THE LOAN MODIFICATION PROCESS The average loan modification project

THE LOAN MODIFICATION PROCESS • The average loan modification project takes 60 to 90 days because of the lenders inability to make a decision without getting 2nd floor approval from their management. Approval is also needed from the investors who own the loan. In some cases the investors may be out of country or the loan may have been “split” between various investment pools. In Majestic Investment Group processing team is specially trained to work this process and to continually follow up with the lenders who are usually too busy to return calls and emails. • • LOAN MODIFICATION PROCESS STEPS. 1. We interview the client (homeowner) and mutually agree on expectations. 2. We collect the client’s financial information and complete debt to income (DTI) spreadsheet. 3. We help the client fill out all of the necessary forms. 4. Client signs all the authorization forms and paperwork and gives us authorization to represent them. 5. We send the complete information package to the client’s lender or lenders. 6. We contact the lender to have the modification case assigned and delegated to a loan representative. 7. We send additional requested information to the loan rep. We only send what is asked for. 8. We review information with the loan representative. i 9. Once we have a “green light” and qualification approval from the lender, homeowner receives a confirmation letter by mail to their property. Thenfore we are ready to start negotiations and servicing payment must to be done to our Company. 10. We start the negotiation by requesting a specific amount or reduction and terms. 11. We review client’s financial state with the lender. We discuss all options with lender and we demonstrate why it is in the best interests of the lender to re-negotiate this loan rather than foreclose. 12. We spend HOURS and HOURSSS!!! emailing the lender, and playing phone tag and leaving voice mails. 13. If the loan representative is not responding, we take the case up to higher levels of management. 14. The Lender outlines what they would like to see from the borrower. 15. We outline the realistic payment needed. 16. The lender request additional information that was not requested during the initial contact. 17. We provide the lender with an up to date re-sale value of the property. 18. The lender resubmits the information to the investor for a decision based on the information we have provided and their perception of the value of the property. 19. The Lender make first offer. 20. We discuss the offer with our client (homeowner) and we make a counter offer. 21. The Lender makes a counter offer to our counter. This may go for days. 22. Finally, all parties agree on the loan modification terms and conditions. 23. The Lender wants to talk to the borrower to go over conditions. 24. We receive written conditions from the Lender. 25. We review conditions to make sure it is the terms discussed. This is where the “LOAN MOD DO IT Yourselfer” gets hammered. They are not savvy to the hidden terms. 26. The deal is signed by borrower and returned to the lender. 27. The deal is done. The homeowner gets to keep his/her and has the new lower monthly payments and possibly a smaller loan than what they had before. ii FREQUENTLY ASKED QUESTIONS: 1. What is Loan Modification? Loan Modification is a procedure in which a loan’s terms, like the interest rate, the monthly payment or the term, are changed to meet the current situation of the homeowner. All of this is done with the approval of the lender. In other words, we negotiate with your lender to change the terms of your loan (like the interest rate, monthly payment and length of the loan), to allow you to keep a lower monthly payment, keep your home and save your credit. According to Investopedia: A Loan Modification agreement is different from a forbearance agreement. A forbearance agreement provides short-term relief for borrowers who have temporary financial problems, while a loan modification agreement is a long-term solution for borrowers who will never be able to repay an existing loan. 2. Is a Loan Modification right for me? If you are one of the millions of people with Adjustable Rate Mortgage, negative amortization mortgage that is about to reset to a higher monthly payment or you have a negative equity in your property then the LOAN MODIFICATION is probably the best bet for you. Since most folks that got interest-only and adjustable rate mortgages don’t have much equity in their home, it will be next to impossible for them to refinance. Short-sale or Forbearance are not good options because the have negative tax and credit history consequences associated with them. A Loan Modification procedure does not have any negative credit or tax consequences, it allows you to keep your home and keep making a lower payment. iii 3. What happens in a Loan Modification Procedure? In a Loan Modification procedure, your loan’s terms, like the interest rate, monthly payment or the length of the loan, can be renegotiated to match what you can pay. So if you can’t afford to make higher payments on your mortgage, we negotiate with your lender to keep the lower payments. 