Provide Proof Of Finances
As you fill out the loss mitigation application form, you will be asked to provide proof of your finances. You should expect to include copies of your most recent pay stubs, bank statements and tax returns. Youll also need to put together an income and expense report that shows how you spend your earnings.
Other Mortgage Modification Programs
Both the Federal Housing Administration and U.S. Department of Veterans Affairs have mortgage modification programs for eligible borrowers.
The FHA loan modification program helps struggling homeowners by using one of the following options:
- Adding late payments to their principal balance.
- Extending their loan term.
- Reducing their outstanding balance by up to 30%.
Eligible borrowers must:
- Not qualify for other mortgage assistance programs.
- Have a DTI ratio of no more than 31% on the front end and 55% on the back end.
- Complete a three- to four-month trial, which depends on whether youre in default or imminent default.
VA loan borrowers who qualify for a modification may receive help by:
- Having their past-due amount added to their outstanding principal balance and calculating a new repayment schedule.
- Extending their loan term and getting a lower monthly payment.
Eligible borrowers must:
- Have made at least 12 monthly payments since your mortgage closing.
- Demonstrate your ability to repay the mortgage and not default.
- Not have had any loan modifications over the past three years.
- Not have had more than three loan modifications since your mortgage closing.
Who Is Eligible For A Loan Modification
To qualify for a loan modification, a borrower usually must have missed at least 3 mortgage payments and be in default.
Sometimes, a borrower who has experienced financial setbacks, which makes a default imminent, can qualify for a loan modification. But not everyone in default under their mortgage is eligible for a loan modification, explains Whitman.
Borrowers whose financial setback is so severe that they will never be able to repay their mortgage wont receive a modification, nor will borrowers who have the ability to make mortgage payments either from their income or savings.
Borrowers whose financial setback is so severe that they will never be able to repay their mortgage wont receive a modification Elizabeth Whitman, attorney & managing member, Whitman Legal Solutions, LLC
In addition to providing a hardship letter or statement, prepare to provide proof of income, two years worth of tax returns, and bank/financial statements, says Condor.
Be aware, however, that your lender is not obligated to provide a loan modification.
Once a lender has an executed contract meaning the loan they dont have to change it. Many are denied a mortgage loan modification, Gallagher explains.
If the lender desires to modify the terms, per your request, then you have a starting point.
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Do Most Loan Modifications Get Approved
No matter how focused your attention to detail, your credit score almost certainly will take a hit with a home loan modification. Often, a homeowner wont get approved for a loan modification unless there is evidence of one or several missed payments. Those missed payments hurt your credit score.
Qualifications For A Mortgage Modification
Some of the basic requirements are as follows:
A. Applicant for Modification is a Borrowerfor the Loan Borrower must be on mortgage or have letters of testamentary allowing them to absorb the mortgage and make decision on the loan.
B. Qualifying Income is also a Requirement Income used towards a review are but not limited to W2 wage earnings, self-employment, social security, pension, child support, alimony, and monthly rental. Temporary income such as unemployment is not used towards a review due to being a temporary source of income. Contributions by non-borrowers could be considered, only if the the non-borrower resides at the property.
C. Basic Documentation and Application and Some Lenders also have specific required documentation to qualify a borrower Some of the documents needed are but not limited to a hardship letter, proof of income in the form of bank deposits, 2 most current taxes and detailed source of income Many lenders have their own lender specific application that must be submitted with the borrowers personal information to be reviewed.
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Gather Proof Of Your Financial Circumstances
The lender will need proof of your financial situation. To show how much you earn and how much youre spending on basic expenses, gather your:
- Recent tax returns
- Monthly bills
- Asset statements
- You might also need to supply an IRS Form 4506-T, which allows your lender to access your tax information from the IRS
Get to work writing a hardship letter, which explains how you fell behind on payments and how you hope to rectify the problem. Your other documentation should support this information.
Qualifying For A Mortgage Loan Modification
Loan modifications are only extended to borrowers in financial crises and who are in danger of defaulting on their original loans.
Lenders can set their own criteria for eligibility, but the requirements are usually that:
- Youve missed at least one payment
- You can provide proof of financial hardship
- You have evidence that you could make your payments with a modified loan
These are typically negotiated through a lawyer or a settlement company.
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Different Forums And Modes Of Applying For A Mortgage Loan Modification
There are different forums that can be used to modify a mortgage as follows:
Direct Modification Negotiations with Lender Borrowers can deal directly with the lender. By dealing directly with a lender, you can resolve the delinquency immediately and avoid foreclosure. This process must be started immediately to avoid your lender from hiring an attorney to start a state action against you and repossess the collateral property.
