It can happen to anyone. You've been downsized from your job, gotten a divorce, been hit with a large, unexpected medical expense...any one of a hundred unfortunate occurrences can suddenly make it very difficult, if not impossible, to pay your monthly mortgage.
You are definitely not alone. And especially in this current climate of high unemployment, more mortgage lenders are willing to bend over backward to keep you in your home. A foreclosure helps no one...not you, and not the lender. Foreclosing on your home would just result in yet another bad loan on their books, further reducing their financial strength and stability. Did you know that when a mortgage is foreclosed on, substantially more than the amount of that mortgage must be deducted from the asset total for the lender, until the home is sold or otherwise disposed of? This affects their ability to borrow and lend out to other borrowers.
It is in the lender's interest to keep you in your home, even if they have to accept a lower payment for an extended period of time.
How can you get started on modifying the mortgage on your home? It may seem obvious, but begin by contacting your lender's customer service department that you normally call when you have questions on your loan. Ask for their loss mitigation department. (The name of the department may vary depending on the lender.) Simply explain your situation and they will put you in touch with the right people to begin the process.
The representative will ask some standard questions, such as your current income and expenses. If you have begun drawing unemployment insurance, this can be considered as income even if it isn't permanent. Be sure to indicate ALL income sources. Also, when asked, list all of your debt other than your mortgage. You may get an initial offer on the same phone call. The offer should consist of the following: 1) a reduction of the principal amount of the loan; 2) a reduced interest rate, or 3) both. You will then be quoted a new payment amount, which hopefully will be much lower than your current payment (by as much as 50%, again depending on the lender and the specifics of your case).
If you agree to the offer, great! You can now move forward with the loan modification process. The representative will probably tell you verbally what documents are required to get it going. He or she should also assign a case number to you. Be sure to record that number, as you will need it for future calls and e-mails. At this point, I also recommend asking for the representative's name and company ID (if they have one), so you can refer to this conversation later, on subsequent communications. The odds are that you will NOT be speaking to this particular person again, especially if your lender is a large bank or mortgage company. If your conversation has been friendly and you have built some rapport, this should not be a problem.
Starting now, definitely keep a folder of all paperwork between you and your lender, including all copies of documentation you will be submitting. Start with a sheet of paper containing the representative's name and ID, and your case number and original loan number. Keeping all your loan modification paperwork organized will really pay off as you go through the process.
You should receive a written follow-up from the lender's loss mitigation department (remember, your lender may call it something else) within a week. This will be a formal list of the documents as described by the representative.
The key to all this is: as described above, get the process going to reduce your mortgage payment! The sooner you do, the sooner you will feel that you are doing something and not just waiting for the foreclosure axe to fall (believe me, I've been there!)
Now you've gotten started! In the next article, we'll go over what documents are likely to be needed and how to effectively follow up with your lender throughout this process. You are on your way to lower mortgage payments!
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