Home mortgage: Checklist for loan modification

The interest rates are slowly climbing from the historic lows of last couple of weeks. The rates are till very low as compared to the rates that most home owners are paying. People are flocking for refinancing or modifying their loans. Loan modification is a cumbersome process with lot of documentations and complicated steps that have to be climbed before reaching the stages of application and approvals. The loan modification approval is completely with the lender and he is the sole person who makes the decision.

Documents are very necessary to prove your eligibilities and qualifications for the loan modification. The presentation of the documents is an important step which would decide the fate of borrower’s loan modification. These documents have to be submitted during the stages of negotiations. It would be a wise decision to maintain a checklist of the documents that would be required for the process.

• Good procedural manners require a hard ship letter accompanying the application for loan modifications. The letter should contain details of the borrower’s present financial conditions and the reasons for the request of modification of loan.
• Proof of the federal income tax returns for two years just preceding the date of application for modification should be made available. It would be wise to maintain copies and records of the same in case of verifications.
• Similarly copies of W 2 forms should for two years immediately preceding date of application should be produced.
• Copies of bank statements for a minimum of two months should be ready. If the borrower has a good bank balance modification might not be approved.
• The borrower’s pay slips and their copies of at least two months would have to be produced.
• Copies of the recent mortgage statement.
• Copies of property tax statements are required if borrower’s mortgage statement does not have details of escrow payments made towards property taxes.
• A very important thing that would help in the decision making would be valid documents that can prove the hardships stated by borrower while requesting for modification of loan. These may be in the form of pink slips, hospital bills, divorce papers, death certificate etc. Anything that can vouch for the truth of borrower’s difficulties.
• Financial information regarding income, other assets should be supplied in the form of borrower information worksheets.
• Insurance taken by home owner and its proof detailing escrow payments which are not given in the mortgage statement. This can be got from insurance agent.
• The most current statement of financial expenses including monthly income, bills etc have to be submitted. This would show the amount of money borrower is short of every month.
• In the event of the proposed modification being approved, the changes that would be brought about to borrower’s financial situation should be shown in a projected financial statement.
• A covering letter as to the need of submitted documents and a list of the same.

All these documents should be signed and it is a good practice to include the loan number on all copies and documents in the package.