By David Galanter
How to Help with Loan Mods
Lead borrowers to better days by learning modification basics
Mortgage brokers around the country have been receiving phone calls from troubled
borrowers seeking advice about loan
modifications. In some cases, brokers
feel clueless about how to help. at
the same time, they don’t want to turn
down new business.
If this situation sounds familiar, the
following tips and guidance can help.
1. know the law and stay compliant.
For example, anyone other than a
lawyer is prohibited from charging
upfront fees in reference to loan
modifications. This rule was implemented by the Federal Trade Commission (F TC) and took effect earlier
this year. Under the law, fees can’t
be collected until homeowners receive and accept a written offer from
2. know the home affordable modification program (hamp) guidelines.
read about the program and educate yourself about its intricacies,
advantages and critics. For starters,
3. develop a complete understanding
of what constitutes a loan modification. put simply, a loan modification is a restructuring of an existing
loan. When considering loan modifications, lenders will re-examine
borrowers’ current financial picture.
In some cases, lenders may reduce
a loan’s interest rate, extend its
terms, forgive unpaid late fees or
grant a principal reduction. The
point of modifying mortgages is to
reduce a borrower’s monthly payment in response to some kind of
4. know what kind of hardships warrant a modification. The HaMp regulations provide guidelines on what
types of hardships will be considered for financial assistance. The list
includes loss of income and death
of an income earner. Interest-rate
increases resulting from adjustable-rate loans also may be cause for a
5. Learn how to begin helping troubled borrowers and understand
what they must do to get on the
right path. In most cases, you’ll
want to know the lender’s process
for considering and approving modification requests.
as you begin helping borrowers with
their problem loans, you’ll get a better
grasp of the process and its steps.
These include the following seven
1. call the lender and inquire about
how it would like your client to proceed. Don’t divulge any details about
borrowers’ financials at this point.
2. if they qualify for hamp, have clients fill out an official request-for-modification affidavit.
3. help write a letter of hardship. This
should clearly describe why and
how the client fell behind on their
payments. Include a timeline of all
events related to the mortgage’s
delinquency and previous on-time
payments. This letter should be no
longer than one page.
4. collect supporting documentation.
This includes paystubs, bank statements, tax returns and the hardship
5. if a lender requires your clients to
fill out a separate modification-re-quest form — one specific to their
company — make sure your clients
do so in a timely fashion. also,
make sure to ask specifically if such
a form exists.
6. consult an attorney. This might not
always be necessary, depending
on how far behind your clients are
on their payments. In many cases,
clients should be able to receive a
free initial consultation from an at-
torney. If your clients have received
a sale date — indicating when the
lender intends to sell the property
to the highest bidder — recom-
mend they speak with an attor-
ney immediately. Sale dates can
usually be postponed if your cli-
ents are in review for a loan modi-
fication. attorneys can plead for
additional time or use other legal
tactics to help.
David Galanter, president of FreeMortgageFix.
com, is a veteran lawyer with a practice concentration in the areas of real estate finance, development, title and foreclosure, joint ventures,
acquisitions, dispositions, commercial leasing,
equity restructurings, and mortgage-loan
workouts for residential and commercial loans.
His work ranges from residential to commercial
transactions. past clientele include commercial
banks, developers, investors, equity participants, private lenders and others. For more info,
visit www.freemortgagefix.com. Contact him at
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