State Court Foreclosure Settlement Conferences Modifications and can be reviewed during the beginning stages of a foreclosure litigation where the Supreme Court Judge assigned to a case or their clerk reviews with the partys attorneys progress toward settlement and/or modification and encourages both sides to engage in good faith negotiations.
Bankruptcy Loss Mitigation Hearings The benefit of requesting a loan modification through a bankruptcy chapter 13 or 11 case is that both sides need to regularly at loss mitigation hearings report to the bankruptcy court progress in seeking a modification and/or other settlement. Lenders therefore have less of an ability to act in bad faith because of this close supervision. The Bankruptcy Judge assigned to the case will give both the lender and the borrower a timeline to produce all documentation. The lender is usually on its best behavior and are less likely to be arbitrary or to make a mistake in fear of being sanctioned by the judge.
There May Be Other Options To Save Your Home
Mortgage modifications aren’t the only option you have to prevent foreclosure. If your financial circumstances are temporary, then your lender may be able to offer you a mortgage forbearance. This is a temporary pause or reduction in payment amount instead of modifying the loan permanently. These programs are specifically for those who have only a temporary change in their circumstances but will be able to resume their regular repayments after a short period of time.
If you can restart your normal mortgage payments again after missing one or two, then you may be better off setting up a repayment plan with your lender. Instead of modifying your loan, your lender can increase your payment amount temporarily until you’ve made up the payments you missed. After that, your payments would go back to their regular amount.
Contacting your lender as soon as you know you aren’t going to make a payment is best. This helps them find the right option for your circumstances.
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How Can I Get A Mortgage Modification
If you’re struggling to keep up with mortgage payments and are seeking ways to avoid foreclosure, a mortgage modification could offer the help you need to stay in your home.
A mortgage modification is a change to the repayment terms on your existing home loan that lowers your monthly payment. You may be able to get a mortgage modification if you can show your lender that your financial situation has changed in a way that could permanently hinder your ability to make your payments as originally agreed.
How Does A Loan Modification Work
If youre eligible for a mortgage modification, your lender may extend the length of your mortgage term.
Lets say you have 15 years left on your mortgage. To lower your monthly payment, the lender might extend your term to 20 or 25 years.
Or if youre paying a higher interest rate, the lender might reduce your mortgage rate. An interest rate reduction can also lower your monthly payment, making it easier to afford the mortgage.
Then again, a modification could involve switching your adjustable-rate mortgage to a fixed-rate mortgage.
Adjustable-rate mortgages have interest rates that reset every year. This is after a temporary fixed-rate period. These loans are riskier because they involve unpredictable mortgage payments.
With a fixed-rate, your interest rate remains the same for the life of the loan. This results in a predictable mortgage payment.
Has a recent rate reset caused your adjustable rate to skyrocket? Switching your home loan to a fixed-rate mortgage might improve affordability.
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What Does It Mean To Refinance Your Mortgage
You replace your existing loan with a new mortgage when you refinance. This allows you to change the terms of your loan. You can also use your equity to take cash out of your home. You might want to refinance to:
Unlike a loan modification, you dont need to refinance with your current lender. Unsatisfied with your lender? A refinance can allow you to switch to a new lenders system.
What Is A Mortgage Loan Modification
A “loan modification” is a written agreement that permanently changes the promissory note’s original terms to make the borrower’s mortgage payments more affordable. A modification typically lowers the interest rate and extends the loan’s term. In some cases, if you’re behind in payments, you might be able to add the overdue amount to the balance of the loan as part of a modification. Lenders and investors usually won’t, however, approve principal reductions as part of a modification, even if your home is underwater.
To get a modification, you’ll need to contact your loan servicer to get an application. In the application, you’ll have to supply details about your income, expenses, and situation. You’ll also have to provide supporting documentation. Even though the process might seem intimidating, most people can apply for and, if you meet investor-specific guidelines, get a modification on their own without paying for assistance.
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How To Get A Mortgage Modification
If you’ve missed one or more mortgage payments or, better yet, know you’re about to miss a payment but haven’t yet gone delinquent, contact your lender and explain the reasons for your difficulty making payments.
Be prepared to discuss your financial difficulties in some detail. You’ll have to document your hardship as part of a formal application, so gather relevant paperwork before you call so you’ll be prepared to answer questions.
The lender will likely require you to apply for the modification in writing, and to submit proof of income and expenses before and after the onset of your hardship. That could include tax returns, pay stubs, monthly bills and statements, plus information on your savings and any assets you may have .
If your mortgage is backed by any number of federal agencies or programs, you may qualify for a government mortgage modification plan:
While the CARES Act only covers federally backed mortgages, private lenders may be extending comparable relief programs to their borrowers.
