Expediting loan modifications and short sales
Documents you need
If you are having difficulties making mortgage payments, then a loan workout may be considered. The two most common types of loan workouts are loan modifications and short sales. To expedite the process, the borrower should be prepared to gather a good deal of documentation in order to submit to the lender. Very generally speaking, here are the documents that are typically needed in order to negotiate a short sale or loan modification
(a) Authorization from owner for attorney/authorized party to negotiate loan mod (one for each mortgage lender)
(b) Last 2 pay stubs
(c) Last 2 tax returns (w-2s and/or 1040s)
(d) Last 2 bank statements
(e) Borrower Hardship letter (one for each mortgage)
(f) Monthly expense report - a list of monthly expenses/income
(g) Financial statement - either one you provide, or a form provided by the lender (optional)
(h) Sales contract and realtor listing agreement.
Also, the lender may want to perfom a BPO (Broker Price Opinion) or an appraisal on the property
The approval process generally takes anywhere from 45-90 days, depending the time it takes to gather the materials listed above, and how many mortgages are on the property. While the short sale is being worked on, the payments should still be made on the home, if possible - otherwise the lenders' collection/foreclosure process may continue. Also, it is not a guarantee that the first and/or second mortgage holder will approve a short sale.
Expediting loan modifications and short sales
Expectations
If you are having difficulties making mortgage payments, then a loan workout may be considered. The two most common types of loan workouts are loan modifications and short sales. To expedite the process, the borrower should be prepared to gather a good deal of documentation in order to submit to the lender. Very generally speaking, here are the documents that are typically needed in order to negotiate a short sale or loan modification
(a) Authorization from owner for attorney/authorized party to negotiate loan mod (one for each mortgage lender)
(b) Last 2 pay stubs
(c) Last 2 tax returns (w-2s and/or 1040s)
(d) Last 2 bank statements
(e) Borrower Hardship letter (one for each mortgage)
(f) Monthly expense report - a list of monthly expenses/income
(g) Financial statement - either one you provide, or a form provided by the lender (optional)
(h) Sales contract and realtor listing agreement.
Also, the lender may want to perfom a BPO (Broker Price Opinion) or an appraisal on the property
The approval process generally takes anywhere from 45-90 days, depending the time it takes to gather the materials listed above, and how many mortgages are on the property. While the short sale is being worked on, the payments should still be made on the home, if possible - otherwise the lenders' collection/foreclosure process may continue. Also, it is not a guarantee that the first and/or second mortgage holder will approve a short sale.
First, do not panic. Stay calm and focused. Be patient. Treat it as a job. You may actually have to lower your expectations that the ones handling your loan modification request or short sale request will treat your situation with the utmost care and promptness that you may wish. That is not necessarily to say that the loss mitigation departments do not care about you, it just means that they are often overwhelmed with the hundreds and thousands of files each day. Also, these departments are often spread out throughout the country, with office in Texas, Wisconsin, California and Ohio, and their knowledge of the file is limited by what computer notations are placed in their national database systems. I am not making excuses for them, but I am just trying to give you an idea of what to expect.
Be prepared to be put on hold for long stretches at a time. Be prepared to get disconnected while you are on hold. Be prepared for the representative on the other end of the line to tell you that your documents have (a) not been received, (b) have not been processed, (c) to call back the next day, or by the end of the week for a status update. If you expect these things to happen, then you will be pleasantly surprised when the opposite happens. There are extremely nice and helpful representatives and short sale negotiators out there…here is hoping that you encounter them if you go through the loan modification process.
DC Real Estate Examiner, Michael Reed