Part 2: Nuts and bolts of mortgage modification
By Jack Guttentag, Monday, May 11, 2009.

Inman News

http://www.inman.com/buyers-sellers/columnists/jackguttentag/loan-mod-go-it-alone

Editor’s note: This is Part 2 of a two-part series. Read Part 1.

Last week, I went over the steps involved in getting a loan modified. This article examines which, if any of these steps, may require a borrower to seek help.

The bottom line is that many, perhaps most, borrowers can handle it all themselves, but some may need an assist here or there. And some may want to delegate the entire responsibility.

Negotiating the Deal: Firms hustling for modification business sometimes pretend that they have the knowledge and skills needed to negotiate a favorable deal with the loan servicer. In fact, a modification is not negotiated -- it is granted (or denied) by the servicer, applying rules or principles set out by the investors who own the loans. In the case of modifications under the Making Home Affordable (MHA) program, the rules are set by the federal government, but these do not override investor rules. If the documents governing the servicing of a particular loan -- known as the Pooling and Servicing Agreement -- prohibits a particular modification, the MHA program will not help.

Delivering Information to the Servicer: Legitimate firms in the modification business know the information that each servicer wants and where to deliver it. This is their principle stock in trade. But borrowers can now obtain this information from my Web site, see Mortgage Servicer Information.

Assuring the Accuracy of Information Provided: Filling out the servicer’s questionnaire form correctly is a challenge to some borrowers, but free help is readily available. One of the purposes of HOPE NOW, the alliance of servicers, investors and counseling agencies established last year to help borrowers in trouble, was to provide free counseling. Borrowers can call 1-888-995-HOPE, or they can find a HUD counselor in their state by going to http://www.hud.gov/local/index.cfm.

Follow-Up: Mistakes happen in modifying loans because the process is complex, and servicer employees may be overworked and/or undertrained. Either the borrower or the borrower’s designee should follow up the request for modification to make sure the papers haven’t been lost and the case is in an active queue. If the request has been rejected on the grounds that the borrower is not eligible, the borrower or the borrower’s representative should find out why and attempt to confirm the reason is legitimate.

Many, if not most, borrowers can do it all themselves, perhaps with some assistance from free counselors. But some borrowers are clueless -- they need to be represented, not just counseled. They want someone to "take over" the process for them and follow it to a conclusion.