4. Can I Do This Myself? There is a very small chance a borrower could pull off the loan modification or pay rate reduction alone. As many borrowers know from experience, there is a thick layer of resistance at mortgage lenders to any suggestion of a workout from the borrower directly. They will listen to your lawyer though. If the lender forecloses on your home they will be the owner and they will sell your home and pocket any equity. They will use everything you say against you. They will want lots of cash down to do a forbearance payment plan you can’t afford. You lose the cash and your home. Majestic Investment Group has the full experience and we know your rights. We will protect you and your home. 5. Isn’t this the same as Debt Consolidation or Refinancing? NO!!. This is not debt consolidation. And this is NOT an offer to refinance from the mortgage company. It’s a shame to see so many debt consolidation companies out there that claim to help people but really end up just taking their money. Most debt consolidation procedures out there consist of just putting everything a person owes on a credit card, trying to negotiate a better rate, charging a high fee and calling it a day. As mentioned, for a person to refinance in today’s market, they would need to have a quite a bit of equity in their home, and since home values are so much lower now, this is next to impossible for most people. iv 6. What do you need from me to get the process going? Typically we ask for some details about your financial situation, your income, how much you owe on your home and other debts, and we prepare detailed paper-work for the lender demonstrating your inability to pay a higher monthly payment on your loan. We then renegotiate the terms of your mortgage through the Loan Modification process, to allow you to keep a lower payment. 7. How long does the Loan Modification procedure take? There is not exact answer. Generally, the process can take from couples of days to a few weeks, up to a few months dependent on how bad your situation is. If a government guaranteed loan is involved (FHA for instance), the process will take longer to work out. Fortunately, most lenders will work quickly to approve a loan modification program once they have received a COMPLETE PACKAGE. Most lenders will postpone the sale of your Property if the have received a complete package at least two to three weeks before the sale date. 8. It is true I may be able to skip payments during the modification process? YES!!!, most of our customers find it to be a huge relief that we are usually able to capitalize at least 2 months payments in the process of the modification. BUT remember some Lenders expect some “good faith” payment in order to start fresh the new modification plan, so capitalize means to save some money and not to run and expend the money. 9. Are the Lenders and Banks willing to go through this process? Most homeowners don’t realize that lenders and banks DO NOT WANT TO FORECLOSE ON YOUR HOME. In the current market, the will lose money by taking your home and trying to sell it, so in the majority of lenders are very open to the Loan Modification process. So consistently tell our clients that Loan Modification is an emerging option to foreclosure that benefits homeowners and lenders as well. v 10. Will I have to meet with the Bank/ Lender or deal with the PaperWork? Absolutely Not. At Majestic Investment Group, we take care of all of the paper-work for you, so you don’t have to worry about the redtape, and negotiation associated with the process. You will never have go to your lender, or bank, we do all of the leg-work for you and will fight to reach the ultimate goal of keeping your home, and arriving at a monthly mortgage payment you can afford, our team of experts consultants will explore every possibility to save their home and their credit. 11. Do I have enough time to stop my Foreclosure? It is important to check the state laws pertaining to your situation, but know that time is your worst enemy in these situations!! Stopping foreclosure, in many ways, has to do with you taking charge of your situation and acting now! There are some required timelines, like getting a loan, loss mitigation, document preparation, etc. They all require time. If you are worried about having enough time to stop the foreclosure, then call right now, not when you’re out of your house. 12. How successful have you been in other cases? We have a very high success rate. Simply because we fight for the client, not the lenders. Majestic Investment Group is an experienced company dedicated to service our customer in all their financial needs, helping to save homes and your credit. If we think your situation is beyond remedy, we will tell you right away. We know you’re used to getting your hopes up only to be let down later and want to be upfront and honest with you. If we accept your case, we will explore every possibility to save your home situation. vi August 01, 2008 NEWS LETTER When applying for a Loan Modification, make a “GAME PLAN” on how exactly you are going to approach them. These People are trained in minimizing loss of their company and the get paid to by getting the most amount of money out of you as possible or declare that your case is unworkable and foreclose on you. That is how they mitigate loss. If you understand this then you will know that you have to approach them and all conversations very carefully. And remember all you say can be used against you. What is a LOAN WORKOUT? A loan workout is an agreement that is negotiated with your current lender that changes the terms of your current loan. Lenders are willing to negotiate with borrowers facing financial difficulties and can’t obtain other financing alternatives. You must show the lender why it would be Lender’s best interest to agree to a workout arrangement. If convinced, a Lender may be willing to reduce the loan interest rate, reduce monthly payment amounts or change other loan terms. A Loan Modification generally occurs where the parties are in loan problems and agreed to workout the problem by creating new and better loan terms. The hope is that the new loan will enable to the borrower to meet their obligations. Items you Will Need When Applying for a Loan Modification: Document income