MCP Help Blog

Homeowners overwhelmed by their housing and other payments may benefit from a loan modification. But they need it fast. How can you get past the red tape and get your file looked at quickly?

First, do a quick and dirty check on your monthly budget. Your total housing expense needs to be over 31% of your gross income to even qualify. But you can’t be too strapped either. Because just having a too-high mortgage payment isn’t going to get you a modification. If you can’t pay your bills even with a modification, you may well be denied one. So first, look at what you’re spending and make cuts. Call your credit card companies and ask for their hardship programs or get into a credit counseling or debt management plan asap. You HAVE to get your monthly expenses down as low as you can. Ditch the extra cell phones, at least for now. Shop for the lowest insurance rates, even if you have to raise your deductibles. Quit eating out for a while and start jogging instead of paying health club dues. Document everything you have done to lower your bills.

Write a good hardship letter. Explain why you were qualified to make your house payments when you bought the place, what happened to increase your expenses (medical problems?) or decrease your income (business down, hours cut?) and how a modification to 31% of your gross monthly income will make it possible for you to honor your obligations. Before making this statement, calculate what 31% of your before tax income is and see how much the lender would have to drop your payment. Explain how you intend to improve your finances during your modification period.

Finally, get your paperwork–tax returns, bills–your old high ones and your new lower ones–to prove that you did lower your spending. Copy paychecks, statements, and list your assets as well.

Lenders are slammed by the sheer numbers of applications for modifications. So if you want to get through quickly, it’s important to start the loan modification process fully prepared. That means having the correct paperwork handy before calling or meeting with a loan servicer or housing counselor.