5 Mistakes When Filing for a Loan Modification

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If you’re considering filing for loan modification, there are several common mistakes you must avoid. Here are some of the most common mistakes: Making large payments to speed up the process, failing to include all of the required documents, and making calculations that can lead to foreclosure. Avoid these mistakes at all costs. If you follow these tips, you can improve your chances of getting approved for a loan modification.

Making large payments to speed up the loan modification process

This process works by calculating your proposed modified loan balance. You add up all of the unpaid interest, advances, and legitimate foreclosure fees on your existing balance. The new modified principal is then amortized over a 360-month term. New fixed interest rate is set at the current market rate. The new monthly payment is then added to your current escrow payment. In this way, your new monthly payment will be much lower than what you have been making.

Failure to include all required documents

A common mistake people make when filing for a loan modification is failing to include all of the required documents. When applying for a loan modification, you must submit financial statements, tax returns, and proof of income. Failure to include any of these items can cause the servicer to deny your loan modification request. The following are some tips to make sure you include everything they request. Here are a few examples of common mistakes.

Calculation errors that can lead to foreclosure

Homeowners who are denied are at risk of losing their homes because servicers make calculations incorrectly and deny the application. Often, homeowners and attorneys do not know what NPV is, and how to check it. NPV is a complex financial method that evaluates the value of payments in the future, such as those of a loan modification. Mortgage lenders calculate the NPV of a modification by comparing the NPV of the loan modification to that of foreclosure. The Making Home Affordable Program requires that banks modify borrowers’ loans when the NPV favors the modification.

Homeowners must carefully read and follow guidelines when filing for a loan modification. The guidelines are available online and are based on certain financial criteria. Failure to follow the guidelines can result in a Federal lawsuit or defense to foreclosure. Federally backed loans are also eligible for loan modification programs. Borrowers who have undergone forbearance should apply for these programs. There are guidelines for loan modifications for borrowers who have experienced the effects of Coronavirus.

Re-applying instead of appealing a denial

While the process of submitting for a loan modification can be tricky, you can avoid some common errors by avoiding these common pitfalls. First, you should understand that the approval of a loan modification does not guarantee your loan will be modified. A denial can result in losing your mortgage, but there are ways to appeal the decision. The first step is to prove that you are suffering from financial hardship. This can be done by providing documentation showing that you have missed at least three payments in a row and have 90 days delinquency on your mortgage.

The next common mistake that homeowners make is not submitting sufficient documentation. Without the required documentation, the servicer will not even look at your application, and it will likely be denied. Consequently, it’s crucial to send all the documents requested by the servicer. If you fail to do so, you will most likely be denied for it. Ultimately, these mistakes will make this process even longer.
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