According to numbers released at the end of July, the number of homeowners in trouble that are actually receiving help in the form of a modified mortgage payment is staggeringly low. Only 9% of homeowners with a home in some stage of foreclosure have received much needed assistance. Banks and loan service providers have pledged to increase these numbers, but there are five roadblocks that are interfering with many homeowner efforts to modify their loans. Knowing about these obstacles can help you to find your way around them.
– The Paperwork Jungle: Modifying a mortgage loan is a paper-intensive process, and a form neglected or filled out improperly can derail the entire process. The mess of paperwork is magnified because most borrowers are asked to fill out forms for both Fannie Mae or Freddie Mac and the institutions servicing those loans. Homeowners are being asked to appease multiple approving bodies, many of which have different requirements. Efforts are underway to create a standard set of forms to be used by all financial institutions, but for right now it’s vital that you go through the painstaking effort of completing the entire stack of required forms correctly.
– Stale Information: One of the problems being experienced by some borrowers is that after providing current financial documents to loan processors and waiting for several weeks for their loan to be modified, the information becomes outdated and new information is required. It’s a frustrating cycle for borrowers who often have to start over when their application for modification is rejected. One possible solution is to send each paystub you receive to your lender as your loan is being modified.
– Lack of Clear Communication: There are some borrowers receiving modification applications from their lenders unsolicited, and others who have been asking to apply for months without hearing back from their lender. Many homeowners are still not sure if they qualify, or what they would have to do to get qualified. Finally, many borrowers find the packet of information that is sent with most applications complicated and overwhelming, causing them to give up before even starting the process.
– Inexperienced Loan Processors: Part of the problem in getting thousands of mortgage loans modified is that it requires thousands of employees to make that happen. It’s great for job creation, not so great for borrowers needing help. Financial institutions have hired thousands of new workers to help handle the flood of applications, but training these new employees is taking a great deal of time and slowing the flow of applications making it through the process.
Technology: Finally, many borrowers run into problems with technological issues such as having to fax in documentation or access and open pdf files. Fax machines have caused major problems, from missing pages to information that is unreadable, many applications stall due to simple fax-related issues. Ironically, the solution to this problem will probably be provided through better technology, as a web-based application process is likely to emerge from at least some institutions at some point. This would make the application process easier and allow for applicants to follow their application more carefully and accurately.