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How To Get A Loan Mod Approved

There's a bold title right?  As if every file is the same and every lender is the same and every relationship manager, negotiator or supervisor is the same.  OK, so with that caveat, this is how I got one client's loan mod approved.



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.

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.

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 of 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?



How To Get A Loan Mod Approved
Part 2: What Now?

Now that you've assembled everything, and when I say everything, I'm talking a couple hundred pages everything, you are ready to fax the paperwork in.  You've numbered the pages and created your table of contents.  So where do you send it?  Every lender has some link on their website for Homeowner Help.  That's where you'll find their forms including the HAMP forms the Federal Government requires of you and the lender.  There will also be a phone number and you're ready to make the call.

Making the call.  When you contact your lender for the first time, let them go through their spiel.  They will ask for your loan number; address; do you still reside on the property; the last 4 of your social, do you want to keep the property or sell.  They will tell you they are a debt collector and anything you say will be used in an attempt to collect a debt and that this call may be recorded for quality assurance purposes.  They will go through this every single time you call.  I suggest keeping these numbers written on a card you keep in your purse or wallet so that if they call and you're driving or somewhere away from you file, you have the vitals.  You also want to have a pad of paper, to take notes; names dates phone numbers or extensions.  Your file notes don't need to be neat, just complete.  Also, remember if they call you it's always a good thing because that means someone is working on your file.  But since they are usually on east coast or central time, the call could come in early, especially if you live on the west coast.  I have received calls at 6:30 a.m. before.  You do not want to miss the call.   Getting back to that initial call, at some point they'll tell you where to find the forms and that you need to fill them out and finally where to fax them.  They will not tell you any of the tips I've listed in Part 1: Getting Started.  At this point you can say that you've put that together and are ready to fax in the paperwork.

You attract more flies with honey.  When you are speaking with the bank's representative there are several things to bear in mind.  First, they really do care about you getting a loan mod, to a point.  Don't interrupt them, or get testy and terse even if you're frustrated at having to verify you are you over and over; or if you're asked to repeat your story to someone new.  Try to never put them on hold and always, always let them know it's OK to take their time, there's no rush; if you're tight on time, don't make the call, do it later or tomorrow.  They are going to really appreciate this and your calm demeanor.  You've got to figure they are working on hundreds of cases.  In general, the process is so frustrating and tedious that the borrower or their representative will at some point, lose it, and rip into the person on the other end of the phone; how would you like that every day?  Be the one that is thankful and appreciative, ask about the weather, how they're doing, are they a Cowboys fan if they're in Texas, or joke with them that you've had 4 days of 70 degree weather or it took you 3 hours to shovel the snow off your driveway.  "Kill them with kindness", my mentor Mark Bader used to tell me.  Be sure and ask their name and use it!  People like to hear their own name and it makes you less an adversary as an ally or friend and in your file keep a log of every conversation.  If you miss something they said, it's OK to ask them to repeat that, or for you to restate it to make sure you got it right.  Your log has to have the date and the name of the person or persons you spoke with.  Ask them for a direct number to them or their extension.  They may not provide it if they are just answering the call in a rotation.  You can also ask for an email address but you are unlikely to get one since the bank doesn't want anything in writing that could be used against them later.

Faxing the documents.  Now that you've been through the authorization process and have the number you are ready to fax the mother lode of papers you've accumulated, even if they haven't asked for them yet, because they will.  It's critical that you try to stay a step ahead of the process.  But here's the key point to this approach: everyone likes the easy gig; the low hanging fruit; the one they can get off their desk as quickly as possible.  By giving them everything up front you are moving your file ahead of everyone else's.

The follow up call.  Your first follow up call will usually be a few days after you've faxed the papers.  It is very possible that they haven't processed your papers yet but you'll call to make sure they received them.  If there is someone to go over them with, do so.  Ask if they have everything they need.  This is where your table of contents comes in handy.  They have almost certainly not looked at all 200 or so pages yet.  So they will rattle off some documents that most people miss or weren't obvious to them in their 2 minute look over.  Find what they claim is the "missing document" in your table of contents and then refer them to the appropriate page number.  It's amazing how impressed they will be and how quickly they will want to push your file through to the next level.  If you are lucky, you'll get escalated right away, but don't count on it.  Finally ask them when you should call back, if they have an extension or direct line or if they know who your next point of contact will be and ask if they know who the investor is.  More often than not, you think the bank you're dealing with is the investor when in fact they are the servicer and the investor may be an entirely different lending institution.  B of A could be servicing a loan for US Bank and their rules may be different from B of A's.  And don't kid yourself, the more players the more difficult.

Super human patience is the key here.  You have to anticipate that this process could take a year or more.  You have to expect they will ask you for items you've already sent and be ready to repeat yourself.  You must be prepared that they will misinform you, contradict themselves and make mistakes.  But you have to keep your cool.  This is the process and you can't change it.

