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how do mortgage modification work

We are so under water on our home by almost 100k, we have never been late or missed a payment. Due to wage reduction we have contacted our bank about a modification, they sent paperwork which we submitted along with everything they asked. It's been over 6 months and they haven't replied, we sent request for updates on our paperwork still with no reply. Our credit is below 620 due to credit cards that we are paying off little by little.
We are in a no recourse state and are thinking of just walking away unless the bank agrees to modification.
If the bank does reduce the loan, is the difference added onto the loan principle?
  • August 30 2009 - Columbia
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Answers (3)

Dear exhausted,

Here is a blog on Loan Modification Slowdown that might answer some of your questions. 

Best of Luck!

Nida
  • August 31 2009
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You may want to walk away if the loan just seems to sizable. I would first explore the modification first. Typically, if you are not late the banks will not consider a modification- it comes down to investor guidelines.If you have a fannie/freddie or your lender took TARP, then we can play ball and you may be eligible for the HAMP. Under this program, you do not have to be late- this is the most aggressive modification on the market.

Your reduction is a write off- get a forensic audit ran on your loan documents..you may be eligible under HAMP for a reduction to your principal..this will be determined by your DTI and your note. I have some great articles and links that will help your learn more about modifications and give you a broader perspective- Best of Luck
  • August 31 2009
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Many Banks are just overwhelmed with the modification requests they are getting everyday.   I talked to a friend who works with Chase and he is in the loss mitigation department and he is telling me how people are quitting left and right due to the amount of work they are getting.  What you need to do right now is get on the phone everyday and just bug them until they give you another update.  Since I bet you money they are going to ask you to update your income documents, or resubmit your whole modification package over again.  You need to stay on them..  If you do not have that kind of time or you do not understand the loan business hire a real estate attorney.  An attorney can kill all the drama of dealing with the banks for you since he would do all the work and follow up.

On the second part of your question...if they do reduce your loan amount then no they will not put that to the back of your loan it's just gone forever.  The only way the difference is put in the back of the loan is when your late a few months and they modify the loan into new terms (interest rate, loan term) and just put the late payments in the back of the loan to get you caught up.  Hope that helped Feel free to contact me if you need any more help!
  • August 30 2009
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