This is updated from the original series first published in September 2011.
Part 1: Getting Started
Stop paying on your loan (no I can’t say that even though it’s true). If you are current the bank has no incentive to work with you. I recently was asked by a Wells Fargo negotiator to explain why the client started missing payment last July. Obviously I didn’t say, “To get your attention!,” rather I said because the hardship of (fill in the blank) was just too much at that time. In this case, I had a homeowner who, after having been unemployed for nearly 3 years, finally had to take a job out of area, in San Diego, hundreds of miles south, and that I said was the reason.
Assemble your papers. You will need 2 months bank and investment statements for all accounts, 2 recent pay stubs, 2 years tax returns – signed, 2 years W-2’s. You will need a copy of your current property tax bill and a utility statement (to prove you live there).
Hardship letter. You will need to concisely explain your situation; you lost your job for a while, your income is down, someone was sick etc. You will need to demonstrate this with a detailed breakdown of your monthly expenses – this is how they will assess whether you even qualify for a mod. They are going to want to see it all so be prepared. As you begin this process, try and figure out what % of your gross income is currently used for housing. I will be going into this a little later in the series, but your ability to get a loan mod under the HAMP program, will hinge on this number – after the modification.
There will be some official forms from the bank that will double some of these efforts – grin and bear it, it has to be done. HAMP forms, the RMA (Request for Loan Modification), Dodd-Frank, 3rd Party Authorization if someone other than yourself is going to make calls on your behalf. Even though these acronyms may sound foreign, you’ll get to know them, real fast.
Make sure every page has your loan number on top – every page. Most lenders still require that you fax rather than email/upload loan mod papers. This means you’ll likely have to break up the pages into clusters of 40 pages or so. You’ll need access to a heavy duty fax machine – a little home all-in-one feeder won’t handle the volume of paperwork you’ll be sending. Expect that some pages won’t go through so you’ll need to resend the entire thing again – don’t try and send just the missing page, it’s easier to send the whole thing again. How will you know if it all the pages went through? You need to number every page. The fax cover therefore needs to also be a table of contents, so A) you know exactly how many pages went through and B) when the RM (Relationship Manager) or the document collection specialist says to you, you need to send the following, you can ask them to refer to the table of contents and then page such and such, which you’ve already numbered. In this way you will save a lot of back and forth. It’s time consuming, but like anything, proper preparation is 90% of the battle. If you go in willy-nilly, don’t bother. You will be chasing your tail forever and give up before you even get started. You have to be ultra thorough.
Next: Part 2. What Now?