So you have gotten your loan modification process started, as detailed in the last article. Good for you! As mentioned in that article, you should now have a good idea of how much your payments will be reduced if the modification goes through. Hopefully this will give you plenty of incentive to respond promptly to the lender with all the documentation you need to produce and steps you need to take. At this point, your lender should have supplied you with a loan modification case number and a list of documents you'll need to produce in order for them to process the modification. Keep in mind that this may be only the initial set of documents they require, and more may be needed later on in the process. The faster you respond with the needed information, the more quickly the process will go for you.
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These requirements will probably vary somewhat with the lender and their underwriters (these are the folks assuming the risk of letting you stay in your home with reduced payments with the assumption that you'll make those new payments). However, the needed documents are likely to include the following:
1. All pay stubs for the last couple of months. These may be from your employer and/or the Unemployment Insurance department in your state, if you've lost your job. In that case, an award letter from the state UI department stating the amount and duration of your benefits will probably also be required.
2. All bank statements for the past two months. These should include checking and savings accounts.
3. Tax Returns. Your lender may send you an IRS Form 4506T, which is just a request for a transcript of your latest tax returns. In my case, the lender had everything filled out - I only needed to sign the form. In any case, the form is only one page - there isn't much on it, other than the mailing address of the lender's loan modification / loss mitigation office to receive the return, the IRS form requested (normally the 1040), and a few checkboxes indicating the type of information about your tax account they need (the appropriate box may already be checked, or you'll be told which one to check if you do have to complete the form yourself). Then just sign the form, and that's it. Although you may get this form, you may still have to send in copies of your own Federal and State tax returns, like I did. Just make copies from your files and include them in the package.
4. Hardship Affidavit. This is the official form of the Making Home Affordable Program, as of this writing, at the website http://www.MakingHomeAffordable.gov. You can find out a lot of useful information at this site about saving your home. In my case, the lender included this form in the initial package. Your lender should instruct you on how to download this form (if they don't give it to you outright), and how to fill it out. Again, there is not much information to fill out (the whole form is only a page and a half), and your lender may very well have already filled in the necessary information, leaving you to only sign, date, and return the form with the rest of the package.
5. Hardship Letter. In contrast to the Hardship Affidavit form above, this is just a free-form letter explaining your overall situation, which can be done one paragraph. I've enclosed the letter I wrote as a sample, with specific information replaced with general data.
To: [Lender] Loan Modification Department (or whatever name they call it)
From: [Borrower Name and Address]
Re: [Loan Account Number] [Loan Modification Case Number (you should have one now)]
To Whom It May Concern:
I was laid off from my job at [company] in [month] and began drawing Unemployment Insurance benefits at that time. Recently, I opened the above referenced case number with [representative name] of your office and received a loan modification offer with a reduced payment of [new payment]. It was determined on both sides that I would be able to meet the offered modified payment, but would not be able to continue the original payment of [original payment] due to the financial hardship resulting from my layoff.
Thank you for your consideration in this matter.
Sincerely,
[Your name]
[Contact Phone numbers]
[E-mail]
Note in the above letter that the representative's name is used, for a stronger reference to the modification offer you received. This is why, in the previous article, I stressed the importance of getting the loan modification representative's name (and ID number if they have one) when the initial loan modification offer is made. That person's name and ID should be part of your records in your loan modification file. When you complete this first package and send it in, you are really on your way. In the next article (Part 3 of the series), I'll talk about other forms that may be required and the vital importance of FOLLOWING UP with your loan modification request!
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