8 Ways To Improve Your Mortgage Modification Application
by Mike Rockwood
Home Loan Modifications
A brief review of this scientific principle can help you balance your family’s budget through a mortgage modification. That’s right, high school physics to the rescue!

I coined this term to help my readers understand a basic tenant of mortgage modification reality. O.K., so it’s not a scientific breakthrough. It can still be important, right?

Your mortgage modification application file will tend to stay in motion until it is acted upon by another force. Then, once stopped, it will tend to stay that way! I know, this is heady stuff.

Here’s how insight into file inertia can help you save hundreds of dollars per month…and, maybe even save your home. There is an influence acting upon all modification applications that slows them or stops them. It’s the fact that the banks are still overwhelmed by the sheer number of applications. Systems and people are strained to the breaking point, making it rational to “stop, reject or send back for updates and corrections”, as many files as possible. Such action gets the file off their desks AND it becomes your problem, not the bank’s. Do not let that happen to your application. Do this.

Your application has to be letter-perfect. Not only do you need to provide all the required info but you must also organize and present it in a way that is clear to an inexperienced and barely trained bank employee. You can hardly blame the banks…when was the last time YOU tried to hire/train 1000 people per month? Missing documents, unsigned 1040s, expired 4506-Ts and inadequate income documentation make it vulnerable to rework. Beyond that, even simple things like lousy copies, missing bank statement pages and illegible hardship statements can send your application to the rework heap.

8 Tips to get file inertia on your side:

1. Document Income correctly and show it clearly. This includes, notarizing self-employed P&L, including annual award letters for SSI and EDD income, showing calculations for monthly gross amounts and explaining precisely how you calculated recent 1099 income.

2. Show rental property correctly. This is especially important if you are applying for a HAMP modification on your primary residence.

3. Be certain your front-end Debt-to-Income ratio is right. Calculate this as the total monthly payment on the 1st mortgage divided by your gross household income. It must be higher than 31%.

4. Your back-end DTI (total indebtedness as percent of gross household income) must be less than 70%. If it is higher, you will get rejected for having too much debt.

5. Get your credit report (it’s free annually at www.annualcreditreport.com). Make sure all current debts are accounted for.

6. At the end of your budget – after income taxes, debt payments and costs-of-living you should have about $0 left each month.

7. In order to be treated within a reasonable timeframe, you must be late on your payments. Most banks require that you be more than 60 days late before they stop halting your loan mod progress with their “Immanent Default” shenanigans.

8. Make it easy to understand. Put it together like you are there presenting it with a cover letter, a table of contents page, with notes to clarify things, etc.

Do these eight and you will capture the power of file inertia instead of falling victim to it. It can help you get through the Mortgage Modification process successfully and in a reasonable timeframe.

Need assistance to get Mortgage Modification? Visit Rockwood’s site about DIY Loan Modification at Home Loan Modification

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Filed under: Real Estate

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