Barbara Sadler: How Long Does A Loan Modification Last?

The loan modification process typically takes six (6) months to nine (9) months depending mostly on your bank and your ability to efficiently work through the process with your attorney. Of course, the loan modification timeline is not set in stone and the more complex your situation or the greater the degree of concessions needed from the investor, the longer the process takes. A lawyer can often reduce the amount of time required by processing your paperwork efficiently, presenting your application in the way the lender wants it, and knowing from past experience what the lender is able and typically willing to agree to. Although each borrower’s situation is unique, knowing the measures the lender is willing to take for similarly situated borrowers can be very helpful.

Whether you are dealing directly with your lender or through an attorney, ask several questions up front:

• How long is the process likely to take? Find out the best- and worst-case scenarios and then count out the days and mark them on your calendar.
• When can I expect to hear something about my case? Mark this date on your calendar.
• If I don’t hear anything by the specified date, whom should I contact? Get the person’s name, employee identification number (if available), phone number, and any extension you need to dial to reach the person directly.
• What should I do while I’m waiting?
In addition, you can continue to make progress on your own by doing the following:

If you hired a lawyer to represent you, do not speak with your bank or bank’s representative. Refer all matters to your lawyer who is representing you. Anything you say to the bank could confuse things or compromise your lawyer’s ability to negotiate the best deal on your behalf. Don’t be surprised if you continue to receive delinquency notices or late payment phone calls. Banks rarely put a stop on the foreclosure process until a workout solution is fully in place. You should ask your bank if your attempts to negotiate a solution will stop or at least postpone other collection actions. If they do not, you should find out what that means for you. When your fate is in someone else’s hands, six (6) to nine (9) months can seem like an eternity. By doing your part to keep the process on track and remain informed, you not only improve your chances of achieving a positive outcome, but you can also reduce the stress that commonly accompanies the waiting process.

Lenders grant home loan modifications when the borrower proves financially unable to meet present payment terms, yet has the ability repay a reduced amount. Lenders may modify loans for owner-occupied homes or investment properties. If your loan was modified under the condition that you live in the home, you can’t simply move out and rent the home. The lender may stipulate that you must continue to live in the home or sell it after a loan modification; however, there is generally no minimum time frame you must keep the home after modifying.

A loan modification may stave off foreclosure and ease financial woes, however, financial troubles might continue after a modification. Borrowers might default again due to new or persistent financial hardship or need to move due to life changes, such as employment relocation or divorce. Lenders don’t forbid borrowers from selling after a modification; however, the lender can make it difficult to sell by requiring you to repay its losses. For example, if your lender reduced the principal balance on the loan or pushed the interest payments on part of the balance to the back of the loan, it may ask you to repay these amounts upon selling. Homeowners facing difficulties can sometimes find themselves in a position where they’re unable to pay their mortgage. When confronting such terrible circumstances, the options can be time sensitive and overwhelming. You may have decided on a loan modification as your initial course of action hoping to avoid foreclosure or the short sale process. If this is the situation you find yourself in, you may be wondering how long a loan modification should take and why the bank is taking so long to approve it? One significant problem with the loan modification process is that it can take a very long time, seemingly forever. The time involved to get all the paperwork together on your own end is brutal enough. Not to mention all the time it takes to have the bank reviews everything. There are indeed steps you can control to minimize some of the wait time. For example, you can have many things in your package organized and laid out in a way that’s friendly for the bank. However, some of these processes are out of your control and involve other people. When you apply for a loan modification, there are many people at the bank that get involved. Some of which extend beyond the bank depending on how your mortgage was initially set up. The loan modification process can typically go between 30 to 90 days sometimes longer if it’s a complicated situation. The bank is going to look at your hardship letter and determine the severity of your current financial situation. They’re going to look into whether you are dealing with a temporary circumstance or something ongoing and permanent.

Before starting the process, you will want to be familiar with your Banks guidelines and how they internally work for loan modifications. Some banks have made the process more difficult than it actually needs to be. For example, the bank may not initiate the process to Borrowers unless they’re two or even three months behind on their payments. This restriction can create a bottleneck concerning an efficient flow of information. It’s not unheard of to discover the bank has lost documentation requiring you to resubmit forms. A good practice would be to document absolutely everything while keeping notes from your phone calls. Setting up a separate file folder in your emails would also benefit you. This way you can track who you’ve spoken to and understand where the bank is at with your paperwork. The bank in some instances may initiate a process called dual tracking. Many people applying for a loan modification may not be aware of this. The bank may be running two internal processes simultaneously within two different departments.

