Getting a mortgage loan modification might seem like a quest only a mythic hero could achieve. After all, the ranks of those who've lost homes in foreclosure dwarf the number of homeowners who've received mortgage help.
Meet Lois Langlois, mythic hero.
Langlois, a single mom, actress and homeowner in Santa Monica, Calif., suffered "a series of unfortunate events that all happened clustered together."
First, she was served with divorce papers. Then she was loaded with medical bills, despite having two health insurance policies, after an SUV struck her son.
Caught in a financial undertow, she turned for help to the nonprofit Los Angeles Neighborhood Housing Services. The organization eventually helped get her home loan modified.
The seemingly mysterious nature of who qualifies for a loan modification is legendary among housing counselors.
Edwin Rivera, area sales manager for First Federal Lakewood
First Federal of Lakewood is not as big as the Bank of Americas, the Wells Fargos. We try to address it before it gets to that point. If we see that they miss a payment, we contact them and ask how we can help to avoid going into foreclosure, And I think our Fc rate was 1%, because we try to address it before it gets to that point.
By the time someone is 3, 4 months behind, when they contact them, it makes it difficult.
Lowering payments to justify their income, we'll work around it, we'll even defer some payments and put it at th back of loam to try to avoid foreclosure. The last thing we want is foreclosure.
Sometimes you can't avoid it, but we';ll definitely do whatever we can. We don't want the house – we want the people to keep the house. The bank doesn't make any money by taking over the house.
Edwin Rivera, area sales manager, First Federal Lakewood Savings And Loan
But these experts say there are ways homeowners can better their chances.
Following are housing counselors' tips for getting a mortgage loan modification:
• Complete the package. Homeowners need to submit paycheck stubs, a hardship letter, a budget and any other documents the loan servicer wants. If even one document is missing or outdated, the entire file will drop to the bottom of the pile.
• Ask questions. Make sure you know exactly what to provide to servicers. Servicers often request two paycheck stubs on the assumption that two paychecks represent one month's income. But a homeowner who is paid weekly, bimonthly or monthly may have to submit more or fewer paycheck documents. Similar misunderstandings about other documents can be equally problematic.
• Stay in touch. Homeowners should call the servicer at least once a week and check on the status of his or her request. Ask whether the file is complete. Review the documents. Explain any special or changed circumstances. A counselor can help, but lenders also want to hear from the homeowner on a consistent basis, says Richard Korn, a foreclosure intervention and default counselor at Apprisen Financial Advocates in Columbus, Ohio.
• Be persistent. Homeowners naturally feel frustrated when they're asked to resubmit documents. But those who realize they are "at the beck and call" of the servicer and "can hang in there long enough" may be rewarded, says Richard Call, grants administrator for the housing program at Apprisen.
On the other side of the table, representatives of loan servicers also offer tips for homeowners seeking a modification. They include:
• Be flexible. Loan modifications come in "lots of flavors" and not everyone is qualified for the federal government's Home Affordable Modification Program, or HAMP, says Gregory Hebner, president of the MOS Group, a loss mitigation outsource company in Irvine, Calif. HAMP is guideline-specific, not negotiable and requires full income documentation.
• Label your documents. MOS receives 54,000 pieces of paper every day from some 3,000 borrowers, according to Hebner. To survive that storm of paperwork, homeowners should submit a complete package, put their names and loan numbers on every document and call to confirm that all the pages were received. Don't scratch out mistakes: Hebner says every document has to be "pristine."
• Release your tax return. Homeowners are required to not only submit income documents, but also sign IRS Form 4506-T, which allows the servicer to access the homeowner's federal tax returns. "The biggest reason they don't succeed is that they aren't able to provide substantive proof of income," Hebner says. "It's by far the No. 1 issue."
Langlois' story is proof that diligence and determination can pay off in the form of mortgage help.
Initially, she called Countrywide Loans and later Bank of America to apply for a loan modification. She also approached local attorneys, who wanted a $4,000 retainer -- money she might have borrowed had the attorneys not quit the business when California enacted a law that banned advance fees on their loan modification services.
"It wasn't that I didn't know how to prepare a profit-and-loss statement," Langlois says. "It was that the lawyers knew how to finesse the application. That was valid to me because I thought that in dealing with a bank, they are the sharks and I am the tuna, and I didn't want to get eaten."
After a year without relief, she finally found help through Los Angeles Neighborhood Housing Services. Within days, she submitted a complete package and received a loan modification. The new loan is 10 years interest-only with an option to pay principal and a first-year interest rate of 3.5 percent. That's a savings of $800 per month -- and an end to negative amortization.
"I'd love to say they looked at my potential and wanted to help me," she says. "But they don't tell you why they say yes."