Next Part 3: Keeping the Pressure On



How To Get A Loan Mod Approved
Part 3: Keeping the Pressure On

After you've gone through the initial collection of your data, submitted all the paperwork and started your conversations, what happens now?  You call and follow up.  In the beginning you'll probably follow up once a week.  I like to call in the morning since I'm on the west coast and besides it's easier to catch people in the morning.  Don't forget, every call starts with verifying who you are, even if you're speaking to the same person every time; so don't get frustrated by this!

Once you have confirmed all your paperwork is in you will be assigned an RM ? Relationship Manager, their job is essentially to make sure all the paperwork is correct and current (this means be prepared to send in your latest bank statements and paystubs upon request).  Presuming you followed my advice in Part 1, you'll pass this test and your file will go to Underwriting.  This is the most difficult part.  You may have thought the losing of your file or transfer between more than one RM was the worst, but I am here to tell you the Devil is in the details and the one in charge of making the modification recommendation and scrubbing the details is the underwriter.   One would think the guidelines would be similar to refinancing a loan and in many ways they are, however modifying existing terms is a complex animal that few understand.  All the more challenging is the fact that you won't be able to speak with the underwriter - ever.  Further still, the underwriter may be forced to follow certain investor guidelines that are different from the bank you make your loan payment too; they work for one bank but have to answer to the rules of another.  The investor may have bought the loan from someone and wants the rate they are already getting from you.  They may have "policies" that exclude you and your file.  The underwriter is charged with managing all this, crunching numbers to try to make a payment fit within pre-structured guidelines set forth by the government; percentages of debt to income or DTI.  It would seem so simple for the lender to say, "OK, we'll just reduce your rate and stretch out your payments".  But it's not.  They have to calculate impounds for back taxes and insurance, what they refer to as "escrow costs" because they will set up what is commonly referred as an impound account for taxes, insurance and maybe even homeowner's dues.  They have to find the balance between the highest rate they can get for the investor against the rate you can afford.

Loan Amounts.  You are probably aware that there are two types of loans; those backed by government agencies like the Federal Housing Administration (FHA), Fannie Mae and Freddie Mac.  These are also referred to as conforming loans.  These loans fall under the oversight of HAMP, the Home Affordable Modification Program.  Remember I said there would be some government forms on your lender's website that you would have to fill out, and HAMP is the root of this.  But what if your loan was a jumbo loan?  Do HAMP rules apply to you?  No, but yes.  No because banks don't have to adhere to the HAMP rules but yes because they still follow them in general.  At Chase for example, they call it "CHAMP": Chase Home Affordable Modification Program.  But because it is not technically HAMP, expect different investors with even more complicated rules.  If you have a jumbo loan, it is very likely you will get rejection letters that will say you've been declined as unqualified for HAMP.  Don't get discouraged by this.  You already know this because by definition a jumbo loan doesn't qualify for HAMP.  The people you need to speak with are not the same people generating these obnoxious letters.  And when I say letters I mean you may get these HAMP decline letters several times if you are a jumbo mod candidate.  Just ignore them.

Time to bring out the guns.  You've been waiting and waiting and it starting to appear as if you've stalled.  You can't get any meaningful updates, and you want answers.  While staying cool and calm, you ask for a supervisor, try to get the name and extension; feel free to go over all your notes with whomever you are speaking with ie: "on March 3rd I spoke with so and so and she said... and on March 17th I was told by Mr. What's His Face that I should expect an answer by such and such" etc., etc.  Let them know you are handling this as a professional; you are detailed and have documented everything including them, if you've spoken with them before.  And if you have spoken with them and you remember, let them know, "John I spoke with last week about my mod on 123 Main Street".  They may or not remember you but it helps to break the ice and makes it friendly.  But you mean business at this point so keep the pressure on.  You can't take no for an answer.  If you completely sputter and really hit the wall, you need to escalate.  From the internet find the number of the Chairman's office and call there.  While this is no guarantee of success, odds are, after you've explained to the person you reach, all the dates and conversations you've had, (obviously it won't be the CEO but will be someone from the executive office), you should find a more responsive RM going forward.  This is called "getting your file escalated", and it's an important, virtually inevitable necessity.  I like to call it Climbing the Food Chain.

QA vs. UW.  So you've escalated, gotten your file over to Underwriting and finally UW has made a recommendation for modification.  You think "I've done it!", only to find out it now goes to Quality Assurance.  QA will evaluate the recommendations made by UW and look for errors; and there will be errors.  Remember how I said it was a lot more complex to modify than to refinance?  Because of this, your file may go back and forth between QA and UW more than once.  If you can't get satisfaction from you RM or there is no answer and you've left a message already, you can go into the general line and speak with anyone in the hopes of an update.  Often their information will not be as current as yours; don't get frustrated by this, sometimes however, they'll give away a couple of nuggets or clues that they shouldn't have, given their pay grade.  The more you find out, the more pressure you can apply.

Next Part 4: Foreclosure and mod offers.




How To Get A Loan Mod Approved
 Part 4: Foreclosure and Mod Offers 


Your loan mod appears like you're making some progress and you are actually starting to get a hopeful.  At the same time, you've got that gnawing feeling that the bank may not get you your modification in time and instead they'll foreclose on you.