For example, the Modification department in the bank might be working on due diligence validating claims within your application, while the foreclosure department is initiating its internal processes. If the lender is leaning in the direction of denying your request. They may not indicate this right away, but the bank may have a lot of paperwork already prepared to move to the next step of foreclosure. This can further put you behind the eight ball eliminating other options that may have been on the table initially. Probably the most substantial delay you will face is when the bank involves the underwriters that backed the original loan. The underwriters will review the process and determine if the existing payment structure is sufficient. This process can be quite involved with lots of paperwork going back and forth between them and the bank. The loan modification timeline is not set in stone. The more complex your situation or the greater the degree of concessions needed from the investor, the longer the process takes. Borrowers with a lot of collateral issues can see their loans take longer than what has become the typical 30- to 90-day timeframe. A professional can often reduce the amount of time required by processing your paperwork efficiently, presenting your application exactly the way the lender wants it, and knowing from past experience what the lender is able and typically willing to agree to. Although each borrower’s situation is unique, knowing the measures the lender is willing to take for similarly situated borrowers can be a real time saver. Playing the waiting game can be agonizing, particularly when you have no idea of whether your application will be accepted or rejected or what the lender will offer in terms of a workout. It feels like your future hangs in the balance, and you remain in the dark. Knowing the standard timeline for processing a loan modification can certainly help relieve some anxiety. In addition, you can continue to make progress on your own by doing the following: If you hired a loan modification specialist to represent you, do not speak with your lender or lender’s representative. Refer all matters to the professional who is representing you. Anything you say to the lender could confuse things or compromise your representative’s ability to negotiate the best deal on your behalf. Log all phone calls and correspondence between you and your lender or representative. Write down the number you called, the person you talked with, what the person said, and what you said – not word for word, just jot down the key points.

Keep track of important dates. If you do not hear something back on the date promised, call the next day to find out what’s going on. Lenders almost never call you back with updates. If you hired a third party representative, they will (or should) keep you posted, but the lender simply doesn’t have the time to make follow up phone calls. If you’re dealing with your lender directly, you’ll have to be the one making the calls. Mark your calendar and schedule periodic update phone calls. Consistent follow up is paramount to a successful modification.
Explore other options. If the lender denies your request for a loan modification or presents an offer that you cannot accept, you will need a plan B (and maybe a plan C and a plan D). In addition, other options may be better for you than a loan modification. Consult a real estate agent about listing your home for sale. Talk to a mortgage broker or loan officer about refinancing. Speak with a bankruptcy attorney to find out whether filing bankruptcy would be a better choice.

Don’t be surprised if you continue to receive delinquency notices or late payment phone calls. Lenders rarely put a stop on the foreclosure process until a workout solution is fully in place. You should ask your lender if your attempts to negotiate a solution will stop or at least postpone other collection actions. If they do not, you should find out what that means for you. If the lender is able to foreclose in 30 days and a workout takes 60 days, there’s a slight timeline problem. Push to have all default and foreclosure actions put on hold while your workout attempts are underway. When your fate is in someone else’s hands, 30 to 90 days can seem like an eternity. By doing your part to keep the process on track, remain informed, and explore other options, you not only improve your chances of achieving a positive outcome, but you can also reduce the stress that commonly accompanies the waiting process.

Mortgage underwriting can take anywhere from a few days to a few weeks. Five to eight business days is probably a good average (from the time the underwriter receives the file, up until a final determination is made). In many cases, the underwriter will issue a conditional approval. This means he or she expects the loan to close, but needs to resolve one or more issues first. For example, the underwriter might need a letter of explanation about a recent bank deposit. Once this “condition” is cleared, the loan can move forward.

Some borrowers don’t get any conditions. In such cases, the mortgage underwriting process does not take as long. Other borrowers get one or more conditions they must resolve, before they are clear to close. Underwriting tends to take longer in these scenarios.

A loan modification process may seem like a good idea initially. However, the problem is it can consume a lot of valuable time leaving you in a tight spot in the end. You may have options on the table initially, but after going through a long process, your back might be up against the wall.