Many people are being approved for mortgage loan modifications, but the process is not simple and varies significantly from lender to lender
Unfortunately, there is a lot of misinformation in the media and online regarding the loan modification process. When the HAMP regulations were implemented in early 2009, many people were led to believe that approval would be essentially automatic. However, there are now hundreds of articles and stories online confirming the problems that homeowners are facing in dealing directly with their mortgage lenders. We have personally spoken with dozens of clients who we think should have been approved for modifications but were either turned down or – worse yet – whose paperwork was never even reviewed by the mortgage company.
Why is it so difficult to get the banks to approve these mortgage modifications? Here are a few reasons:
1. Most banks are probably understaffed to review the applications. Even before the HAMP regulations took effect, the banks were having a tough time keeping up with the paperwork. Now they are simply flooded with applications, and we believe that there are many applications that are not properly reviewed. Actually, there are a number of lawsuits against banks alleging non-compliance with the laws.
2. Not all banks are participate in the HAMP program, and many banks just dont offer alternate modification programs .
3. Many applications that are submitted are not complete, and this is slowing down the process for everyone. We are not seeing any banks approve modifications without all of the necessary paperwork. This typically includes tax returns, pay stubs, a hardship letter, banks statements, and other financial information. The banks are not taking any chances because if they approve a modification that they shouldn’t have, they could forfeit the benefits they are supposed to receive from the federal government.
4. Many people who are applying are simply not eligible. The banks cannot approve homeowners if they do not meet lending criteria. The most important of these are stable sources of permanent income and sufficient income to meet required debt-to-income ratios. Under the HAMP regulations, the banks are not required to approve a modification if the homeowner’s monthly mortgage payment is either too high or too low a percentage of the homeowner’s verifiable income.