Starting The Loan Modification Process

In this article, you will learn:

• How the loan modification process begins
• Which banks may offer loan modification and why they choose to do so
• How long the process may take

There are several different ways in which you can start the loan modification process. The cheapest way is to pick up the phone, call the mortgage company, and ask for the loan mitigation or modification department and talk to someone there. They will give you the paperwork and what you need to do. You don’t need an attorney to do a loan modification. Sometimes you do, but to fill out paperwork and turn it in, you don’t really need to hire an attorney. However, the question becomes, do you want to hire an attorney to do it for you? There are things that attorneys do that you might not know to do. One is simply constant follow-up. If you’re going to do this on your own, you need to call the bank every day because if they tell you it’s not complete, then you don’t have any protection from moving forward in a foreclosure case. The application has to be complete. So that’s one issue.

The other issue is, often, you’ll turn in all the paperwork you were asked for, you were told they have everything, and then you get a rejection of your modification because you didn’t turn in all the paperwork, or you get a rejection for something that just doesn’t make sense. That’s when you’re going to need help, because if you get those types of rejections, what are you going to do? So, if you are trying to do a modification and you want an attorney to help you, they’re going to start with writing letters to the bank. And the purpose of writing the letters to the bank is to verify that you are turning everything into the right entity because you might think bank A is the right bank, but what you don’t know is bank A is the servicer for a totally different company. So, you need to know who to reach out to and say, “I need information.” You need to know who to write, “I have an error here, I need to send you a notice of error and get it fixed,” and that’s the process that a foreclosure attorney will know to do that most individuals won’t. One of the most important considerations is setting the stage to either find something that maybe a mortgage company has done wrong and point that out to them to help you get better terms in your mortgage modification, or if they are telling you don’t qualify for reasons that are not in compliance with the law, to know how to move forward to protect your rights.

When Banks Generally Engage In Loan Modifications?

All banks must offer loan modification processes. However, no bank is required to give a loan modification. I should also clarify that every mortgage lender has a requirement to offer a modification process and procedure, but they don’t have to give a modification. So, even if a person thinks they absolutely qualify for a modification, the bank can say no. The question becomes why do they say no, and did they violate your rights? That’s going to be very individualized, and you wouldn’t know that until you got a rejection.

Why A Bank May Want To Work With Someone On A Loan Modification?

Part of the decision is because the federal government says they must. They are required to offer it, but foreclosure is a long process, and an expensive one. Here in Illinois, I am assuming in many other states as well, the mortgage company is paying an Escrow, so they are paying the insurance, and they are paying the taxes and they are losing money. Now, it is true that mortgage lenders do have insurance, so they don’t really lose money, at least not significant money from the foreclosure process because of the insurance, but they do lose other things like time, money, and interest. They’re going to make more money off of an individual with a modified mortgage paying it current with interest than they are going to if they foreclose or sell it to somebody else and collect a lump sum insurance payment. So, they will make more money in the long run by working it out with people.

How Long The Client Should Expect The Loan Modification Process To Take?

As I alluded to earlier, there are a couple of statutes that regulate loan modifications. Truth-in-Landing is a little bit different, but the real one is the real estate settlement practices act. That tells lenders how long they have to complete the modification application. The first question is when does the time start? It starts when they have a complete and full modification. A loan modification takes approximately 30 to 90 days to have it complete. If 90 days goes by, and they haven’t given you an answer, then that’s when the notice of error letters can go out saying a mistake has been made and they have 90 days to respond.

For more information on Loan Modifications in Illinois, an initial consultation is your next best step. Get the information and legal answers you are seeking by calling (847) 440-5998 today.