Mortgage Modification Success Requires File Inertia

July 4th, 2010 | Author: Mike Rockwood

A brief review of this scientific principle can help you balance your family’s budget through a mortgage modification. That’s right, high school physics to the rescue!

I coined this term to help my readers understand a basic tenant of mortgage modification reality. O.K., so it’s not a scientific breakthrough. It can still be important, right?

Applications that are in motion tend to stay that way unless acted upon by other forces. Applications that are stopped tend to stay that way. While this discovery may not bring me fame, it has brought my readers lots of mortgage modification success. And, with the acute dissatisfaction with the whole mortgage modification process, that’s a lot.

Here’s how insight into file inertia can help you save hudreds of dollars per month…and, maybe even save your home. There is an influence acting upon all modification applications that slows them or stops them. It’s the fact that the banks are still overwhelmed by the sheer number of applications. Systems and people are strained to the breaking point, making it rational to “stop, reject or send back for updates and corrections”, as many files as possible. Such action gets the file off their desks AND it becomes your problem, not the bank’s. Do not let that happen to your application. Do this.

Your application has to be letter-perfect. Not only do you need to provide all the required info but you must also organize and present it in a way that is clear to an inexperienced and barely trained bank employee. You can hardly blame the banks…when was the last time YOU tried to hire/train 1000 people per month?Missing documents, unsigned 1040s, expired 4506-Ts and inadequate income documentation make it vulnerable to rework. Beyond that, even simple things like lousy copies, missing bank statement pages and illegible hardship statements can send your application to the rework heap.

Take advantage of file inertia. Make you application perfect by:

1. Calculate and verify your income correctly. Notarize self-employed P&L, include annual award letters for SSI and EDD benefits, show calculations with explanations for monthly gross amounts and calculate recent 1099 income.

2. Show rental property correctly. This is especially important if you are applying for a HAMP modification on your primary residence.

3. Be certain your front-end Debt-to-Income ratio is right. Calculate this as the total monthly payment on the 1st mortgage divided by your gross household income. It must be higher than 31%.

4. Be sure your back-end DTI (total indebtedness as percent of gross household income) is no higher than 70%. Any higher and you will get bumped (or, at least reworked).

5. Get your credit report (it’s free annually at www.annualcreditreport.com). Make sure all current debts are accounted for.

6. At the end of your budget – after income taxes, debt payments and costs-of-livingyou should have about $0 left each month.

7. In order to be reviewed, seriously reviewed, you must be in default. Most require that you be more than 60 days late before they send your file to the collections department. That’s where you want it to be in order to get considered for a modification.

8. Make it easy to understand. Put it together like you are there presenting it with a cover letter, a table of contents page, with notes to clarify things, etc.

If you take these 8 tips seriously you will get file inertia working for you. It can be one piece of high scool physics that really pays off for you.

Looking for more help to get Mortgage Modification? Visit Rockwood’s site about DIY Loan Modification at Home Loan Modification This article, Mortgage Modification Success Requires File Inertia has free reprint rights.

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Mortgage Modification Success Requires File Inertia

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