and expenses. Keep all correspondence (even the envelopes) before negotiating a deal; gather all the information you need, starting with any correspondence from your lender. Do not throw away envelopes from the service postmarks sometimes can make a big difference between being eligible or ineligible for a relief. vii Collect everything that relates to income and expenses. Find your pay stubs. They want to see at least one month of income. If your income is very sporadic, then support your story by showing how you are getting paid so we can calculate and average overtime. Gather at least two years worth of W2’s and tax returns, plus two Bank Statements. Find all the mortgage paperwork and add that to the file. Pull together all bills, paid or not, from the times you were falling behind on the house payments until now. Include utilities as auto payment, credit cards, student loans, child support, and medical bills. You need to also include everything that documents why you fell behind. An employer’s notification of reduced hours or a layoff, an invoice for auto repairs or a shutoff notice from a utility, etc. What happened behind the other side of the line when you call your Lender or Bank? Simple, your Lender has two platoons of employees who talk with delinquent borrowers. How many you have? The first platoon is from collection department which consists of people who try to pry money out of you and get you current on the payment. The second group is from Mitigation Department, known as well as Loss mitigation Specialists. It can be difficult to get through to the loss mitigation department if collection agents are discouraged from transferring calls to every desk. This is one of the benefits of having a helper, such a Housing Counselor. This will work with the lenders and bill collectors because they have the necessary contacts and experience to negotiate with them. Over the years our Processing Team has acquired experience on how to negotiate with Banks and Lenders to navigate their phone system so as to increase chances of getting live people over the line and start working out the best solutions for both parties. Once we achieve this point we want to be working a way up to a decision maker. This most of the time is hard for the borrowers than a third party Company. viii Often with the homeowners get stonewalled at the first level, and sadly the tried in Loss Mitigation. We want to remark that in this department they are paid by hourly and the employees have a very little or not motivation to go an extra mile and help you get some needed comfort and relief while resolving you problem. Often they just compound the problem by being rude and demanding, telling people things like: “just pay your bills”. So it is essential you get beyond all these people and get a specialist. Our experience says that MOST crucial element to this whole process is your monthly budget and if you have done your due diligence, you will be ready to stand on a realistic financial answer when the times come to do it. Other important thing you need to keep on mind is: DO NOT SPEND YOUR HOUSE PAYMENTS. You have the choice to stop making payments because they are falling behind in other bills but realize that Lenders expect you can start fresh and do not fail on your loan monthly payments. If you do not pay your mortgage for 3-4 months for instance and your Lender decides to negotiate a repayment plan or a Loan Modification, they will want what is called: “Good Faith” money for you to come to the table with. Is it Better to Just Walk away and Start Over? Many homeowners are just in over their heads. Many they love their home and their families too. But what good is it when you are so stressed out that you cannot enjoy your home. You maxed out and you do not have a dime to take the kids for an ice cream or the movies. That is not a way to live. This is a serious time to really sit down and see if it is all really worth the stress and heartache. By saving up your payment for 2-3 months or more depending on the foreclosure time line in your estate, you can not only have enough to put together a really nice plan with your Lender, but also have some in the bank for a rainy day or worse case scenario, a rental. Often payment plans with the bank can be pricey and very short terms, like 6 months total to repay what you fell behind on. The people we have helped took the advice and save up and keep some funds and the bank, we are 99.99% successful and keeping their homes. Because they were prepared for life’s curve balls. Even though they had fallen behind in the ix past, if they had an expense one month, they just pulled a little from the slush fund in the bank to help supplement their house payment that month. The Lender Has Made you A Deal What Now? We respond to the Lender, but do not rushed into making a deal with your lender, we review the offer and make sure that it is reasonable and not an agreement that will stop foreclosure for month or two. Many Lenders are likely to offer Forbearance. These are only good for a short term band aid and not for a long term. Most commonly, this entails adding a set amount to each monthly payment. A Forbearance plan can go as long as 36 months, but many are set to fail and are completely unreasonable for borrowers to pay back. Usually this will require placing the delinquent amount on top of your monthly mortgage payment. If you had trouble making your mortgage payment before, GOOD LUCK! Paying your new larger more unaffordable payment. Your wisdom decision is to look professional help and an experience Company on negotiations with lenders and work out your financial needs. GOOD LUCK!!!! ___________________ Angel Gutierrez President of Majestic Investment Group. x