Frequently Asked Questions
Why does the Loan Modification process take so long?
There are many reasons including:
- The volume of requests being made to lenders is huge (one company indicated they get 40,000 calls per day).
- Many, if not most, lenders and servicers have limited resources to respond to the volume of requests.
- Each loan and modification request is unique and needs individual attention.
- Because lenders are inundated with requests, by the time they get a file to work, the information in it is out-of- date and they have to request updated data.
- The submission process by fax is error prone and leads to missing information.
- The government’s involvement through the stimulus package has added options, but also added layers of procedures and additional work.
- Lenders have some motivation to wait to see if your situation improves, or if the market and economy improves, or if the government will add or change existing programs to address the situation.
What criteria does a Lender use in determining when they will make a loan modification?
Unfortunately, there is no black and white answer to this question. Unlike guidelines used for approving loans for purchase or refinance, there are no established industry criteria for loan modifications. With so many factors involved in the decision (property value, borrower reasons for non-payment, agreements with loan servicers, etc.), each file is treated as a unique situation.
What are the options that a Lender may give to someone who is requesting a loan modification?
The most important thing to realize is that the Lender is under no obligation to offer anything. They will often make an offer when they realize that some modification to the existing agreement will cost less for them than foreclosing on a property. Those modification offers could include reducing the monthly payment and interest rate, forgiving some or all of the missed payments, putting missed payments onto the end of the loan, reducing the principle balance owed or even something else they come up with. Because each situation is different, each solution may be different as well. Just remember, the Lender is making their decisions based on what is best for them.
Why do I still get letters and calls for collection or threatening foreclosure when my request for a loan modification has been submitted?
With most Lenders the department that initially considers your modification request (typically the “Loss Mitigation Department”) is different from the department that collects late payments and pursues foreclosures. (“Collection Department”) The Collection Department will not know about your modification request until they are notified by the Loss Mitigation Department. As stated above it can take some time before someone in the Loss Mitigation Department starts working on your request. Until the Collection Department hears otherwise they continue their work. In most cases, the fact that you continue to receive notices from the Collections Department is not any indication at all about the status of your modification request, although, you shouldn’t ignore these notices. We can help with these issues and so it is important for you to let us know of the notices you are receiving.