Contact Denbeaux & Denbeaux Law To Discuss Your Shellpoint Mortgage Servicing Loan Modification In Nj
Are you a homeowner going through foreclosure and ready to get a loan modification with Shellpoint Mortgage Servicing? At Denbeaux & Denbeaux Law, our goal is to guide homeowners through the loan modification process and give a sense of peace in a troubling time. Joshua Denbeaux explores everyones unique situation and helps you decide the best course of action.
Dont wait until its too late! Contact us today for a free consultation and find out how Denbeaux & Denbeaux Law may be able to help you get a Shellpoint Mortgage Servicing loan modification.
Speak To a Loan Modification Defense Attorney
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Tips To Avoid Loan Modification Scams
Unfortunately, there are people who aim to wrongly profit off consumers facing difficult times by creating mortgage modification program scams.
Modification scams typically relay false promises of saving you from foreclosure, and instead, take your money. Scammers may charge high, upfront fees to receive assistance or ask you to sign over the title to your home, just to name a few examples, according to the Consumer Financial Protection Bureau .
Do your due diligence when seeking mortgage assistance and verify youre receiving legitimate loan modification help. The Federal Trade Commission recommends the following six tips to avoid a modification scam:
File a complaint with the CFPB online or by phone at 855-411-2372 if you believe you might be the victim of a mortgage modification scam.
Procedure After The Modification Application Is Submitted
Once the file has been submitted to your lender with all required and up to date information, it may take an estimated 2 weeks for your lender to complete the initial review of your file. During the first 2 weeks, your lender will assign a point of contact who is responsible for reviewing the file and gathering internal information. Once this process is complete your file will be turned over to the underwriter for a decision on the application.
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Watch Out For Loan Modification Scams
Mortgage loan modification scams are schemes to take advantage of vulnerable homeowners. They are aimed to steal your money by making false promises that they can take care of your loan and save you from foreclosure.
Here are some common red flags from loan modification scams that homeowners should look out for:
- Promises you that all of your debt will be eliminated
- Letters that look like a loan modification pre-approval
- Receiving notices from government modification programs
- If they ask you to pay any fees up front
If you arent familiar with the loan modification process in New Jersey, it can be easy to fall for these common scams and more. A trusted loan modification attorney on your side can guide you through the process and help you avoid scams. At Denbeaux & Denbeaux Law, we know the laws and regulations and well help you discover if Shellpoint Mortgage Servicing isor isntfollowing them so you can protect your rights and your home.
How To Apply For A Loan Modification 3 Simple Steps
If you are currently facing a financial hardship and want a loan modification, then know that time is of the essence. You have a greater ability to negotiate with your lender earlier on in the foreclosure process than later. Get started today:
Nonprofit housing consultants from a HUD-approved agency can provide you with:
- All available loan modification options
- A customized action plan
- Help in negotiating with your lender
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Mortgage Loan Modification Faq
What happens when you get a loan modification?
The goal of a loan modification is to help a homeowner catch up on missed mortgage payments and avoid foreclosure. If your servicer or lender agrees to a mortgage loan modification, it may result in lowering your monthly payment, extending or shortening your loans term, or decreasing the interest rate you pay.
How do I get a mortgage loan modification?
Contact your mortgage servicer or lender immediately to alert them of your financial hardship and ask about loan modification options available. Be ready to provide all documentation requested, which can include financial statements, pay stubs, tax returns, and more.
How long does loan modification last?
Expect your loan modification process to take anywhere from one to three months, according to finance and insurance expert Karen Condor. Once your loan modification has been approved, the changes to your interest rate and/or loan terms are permanent.
Does loan modification hurt your credit?
A mortgage loan modification under certain government programs will not affect your credit. But other loan modifications may negatively impact your credit and show up on your credit report. However, since your mortgage usually must be in default to request a modification, your financial difficulties are probably already on your credit report, explains attorney Elizabeth Whitman.
Can you be denied a loan modification?How much does mortgage modification cost?
How A Mortgage Loan Modification Works: The Basics
During the mortgage loan modification process, your lender will work with you to change the terms of your original mortgage contract.
This could include one or more of the following:
- Lowering the interest rate
- Extending how long you have to pay the mortgage back
- Changing from an adjustable-rate mortgage to a fixed-rate mortgage
Each of these adjustments could be a big help. Just make sure you understand the financial impacts before you sign on the dotted line.
For example, extending your loan from a 15- to a 30-year mortgage could lower your monthly payment, but youd end up paying more over time because of interest even with a lower interest rate. That might sound good, initially, because it helps you hold on to your home, but dont hesitate to ask your lender about these kinds of considerations.
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