Positives and Negatives of Doing a Loan Modification Yourself

A loan modification is modification to your existing mortgage that reduces the interest rate and/or extends your loan term making your monthly mortgage payments more affordable. The arrearage is tacked on to the back end of your loan or sometimes the lender will forgive the arrearage amount.

Homeowners who qualify for government’s The Home Affordable Mortgage Modification Plan may be eligible for a mortgage modification if they meet the guidelines. Some highlights of the program:

• Loans must be originated on or before January 1, 2009.
• Owner occupied properties with first lien loans of $729,750 on single family homes and slightly higher limits are 2-4 units are eligible. Investor, vacant and condemned properties are not eligible.
• Borrowers must show proof of income in the form of their last two paycheck stubs, current bank statement, most recent income tax return and provide the lender with a hardship letter explaining their financial situation and why they cannot afford to make their mortgage payments.
• Incentives will be given to lenders and servicers to modify their borrowers who are current on their payments, but at risk of being in default.
• Mortgage modifications starting now will be effective through December 31, 2012. Loans can only be modified once under this program.

Negotiating Modification Yourself vs. Hiring a Professional

While you can try and negotiate a mortgage modification yourself, unless you have done one before, it is recommended you hire an attorney, like American Residential Law Group who specializes in real estate foreclosure defense work or a mortgage modification company. But if you do decide to go it on your own, here are some positives and negatives you should be aware of first:

Positives

• You will save money negotiating it yourself. Some companies charge a fee equal to at least two months of your mortgage payment
• You are in control and not helpless
• If you have the patience and time, then there is no reason why you cannot do the negotiations

Negatives

• You don’t have established relationships with the loss mitigation departments of lenders
• No or little experience in successfully negotiating modifications
• Emotionally involved
• Time consuming
• You are not an attorney and should have one review your loan modification agreement before you sign it
• You only get one chance to do it right

Mortgage modifications can take a few months or longer to get approved so keep following up with the loan servicer or loss mitigation department until a negotiator has been assigned to your file. Once the negotiator has been assigned, you should have a response within a few weeks. You don’t need to accept the lender’s first offer, you can counter it and try and negotiate a better rate and terms.

None of this matters if you don’t have enough income to make your payments because you won’t qualify for a loan modification and will need to come up with another option such as selling your home or selling via a short sale.

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