The first thing you need to realize is that the lenders are not in the business to own property. They lend money; not properties. They don’t want your home, but if you cannot pay your mortgage, they foreclose on your home to reclaim the money that they loaned to you to purchase that home. As strange as it may sound, this is YOUR leverage against the bank.
The first thing that you need to do if you are behind on your payments is call your bank and ask for the Loss Mitigation Department. This is the department that you will negotiate with to lower your payment, change your interest rate, or simply work out a plan to save your home. Those of you with a fuse that is as short as a paper clip should grab a dictionary and look up the word “patience”; you will need a lot of it! Now that the warm body answered your call, immediately ask for a supervisor. The person that picked up the phone will read from a script and further aggravate you. Once the supervisor is on the phone, make sure they have your account in front of them and simply explain to them that you want to begin the process of saving your home through loan modification, however keep the details to a minimum. This will benefit you in the negotiation process. Let your paperwork do your speaking, as your words will not be documented properly in their computers.
Now that you have spoken with the loss mitigation department, you will need to get some things together to submit in a package to the lender. These items will consist of your last two years tax returns, last six months bank statements, last three months pay stubs, an income and expense statement, and lastly; a hardship letter. What is a “hardship letter”? This is a letter explaining why you are in the situation that you are in, financially. No matter how embarrassing your situation may seem, I will tell you from my experience assisting in this process; your letter is not the most embarrassing they have seen! (If you only knew!!!)
The more information that you can give the lender concerning your financial situation, the better they will be able to assist you. Please be aware that not every person will be able to obtain a modification to their loan. Due to the financial crisis we are going through here in the United States, a lot of people are, and have been out of work for quite some time. Obviously, if you are not making any money, or your expenses far exceed you income, the lender most likely will not work with you and you might want to consider short selling your home. For more information on short selling your home, feel free to e-mail me at firstname.lastname@example.org .
Once you have all of your information together, a cover letter would not hurt, however it is not required. Send this package into the bank and prepare to wait for 30, 60, or maybe even 90 days for any response. My suggestion is to start calling the loss mitigation department every week and ask to speak to your negotiator. This negotiator will be very stern, once they are assigned to your file, but cooperate with them. These negotiators have a lot of files to handle, as you can imagine, so it will benefit you to make sure that you supply anything beyond what I have informed you of.