Thursday, September 23, 2010

Living Happily on a Shoestring: Mortgages Can Be Modified (If You Keep Trying)

Before I get started on this week's column, I want to include a postscript to last week's. I found a birthday gift-giving solution that worked great for me and my family.  If you're interested in learning more, check it out here. Now on to more serious money matters...

Are you having trouble paying your mortgage? You may qualify for a loan modification. We did. While each lender may handle the process differently, I can only tell you how we went about ours with Wells Fargo.

The first step is to make sure you have all your facts and figures ready. You will be asked to provide a great deal of information and documentation. Certain circumstances make you more eligible, such as being able to prove a financial hardship (e.g., job loss) or change in finances (business loss). You are ineligible if you have filed for bankruptcy, and you must own and live in your home. And while banks will say this isn’t so, I have heard that you get much faster results if you’re behind a payment or two. (Disclaimer: We did not do this and I am not encouraging you to do so... I’m only repeating what I’ve heard.)

It makes sense for the bank to modify your loan if you are in financial trouble:  Getting most of their payment sure beats foreclosures or short sales. Get in touch with your lender and ask how to contact its loan modification program directly. Insist on talking to someone there. Once you reach that department, explain your current situation and tell them you need a loan modification. Make it clear that, despite your current setback, you are a conscientious customer who very much wants to repay his/her loan. We happened to have used Wells Fargo for all three homes we have purchased over the years, and went out of our way to say that in all those years, not only had we never missed a payment, but we had never been late. In the end, what we were able to work out was a greatly reduced interest rate for four years. This makes our monthly payments far more affordable, while also giving us a chance to get on our feet again.

If I just made this sound easy; boy, did I err. Holy mother of understatements!

We had to fight tooth and nail for our modification, including sending a letter directly to the president of the company, as well as to our local senator (whose office did, in fact, contact the lender on our behalf). That said, the effort was well worth it as the new monthly rate is considerably lower. So whatever you do, don’t give up if the bank’s first response is no.  Start putting your requests in writing and keep a paper trail. Make it clear that you won’t go away quietly. Give ‘em hell, Harry!

If you think you qualify for a modification, a good place to start is with the government’s Financial Stability website and, of course, with your own mortgage lender.

Christine Wilkinson is a veteran middle school teacher, who holds a Master's degree in Education and is currently job hunting. Christine is also a freelance writer who has had articles published in the Raleigh News and Observer and most recently in the Washington Post. She has lived most of her adult life in the DC-Baltimore area, although she recently returned from a three year detour in the South (Raleigh, NC). She is married with a 7-year-old daughter, which prompts her to observe: "While I may be struggling in this economy, I lead a rich life blessed with a great family and amazing friends."

Christine welcomes your comments below.

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