Can I file for a Loan Modification on My Own?

by tammy on March 19, 2010

Generally speaking, up front requests for loan modifications do not require anyone to “file” anything and can – at least in theory – be as simple as a discussion and negotiation between yourself and your lender. Asking for, or negotiating for, a basic modification of the terms of your mortgage loan is not an “official” process and there is nothing preventing anyone from asking their lender for such a modification at any time or for any reason. Of course the lender is also free to respond as they see fit either and they are under no obligation to even listen to your request, much less act on it.

If your mortgage is owned by a specific institution and you have a long history with that institution and are considered a preferred customer, there is no reason not to approach the idea of requesting a loan modification personally. Further, if you can thoroughly document the financial distress that has inspired the request and the property is not hugely in demand, it is entirely possible that you and your lender can come to terms with one another without the help of third parties, though it is always prudent to have an attorney review the finalized documentation before signing anything.

If you are applying a loan modification using the Making Home Affordable program offered by the U.S. Department of Housing and Urban Affairs (HUD), the process is much more formal and regulated. Assuming you qualify for loan modification under this program, there is a very strict process that has to be followed which involves filling out an application and providing a lot of other subsidiary information to your lender. However, if you are willing to take a few hours to carefully review the program and follow the instructions provided on its website (makinghomeaffordable.gov) you can still do this without the assistance of any third parties.

However, if your mortgage is owned by an entity other than the one that services the mortgage, like a trust, then the process can be much more difficult. Despite the fact that it may be in the mortgage holder’s best interest to accept a loan modification, it usually is not in the best interests of the servicing company which usually makes more money through foreclosure and stand to get nothing from a modification of the original mortgage loan. In these cases, especially after an initial up-front request for a loan modification has been refused, hiring an attorney with experience in loan modification can make all of the difference. While most servicing companies get extra money if they have to deal with defaults or foreclosures; they usually have to handle expenses stemming from borrower initiated litigation themselves. Therefore, being represented by an attorney provides a much stronger incentive for the servicing company to come to terms with the borrower.

As a general rule of thumb, if the borrower decides that they need the assistance of an expert, they should look for proper attorneys over many of the “specialists” that advertise online and have no verifiable experience. Properly licensed attorneys tend to carry much more weight with the servicing companies since they involvement at least implies the threat of potential legal action in the future. Further, attorneys are much more likely to be familiar with common legal loopholes and more likely to catch sneaky measures added to the terms of a loan modification by the serving agents.

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