Loan Modifications: Why are they so slow?

Most loan modifications enter the system at a low level employee whose only job is to make sure that all of the materials (i.e. financial statements, hardship letter etc.) are present. After that (depending on that particular lenders policies and procedures) the package is submitted for review to a committee or a single negotiator. The review process is a painstaking, pride swallowing process that can take several months. The reason they take so long is because the lenders do not have the infrastructure to deal with the massive volume of loan modification requests and more importantly do not have the incentive. The Home Affordability and Stability Plan provides servicers with an up front $1,000 per loan modification plus up to $1,000 per year lenders for up to three years in “pay for success” incentives. See for a copy of the fact sheet. What you don’t know is that most servicers receive more money than that in loan origination fees if the property is purchased after a foreclosure. Thus, what is the incentive for the lender to modify?

If you want assistance in your loan modification you have to be extremely diligent in your efforts. You must call the servicer daily to see where you are in the process. Your other strategy is to contact your senator. Other modification bills have been presented in the House but the Senate has yet to hear such matters. See my subsequent blog entitled the Loan Modification Program That Could Be.

As always an attorney can help you navigate the process with a more in-depth analysis of your financial situation. There may be other options for you in relation to financing or modifying your current loan. If nothing else it can be sped up with a quick letter from an attorney they may cost you no more than $100-$300 dollars depending on your situation.

Don’t give up hope!!


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