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Why Getting a Loan Modification May Not be a Speedy Process

A great new article was just written from CNNMoney explaining some of the reasons why troubled homeowners are not getting mortgage modifications. Many of you will find the items discussed below to be absurd and ridiculous. These are some of the pitfalls we face everyday, here at Loan Mitigation Advocates, when trying to help our clients get a loan modification granted by the lender.

The top Five Reasons for why the loan modification process is slow are a byproduct of the lenders’ inability to get ahead of the shear volume of loan modification requests.  Essentially, they are always playing catch up and here are 5 reasons adding to this deficiency (see the more defined list at CNNMoney):

#1 – The Fax Machine
Everything from lost pages to warped pages to no acknowledgement that the fax has been received to incorrect fax numbers.

#2 – Multiple Forms
Seemingly endless amounts of documentation are required for a loan modification.  To compound the issue, each lender has its own set of requirements and each borrower’s situation is different which demands a different set of requirements.

#3 – Outdated Information
The time it takes to process a loan modification could be weeks to months.  Information gets outdated and lenders want to make sure that your situation does not change during the time they are considering granting you a loan modification.  In many instances, they will ask for updated information two or three times (i.e., pay stubs, bank statements, etc.)

#4 – Poorly Trained Personnel
I can tell you first hand that there are some people working for the lenders that are rude and unable to assist.  Most of the time, these individuals do not acknowledge receipt of the initial loan modification packet and if you are calling to obtain a status, they have no history of where the loan modification is in the process. You would assume that all individuals working in the loan modification department would be able to obtain a current status on a borrower’s file.  Not the case.  We could speak to multiple people in the same department and get multiple answers. Training seems to be the downfall here.  However, this is easily understood for the lender since they have had no time to train and have their employees comes up to speed on what to do for loan modifications.

#5 – Unclear Modification Offers
Two things come to mind for this one.  Some lenders are sending modifications to borrowers with no follow up call or communication that a modification has been granted.  A packet arrives in the mail but looks fairly innocuous. In some cases, this envelope looks no different than the several delinquent notices that the homeowner has received over the last few months.  Unfortunately, this envelope ends up in the same location as the delinquency notices – the garbage.  We recently had a similar occurrence where a client of ours called up in a panic and wanted to know what to do with this packet they received.  They thought it was related to their house being delinquent.  However, it was actually their modification packet.  It contained $1,300 a month in savings!  That was a close one. Secondly, even when you think a modification has been granted, it may not be over.  Many lenders are requiring trial periods and you have to step up to the plate without any glitches. If you miss a payment or don’t pay the whole amount, your trial period ends and you don’t end up with a modification.

Homeowner’s complaints are mounting and the government is placing added pressure on lenders to more efficiently perform modifications.  We expect to see vast improvement in the process and a greater willingness to work on mortgage modifications in the future.

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