Qualifications for Loan Mod for Homeowner in Default?

18 Replies

Hello beautiful people of BP! So I work for a company that purchases preforeclosures and specializes in short sales. I want to build genuine rapport with the sellers I get into contact with and I understand that a loan mod is one option they have besides selling. 

Can someone please enlighten me on what the general qualifications are for a homeowner who is in default (that has been served an NOD) that would like to apply for a loan mod.

Thanks in advance! 



Originally posted by @Jeffrey Mendoza :

Hello beautiful people of BP! So I work for a company that purchases preforeclosures and specializes in short sales. I want to build genuine rapport with the sellers I get into contact with and I understand that a loan mod is one option they have besides selling. 

Can someone please enlighten me on what the general qualifications are for a homeowner who is in default (that has been served an NOD) that would like to apply for a loan mod.

Thanks in advance! 


Unfortunately, You cannot offer them a loan mod if you are not the lender. You might suggest they contact their lender to try and get one worked out, however what would you get out of it?

 

Originally posted by @Jeffrey Mendoza:

Hello beautiful people of BP! So I work for a company that purchases preforeclosures and specializes in short sales. I want to build genuine rapport with the sellers I get into contact with and I understand that a loan mod is one option they have besides selling. 

Can someone please enlighten me on what the general qualifications are for a homeowner who is in default (that has been served an NOD) that would like to apply for a loan mod.

Thanks in advance! 




 

What does it mean that you purchase pre-foreclosures and specializes in short sales? Based only on that, it doesn't sound like you do anything more than try to buy people's property while they are in foreclosure, and possibly try to buy them with a short sale? As others have pointed out, unless you are the lender, you can't offer them a loan mod. If you are trying to be some sort of short sale negotiator, or some sort of loan modification negotiator, lenders will shut that down quickly and so will the state if you do not have the credentials to be offering those services. I suppose you could help them out of the goodness of your heart but, you couldn't do it for compensation unless you were registered/licensed in many states (California is one of those states) and doing it without that paperwork could subject you to civil and criminal penalties if you ended up taking title to that property, or received compensation in exchange for helping them or made some promise like, you are there to help them.

Maybe I'm misunderstanding your post but, if you don't understand what the general qualifications are for a loan mod, I'm confident you shouldn't be doing what you say you are doing, or trying to do. There are many state, federal, investor, lender specific qualifications for alternatives to foreclosure and a loan mod is but one of the alternatives.

@Chad Urbshott Sorry if I confused you. I thought it was implied that their lender would be doing the loan mod. My question is what their lender or any lender's general qualification is for a loan mod assuming that the homeowner has never done one. That way I can be armed with some knowledge to inform the homeonwer if they request a loan mod with their lender.  What would I get out of it? Hmm. Hopefully some good rapport.

@Ron S. Hey there! Wow what are you talking about? lol. Im just trying to see what qualifications a lender would need to approve a loan mod. I never said any of those assumptions you have made. lol. Thanks for the response though!

@Wayne Brooks What? Why cant you give your own input?

Originally posted by @Jeffrey Mendoza:

@Chad Urbshott Sorry if I confused you. I thought it was implied that their lender would be doing the loan mod. My question is what their lender or any lender's general qualification is for a loan mod assuming that the homeowner has never done one. That way I can be armed with some knowledge to inform the homeonwer if they request a loan mod with their lender.  What would I get out of it? Hmm. Hopefully some good rapport.


@Ron S. Hey there! Wow what are you talking about? lol. Im just trying to see what qualifications a lender would need to approve a loan mod. I never said any of those assumptions you have made. lol. Thanks for the response though!


@Wayne Brooks What? Why cant you give your own input?



 

You should not be involving yourself in people's lives without knowledge of the situation, and awareness of your impact on the situation. What am I talking about? As I stated in my first sentence, based solely on what you wrote, it sounds like you are a debt buyer, or wanting to be some sort of "negotiator". In either event, you might have to be licensed/registered. You do in California unless you qualify for very few and very specific exemptions.