Watch your timelines.  As this process is moving along, you're still not making payments.  You've been having lots of conversations with the Loan Mod Department or Loss Mitigation Department AKA: "Loss Mit", but did you know that the Foreclosure Department may not know the status of your mod and is moving toward foreclosing on you?  Not making payments triggers several things.  First, you are accumulating unpaid payments that are adding to your loan balance. This in turn is increasing your borrowing costs because those payments are adding additional interest to an ever increasing balance, further complicating the Underwriter's calculations by the way.  You've been getting nasty letters and calls from the Collections Department; don't they know you're doing a modification?  Uh in a word, no, and they don't care anyway.  They'll want you to make a payment of some kind - if you're in this far, don?t start making payments now (but I can't say that).  Every state is different of course.  In California the other trigger is the Notice of Default (NOD) or worse, the Notice of Trustee Sale (NOT).  For those of you reading this that are in Judicial states, I can't speak to the process since California is a Non Judicial state we have trust deeds not mortgages so no court appearance is required for foreclosure.  This is a critical point in the process, because you are like a covered wagon heading towards the edge of the Grand Canyon and if you're not very careful, will find yourself flying over into the abyss; said another way, you're playing Chicken with the bank and you could lose your home.  You need to call the foreclosure department and they should have a person or message directing you to a website that will show the sale date and status.  If a sale date has been set, you need to know about it.

Getting the sale postponed.  Truthfully if you are 60 days past the Notice of Default, you need to start talking with your RM or negotiator about the sale date.  Alert them by writing at the top of every correspondence, SALE DATE: PENDING.  Once you've found out the sale date, and you should have received written notification of this my mail or a note posted to your front door or both, you change your heading to, SALE DATE: 1/1/11 (your date).  It must be made clear to them that the clock is ticking; you have to get your sale postponed.  Get on the phone with whomever you've been working with and alert them to the pending sale.  This is a call you'll need to make every day or every other day until you get the sale postponed.  You need to verify the postponement in writing.  If someone says it's been postponed, ask for a letter, a screen shot, something.  You can't take their word for it, you've got too much at stake.  Once the sale is confirmed postponed, you can breathe a little easier, but they will only postpone it in 30 day intervals so this now becomes a regular part of your loan mod procedure.

Your first offer.  Very often the lender will make a throw away proposal to see if they can get you to bite.  It will usually be a "Piggy Back" offer.  This is where they "generously" allow all of your arrearages and back payments to be added to the balance but nothing else.  In other words, you don't have to make some monster single payback payment, but rather just add everything onto the back end.  They will tell you that this is what most homeowner's biggest hurdle is and tell you that's the best you can get.  You do not want to accept this offer.  First of all, it does nothing to change the payment you were making when you started this process; no change in rate or terms.  Secondly, if you accept this offer, you have precluded yourself from a future modification.  They won't grant a 2nd modification.  So repeat this mantra: escalate.  Explain to your person that this doesn't help you afford the home.  Ask them, if the underwriter is "looking at all my debt?; Don't they see I've got child support payments, a 2nd lien; a lease or time share you can't get out of; huge medical bills?"  You give them anything you can think of and then ask for a supervisor or make the call to the Executive Office.  You can call the Executive Office anytime you want.  They will likely be able to help get your file pushed forward and escalated.  Remember, write down everyone you've spoken with and their extension and reference your conversations with other Executive Office personnel; they likely all work together and know one another.  Again, this is just showing that you're serious, diligent and professional.

The Trial Mod.   After all the wrangling and number crunching is done, they'll finally come up a real offer.  This offer typically stretches your payments to 40 years rather than 30, makes it fully amortized if you were in an interest only and reduces your interest rate, which could come in the form of a straight forward reduced flat fixed rate or could be a step up whereby the first years are reduced super low and gradually step up; ie: years 1-3 are at say 2.5%, the next 2 years 3.5% and then the remaining years fixed at 4.5%.  But it won't become permanent until you've demonstrated you can handle the new payments.  This is called the "Trial Loan Modification Period" and is usually for 3 months.  This new structure will start at a date, often a month or two out; will include the taxes and insurance based on all the figures you've provided in your package and include all back payments and accrued interest.  Once you make those 3 "Trial" payments in full and on time, your lender will draw up new loan docs usually based on those terms (though they won't guarantee it's usually the case), and you now have a successfully modified your loan.  It only took a year but you did it.  Congratulations!

The object of this series.  You may be wondering why I would devote so much time in writing this and "giving away" all my secrets.  The reason is simple, I want to help you.  There is really no money to be made for a guy like me in doing loan mods.  They take a really long time and I cannot by law collect money up front.  In fact I could only collect a fee if I were successful.  Since this process is so difficult to accomplish, and since there are no upfront fees or retainers, it's just not a job that pays, so I'll stick to selling residential real estate.  I do make this one request, if you are one of the many that are seeking a loan mod or know someone who is, and you found this helpful, send me a referral.  I work the Los Angeles/Ventura County line and help buyers and sellers including short sellers, buy and sell real estate, so keep me in mind, I'm never to busy for a referral.