to short sale your home or ask for a deed in lieu of foreclosure make sure you tick on the “Keep the Property” box. Another important question you must answer is if the property is your “Primary Residence”, your “Second Home” or an “Investment”. Government sponsored loan modification programs such as HAMP will only provide mortgage aid if the property is your primary residence.

    Other questions you must answer are: Is the property listed for sale?, Have you contacted a credit-counseling agency for help? Have you filed for bankruptcy? If you have, what is your bankruptcy case number? Who pays the real estate tax bill on your property? and Who pays the hazard premium for your property?

    Contacting a credit counseling company sponsored by the government’s MHA program (that means free for you) is a good idea. Counselors will explain the implications of a loan modification and help you negotiate with your mortgage servicer.

    The RMA also includes a hardship affidavit you can use to explain why you are struggling to pay your mortgage. The RMA  sample we provided above provides four possible reasons: unemployment, excessive debt, increase of expenses and low cash reserves.

    The third section of the RMA is a detailed analysis of your income and expenses. The purpose is to check you have enough income after expenses to pay for your mortgage. Loan modification programs (such as HAMP) aim for homeowners to spend no more than 31 percent of their income on mortgage related costs.

    Fill in the entire RMA form, make copies and send all documents (both sides) to your servicer. Our next step is to complete the Homeowners Information Packet by filling in the IRS form 4506T.

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