How to seek a loan modification

Borrower looks at loan papers.

TEXT OF INTERVIEW

Tess Vigeland: Tanya mentioned that the McCoys had tried to refinance. That's not easy for anyone these days because credit is still in short supply. And if a borrower is already in trouble, they might have a better shot at trying to modify their existing mortgage. The federal government has tried to encourage banks to change loan terms for delinquent customers, but the record of success is mixed at best. So if you're looking for a loan modification, what should you do?

Joining us now is Mary Ellen Nicol, a certified housing counselor in Atlanta. Welcome to the program.

Nina Olsen: Thank you very much.

Vigeland: What are the, kind of, common situations where people are calling you for assistance?

Nicol: Well, they're usually calling when they're past due on their mortgage or they know they're going to be past due on their mortgage in the near future.

Vigeland: So what do you advise them to do, in a very general sense, first?

Nicol: Well, I want to know if they've been in contact with their lender? If they've spoken with their lender about the situation? If they know they're going to fall behind with their mortgage in the near future, if they've reviewed the situation with the lender and let them know why they are going to be unable to make the payments?

Vigeland: Well, if you are hoping to modify your mortgage, as so many people are right now, what kind of check list might you want to have in front of you when you get on the phone?

Nicol: Well, you're going to want to have quite a few financial papers. Things like two current years of your tax returns, two months of bank statements. You're going to want to have your W2's or any other 1-99 that you may have if you're self employed. A list of all of your income and all of your expenses. And probably two months of all of the pay stubs for all the wage-earners.

Vigeland: And how do you go about describing your situation so you can prove to them that you really have a hardship situation?

Nicol: Most people are able just to recount what has happened in a way that they lender knows that it's either a temporary situation or a permanent situation.

Vigeland: And is this a situation where you should, prior to talking to the lender, come up with, you know, what you would like the deal to be? How much you might be able to pay? Or is that something that they should talk you through?

Nicol: That's why I like having a really good budget; when you know exactly what your income is each month, then you're able to know when you're talking to the lender what's going to work for you.

Vigeland: So you should have numbers at the ready?

Nicol: Definitely have numbers at the ready.

Vigeland: How does that conversation go? I mean, is that, I don't know, is it like a negotiation? Where, you know, you give them a number you can pay, they say well we'd like you to try to pay this? I mean, is -- in general are you finding that clients find this a positive experience? Or a negative experience? A difficult experience?

Nicol: I think they're ready to agree to whatever the lender asks them to do. And in some cases they know when they're on the phone with them that it's not going to work from a financial point of view. So a lot of times if I'm talking to a client who has worked with their lender already, they're calling because the agreement they made with the lender isn't going to last for much longer. And they're telling me, "I agreed to do this each month or make this payment each month." Or they're telling me, "I was able to make the payments for three months in a row, but now I'm having trouble."

Vigeland: Mary Ellen Nicol is a certified housing counselor at the Consumer Credit Counseling Service in Atlanta. Thanks so much for your help today.

Nicol: Thank you.

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