April 23, 2009, Rewritten February 10, 2012

Millions of mortgage borrowers who can no longer afford their mortgage payments but can afford a lower payment, can avoid foreclosure by getting a modification of their loan contract. While the path to a modification remains torturous, it is not quite as bad as when I wrote the first version of this article early in 2009.

Are You Unqualified?

It is not possible for borrowers, acting on their own, to determine whether or not they qualify for a modification because they don’t have access to all the criteria. Some is kept under wraps by loan servicers. However, borrowers can determine that they are not qualified for a Government-supported modification by accessing Treasury's Frequently Asked Questions at http://www.makinghomeaffordable.gov/about-mha/faqs/Pages/default.aspx.

Bear in mind, however, that servicers also offer modifications outside of the Government's program. You might qualify for one even if you don’t meet the Government’s requirements.

 Compiling the Information the Servicer Wants

The single most important step in obtaining a loan modification is providing the servicer with the exact information the servicer needs to make a decision. Each servicer has its own set of forms that must be completed, and its own requirements for the documentation you must provide. 

In my first stab at this problem, I placed the information required by each of the major servicers on this site. Now borrowers can access the DMM Document Wizard at https://www.dclmwp.com/mtgprofessor_question.php, provided at my request by Default Mitigation Management LLC, which is a lot better. Based on your answers to the questions it asks, you will be provided with a customized list of forms you must complete and documents you must provide.  It is free and will take the guesswork out of what you need.

Don’t Exaggerate Your Financial Shortcomings

Warning: The servicer will examine your statements of income and expense to determine whether or not you can afford a reduced payment. Exaggerating your financial weaknesses may open his heart but close his purse, if it makes you appear to be a lost cause.

 Assuring Accuracy

Having the right form is one thing, filling it out correctly is something else. Some industry executives estimate that about 95% of all packages submitted are incomplete or contain errors.  A package with obvious errors may fall to the bottom of the pile, or it may lead the servicer to conclude that you do not qualify for a loan modification when, in fact, you do. Remember what you were taught in second grade: neatness counts!

In addition:

1.     Use a cover sheet that identifies all documents in your package.

2.     Write your name and loan number on every page.

 Assuring Delivery

Preparing an accurate and complete set of documents is one thing, delivering the package to the servicer is something else. Servicer systems have been overwhelmed by requests for help and documents routinely get “lost”.  You want to minimize the chances of that happening to you.

Using Fax or Certified Mail: Make sure you have the correct contact information.  Treasury provides addresses and fax numbers of every mortgage servicer at http://www.makinghomeaffordable.gov/get-assistance/contact-mortgage/Pages/default.aspx.  Certified mail is more reliable than fax, but neither guarantee prompt attention by the servicer, or even that the documents won’t subsequently be misplaced or lost.

Using the DMM Portal: The best way to deliver documents to servicers is to use the DMM portal, available through the DMM Document Wizard by clicking on “Submit Online”, or at www.dclmwp.com. I have no financial interest in DMM.

If you use the portal, your documents are delivered to the servicer electronically, and the portal then becomes a direct communication channel to the servicer. The servicer uses the portal to acknowledge receipt of your documents and to request additional information or documents.  You use the portal to make corrections, to send additional information, and to update yourself on what has been completed and what remains to be done. Questions by you are automatically directed to the specific employee who can answer them. All communications are time-stamped and remain in the portal as a record of borrower/servicer exchanges.

Unfortunately, not every servicer subscribes to the DMM Portal. The list of those that do is shown on the DMM Wizard.

Follow-Up, and Then Follow-Up Again

Because the process of modifying mortgages remains slow and error-prone, you may need to nudge the servicer. If you faxed your documents, you should follow up to make sure the papers haven’t been lost and the case is in an active queue. But even if you use the DMM Portal, you should follow up with the servicer regularly to make sure your application is on track. 

Next week: getting help with your modification without getting scammed.

Thanks to Igor Roitburg.