You are only looking for good rapport? Gimme a break.

At the end of the day, while I'm suspicious of your motives, who cares what I think. Your question can be answered easily with a google search. "Loan - Modification - Requirements" will net you all the information you want to know.

@Jeffrey Mendoza My knowledge is limited, I've never dealt with them. I do know that the homeowner has to "qualify", just like for a new mtg, on income /DTI for whatever a new reduced payment might be.....no job, no mod.

Googling it will give you a basic understanding.

@Ron S. lol. Even though your first post didn't answer my question it was informative of the legal ramifications of what I could face if I were to do any of what you mentioned, myself. So thanks for that. But no, I am not a one man team over here. And yes we do have our own short sale negotiator (who is a licensed agent) as well as an attorney. My job is to get into contact with these homeowners and build literally just build rapport and if they come back to me (us) wanting to sell (which is the end game) then is that illegal (serious)? I'm not tying up their property. My boss is the end buyer.

Originally posted by @Jeffrey Mendoza:

@Ron S. lol. Even though your first post didn't answer my question it was informative of the legal ramifications of what I could face if I were to do any of what you mentioned, myself. So thanks for that. But no, I am not a one man team over here. And yes we do have our own short sale negotiator (who is a licensed agent) as well as an attorney. My job is to get into contact with these homeowners and build literally just build rapport and if they come back to me (us) wanting to sell (which is the end game) then is that illegal (serious)? I'm not tying up their property. My boss is the end buyer.


 

Now the whole story comes out and now we know what the end game is. Why not put that in your first post!? Your attorney and agent may be exempt from registration. They know if they are or not. Short sale negotiators are like travel agents two days after priceline.com went on line. They aren't needed any longer and no one is paying them if there is a short sale for them to "negotiate", as a short sale negotiator. Perhaps the buyer's agent is doing the same thing but they call those real estate agents.

I'll keep this short and brief as I could write an essay on this.

Here's my advice; Keep it simple. If a homeowner wants to keep their home then they should apply for review of retention options with their servicer or consult with a reputable attorney about filing bankruptcy for a repayment plan.

You should review HUD, FNMA, FHLMC guidelines for modifications if
you want to learn what some eligibility requirements are for large GSE's
and HUD. Other investor and servicer guidelines differ. There is no one size fits all except general principles and concepts.

As it's been stated already there are many state and federal laws revolving around home retention services, short sales, homes in foreclosures, etc. Sensitive arena in all aspects.


@Brett Goldsmith You're absolutely right that there's no "one size fits all," since every lender has different criteria that affects their decisions on a loan mod. 

@Jeffrey Mendoza That's the main reason it's so hard to answer your question. If you know who the lender is and have experience with their loan mod process, then their criteria should apply to all loans so you'll know what they'll accept in the future. However, as @Ron S. pointed out, loan mod and short sale negotiators don't seem to be a "thing" anymore. Maybe real estate agents who specialize in doing those types of transactions, yes. But not as a sole and separate job.

We only deal directly with our borrowers (or their attorneys when they're in a judicial foreclosure state or BK).

Brett, a side note: do you actually recommend to borrowers that they file bankruptcy?

@Andy Mirza Depending on a homeowners goals and specific circumstances I do recommend people to consult with the appropriate professionals, not limited to attorney's for bankruptcy, mortgage litigation, or probate consultations.

I know you didn't ask and you may already know this and agree with me, but bankruptcy is a valid and great tool ( when one knows how to use it and how to optimize it's benefits ) for borrowers to research when it comes to discharging liabilities, unsecured or secured debt, or to avoid foreclosure through a repayment plan if their goal is home retention. 

The challenge is many borrowers aren't truly good ch 13 clients as they can't afford a repayment plan due to their mortgage arrears. They need a lower payment which is why they "need" a good modification. 

