How homeowners are killing their own loan modifications

Someone once said that a single death is a tragedy, a million deaths is a statistic. The same could be said for foreclosures, and you don’t want to be a tragedy or a statistic. Projections for this year are as high as 2.4 million homes that will be lost to foreclosure. This is horrible and mind numbing. If these numbers are right, then at 2.5 people per household, foreclosures will affect 6 million people this year alone!

And here is a loan modification tragedy. Homeowners are doing something totally wrong - they don't know it, and it is killing their chances before they even begin. Then the lenders take over from there, throwing up absurd roadblocks, losing documents, giving conflicting feedback -- apparently going out of their way to make this process as difficult as possible. How else to explain, according to one source, that lenders with "high success rates" are approving not more than 5% of loan modifications?

There's not a whole lot a homeowner can do to control the bank's behavior, but they can do something to avoid being a tragic contributor to their own demise.
Things go so horribly wrong for homeowners because they are told to complete a document called the financial form. Homeowners have absolutely no idea whether the numbers they are presenting to their lender are helping or hurting their chances for approval. It is easy to understand why this happens.

The lender gives the homeowner a blank financial form that asks for raw data. The lender does not explain how they will use this data or how critically important this is. They act as if they are worried about giving away trade secrets, or something. A lender once told me on the phone that they couldn't possibly tell me because then they would be "telling the homeowner how to fill out the form." Isn't that a novel idea? Actually help the homeowner get a loan modification! So the homeowner blindly fills out the financial form in good faith and total ignorance as to the consequences.

Here's the truth loan about modification financial forms. If you don't get your numbers right, there's no point in doing anything else. Either you get your financials right - or get denied, and start staring down the pain of foreclosure. It's that simple.

Lenders contribute to this destructive force by regularly encouraging homeowners to give financial information off the top of their head over the phone. They generate a sense of urgency and an impression that they need these numbers now. Never, never do this! Do you really want your lender to make their decision about you keeping your home, based on the numbers you blurted out while driving your kids to soccer practice?

Spend time going over your numbers carefully, and if you don't understand the consequences of the numbers you are presenting to your lender then get some help. Spring for an hour with an accountant. Talk with a good loan modification specialist or attorney (a good one -- not someone who calls you out of the blue sounding more interested in getting $2000 from you). Offer to pay them a fair price for an hour of their time, explaining that you want someone to look over your financials before you submit them to your lender.

Give your financial form the careful thought it deserves. Your numbers have to tell a convincing story that supports you getting a loan modification with lower payments. Make sure you understand your numbers' "story" before you call your lender. Use this general guideline: your numbers should show that you can afford to make a mortgage payment, just not the one your lender is currently requiring of you. Hold on to that "truth" and you will have just vastly increased your chances for success.