So you have gathered all your paperwork and are ready to send it in. Typically you have to fax all this stuff in with your account number written on every page. You usually have to update the things like bank statements and pay stubs as you get new ones.
Don’t be surprised but the first answer is usually – NO! (If the bank says yes please read section 4)
3) After The Bank Says NO: Don’t let this deter you. Ask for the specific reasons in writing. Ask for supervisors to explain what your options are. Ask what the review process is and tell them you want to be reconsidered. Unless they can tell you specifically that you do not qualify based on your income I would not accept no from this level at the bank. I would keep pushing until they refuse to consider your paperwork anymore. Sometimes they will cite the type of loan you got originally. Ask for this in writing so you can show it anyone else you may seek help from. You should assume that you will have to push and you will have to raise the stakes. Don’t lose your cool but be persistent in letting them know you want a solution.
If you get that final “no we won’t look at your file or try to help you any more” answer you should then try to get outside help. There is a non-profit organization that will help you with this process. NACA.com. Go to their website and see how the system works. Basically they negotiate with the banks to try and get you modified loans and reduced payments and interest rates. Since you will have all the paperwork together you can start their system right away. Again, this is not loads of fun but it can be done –I personally know multiple people who have received help, with great success, from NACA. You could start with NACA and skip trying to do it yourself but I do not think you should. As the banks customer you should trying asking for help from them directly first. Document your efforts – keep a small notebook with dates and times of calls made, faxes sent, answer received.
Lastly, if the Bank won’t help, if NACA says they can’t help you you can try two other routes. One is called a forensic Audit of your loan. There are firms out there who do this for about $3,000 – many are attorneys. They will examine your original loan for inconsistencies and help you go back against the bank to reset the terms based on faulty original paperwork. This is a very aggressive approach and you must be careful to avoid scam artists. Check out anyone you are thinking of hiring with the Better business Bureau and the Attorney Generals office in your state. The other option is an attorney. There are many attorneys now specializing in debt reduction –debt relief and bankruptcy. These would be a good place to start. Find one who will help you try to negotiate with the bank and any other creditor you may have to try and keep you in your home.
4) The Bank Said Yes! Hopefully you will get to a yes long before you consider a forensic audit or a attorney. So if the bank says yes read their terms very carefully. There are basically two types of yes answers. One is a temporary reduction of payment and/or interest rate that sets your monthly payment at a rate you can afford. The total amount of principal that you are not paying is often wrapped to the end of the loan – in other words you are not getting out of paying any amount due you are just putting it off. This is often called forbearance. A better version of this is a permanent reduction of interest rate (if your problem iis that your rate is too high) The second type, and less common one is the mortgage modification or principal reduction where your note is lowered by a cancellation of some of the debt. They are reducing the total amount due on the loan.
Staying in your home is well worth the effort you will have to make for most people. Don’t be discouraged and don’t fall for scam artists who say they will do all the work for you. No matter which route you take you will have to gather organize and prepare all the paperwork listed above that will be used to make the decision about your mortgage payments.
The programs available to help you and the banks willingness to help change constantly so keep asking questions. I believe that we are in a 10-15 month window of time where these programs and options are at their peak. After this window passes I think we will start back towards a market where many of these options for you as a homeowner will be phased out and no longer available. The time to act is now before they start disappearing.
If you know you cannot afford your home now or in the near future a short sale may be the answer for you. You can read more about short sales at PSagent.com