On a side note* To anyone reading this post. Loan modifications do not guarantee lower payments. A modification simply means they are modifying the terms of your loan to some extent. At times modifications will increase a borrowers payments. 



@Brett Goldsmith I do agree that Bankruptcy is a valid tool when used correctly for the right people. From my view, though, most of what I see are the people that take unfair advantage of it at the expense of others. When this happens, the creditor is affected directly but we all are affected indirectly. Do you think that banks just take these losses on the chin and give their shareholders smaller dividends? Or do they jack up banks fees or charge higher interest to make up for the losses they take on borrowers who need to face reality when they can't afford their house anymore?

I don't think most borrowers that file BK have a good idea of the long term consequences of their actions or their unreasonable desire to stay in their home blinds them to this or they don't care. Ch 7 BK is a great tool for those that get in over their heads and have to hit the reset button. I have no problem with that. Filing Ch 7 BK to stay in a house for a few months is a terrible decision in my mind.

Ch 13 is so much worse because there doesn't seem to be an adequate system in place to make this fair to the creditor and the debtor. It's completely stacked against the creditor and the trustee and BK attorneys are incentivized to advise nearly all debtors to file BK. The trustee keeps 10% of all of the borrowers arrearage payments. BK attorneys charge $3000-$6000. Both get higher priority than secured creditors. Who really benefits when a borrower who shouldn't be in a plan, gets his plan and fails after a few months or a few years?

@Andy Mirza Good points from the macro view. I hear yeah, there are always people who will "play the game" and abuse the systems and tools given to them. The courts do have systems in place to try to mitigate this but unfortunately by the time they kick into effect for the particular borrower and asset the damage is already done. Obviously there is no true solution to currently to weed out all the bad apples ahead of time. I am aware that most people who file may do it simply for getting an extra month or two in the property. Not really the smartest move and it's usually self inflicted, but at times that's the only play they have due to their own procrastination. 

I'm a firm believer that homeowners who can't keep their home need to stop the bleeding and rebuild their lives as soon as possible. No point to drag it out as the healing process can't truly start until the wound is sealed. I've seen too many homeowners lose all of their equity from arrears and foreclosure fee's due to dragging their feet. I see poor decision after poor decision, and it's clear as day why they are in the position they are in.

I personally make money when people sell, not keep, so I'm the first one to educate people on why their home is a poor investment or why the chances of them keeping are potentially unlikely due to their financial circumstances if that's the case. You won't believe how many homeowners who have 5K + mtg payments and who are unemployed think they will receive a loan modification with a principle forgiveness like it's some sort of right. But hey, if a homeowner wants to keep and can, that's their prerogative and I want them to be successful if they can.


@Brett Goldsmith Oh no, I do believe you on how many homeowners think that loan mods and principal forgiveness are some kind of right. The last home we foreclosed on had a borrower who asked for principal forgiveness on a loan she hadn't made a payment on for 10 years! That's just the P&I payment. She didn't pay for taxes or insurance either.

I see that you're the type that would give the right advice regarding BK. We've had calls from free legal aid and foreclosure prevention non profits who use the idea of the borrower filing BK as a threat to get us to give their client a loan mod. I don't think they know or care that it will hurt their client more in the long run. I think it's reckless advice to say, "just file BK to stop the foreclosure," but I see that all over the internet and it pisses me off....

@Andy Mirza Haha I find it funny when people threaten to file Bankruptcy to try to get a short sale or loan modification approved. Any large mortgage servicer doesn't care about such threats or even if you file. I guess maybe if you're dealing with a private individual or hml it "could" help, but i'm not sure. People are uneducated and not experienced in these matters so I totally get it, it's typically a circus in these situations all the way around.

If you need to win the lottery of loan modifications to obtain a payment that's affordable that's a clear sign you need to sell as the chances of that happening are slim to none.

Loads of bad advice in this space are given to homeowners from attorney's, agents, investors, etc. 

Create Lasting Wealth Through Real Estate

Join the millions of people achieving financial freedom through the power of real estate investing

Start here