Information and Warnings about the Modification Application Process

Any quick internet search can pull up hundreds (and probably thousands) of horror stories relating to the HAMP application process.  The same is probably true for all of the programs detailed in this section, but HAMP will specifically be discussed in this article because it is the most prevalent program and the most often applied for program.

One of the problems is the sheer length of the application process.  The most important thing that can be done when applying for a modification is to always keep the ball in the lender’s court.  Get the lender everything it asks for, as soon as possible.  Even by constantly supplying them with requested information, the process will almost undoubtedly take months. 

It may take them a month to “evaluate” your application.  Then they may determine that you have not supplied all the documents they need.  After you supply them with the requested documents, they may take another 2 months to reevaluate the application.  Then they may discover that the documents you originally provided have expired and that you need to submit updated financial documents and complete a new application.  This process may repeat itself 2-3 times before you get any type of response.

Another problem is the difficulty in enforcing HAMP.  HAMP is not a law.  There is no real mechanism to force a lender to speed up its evaluation process or to force it to modify a borrower’s loan.  (This is different from if a lender provides a final modification and then fails to adhere to the new modification terms, or from if a lender makes misrepresentations regarding the HAMP application.  These scenarios may be enforceable and are discussed in the “Restraining Order” section of this website.  Because of this, lenders have little incentive to participate or cooperate with the HAMP process.  Lenders are paid a fee for each loan modified.  But it is a relatively small fee which likely does not provide much encouragement for the lender.   Additionally, it is important to note that engaging with your lender in a HAMP application will not automatically stop a foreclosure if the home is already posted for foreclosure.  The lender may agree to postpone a foreclosure pending the modification review, but it is not guaranteed.  

But the major problem that can arise with the HAMP process is what it does to a borrower in the event of a denial of a HAMP application.  A significant number of borrowers first apply for a HAMP modification when they are either not behind or only a few months behind.  But as stated above, it is not uncommon for a HAMP evaluation to take a year or more before any determination is reached (if a determination is ever reached).  The result is that by the time the application is denied, the borrower is in default on the loans by many thousands of dollars, when he/she might not have been behind (or only behind by a few thousand dollars) when the process began.  This puts most borrowers in a spot where the only economically feasible option remaining is to walk away from the house.  This is in addition to what has been done to the borrower’s credit report and credit score.

This is a catch-22 situation for borrowers.  They are told not to make payments during the HAMP evaluation.  But the payments are required by the contract (Note and Security Instrument) with the lender.  Therefore, as the lender is taking an eternity to make a decision, the borrower is falling further and further behind on his/her contractual obligation.  The lender’s usual response upon denial of the application is “you don’t qualify for the modification . . . now pay us the many thousands of dollars you owe us or we are going to move forward with the foreclosure process immediately.”

The previous paragraphs are not meant to scare you or to discourage you from applying for any of the modification programs.  It is simply a warning to stay as on top of the application process and to always keep the modification process moving, by any means available to you.  When applying for a modification:

  • Send in a full and complete application, along with every document the lender requests.  Check and double-check the information the lender sends to you to ensure you have complied with their every request.
  • Complete every question on every application.  If questions do not apply to you, answer N/A rather than leaving the question blank.
  • If they ask for a document, get it to them immediately.  Ask for a fax number to fax the documents to them (it’s faster).  Keep a fax confirmation sheet of everything you send.  Then call them to tell them that you sent it to them. 
  • Read the information contained at http://www.makinghomeaffordable.gov/get-started/request-modification/Pages/default.aspx.  Comply with everything stated on this webpage.
  • This piece of advice requires discipline:  put your mortgage payments into a savings account every month while you are being considered for the modification.  As was stated above, the mortgage company is unlikely to accept payments while you are being considered for a modification.  Suppose it takes the lender 15 months to determine that you do not qualify for a modification.  You will be in serious default on the Note.  If you have not saved your payments, this would be an insurmountable default for most people.  If you have saved your payments, you can reinstate the Note and then regroup to figure out how to best move forward.  Or if you have only been able to save 12 of the 15 payments, it should be a lot easier to figure out how to come up with 3 missed payments before a foreclosure rather than figuring out how to come up with 15 missed payments.
  • Monitor the evaluation with constant diligence.  Be a pest.  The squeaky wheel gets the grease.  You get the idea.  The lender may not have much incentive to move your application forward.  Give them a reason.    Ask them when you can expect to hear from them.  Call them twice a week.  Then if that doesn’t work, call them every day.  The best case scenario is that this sparks them into giving you your modification sooner rather than later.  Great.  Mission accomplished.  The worst case scenario is that you get denied for the modification.  But is you have stayed on top of them, perhaps you will get your denial many months before the less diligent people.  This may mean that you can move forward and still have other options available to you because you are not a year or more behind on your mortgage payments.

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