There are acceptable reasons for a loan modification, and homeowners who hope to get their lender's attention and cooperation need to understand exactly why some borrowers are approved while others are denied. A loan workout will only be offered to homeowners who can prove that they are eligible, and this includes documenting a legitimate financial hardship situation. Some borrowers simply do not relay their situation properly to their lender and as a result may be denied the loan mod they truly need an deserve.
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So, what are the acceptable reasons for a loan modification? There are many reason that a lender may consider, but here are the basic guidelines that must be met in order to be considered a good candidate:
The borrowers income has been reduced or impacted in some way. This can be due to a loss of job, cut in pay or hours. Many homeowners have been affected by the high unemployment rates and others may have a spouse who is not working or no longer contributing to the monthly income. You have used up your savings and other reserves in order to make ends meet each month. Once all of your savings are depleted, you will be at imminent risk of default. Using credit cards to pay basic living expenses is an acceptable reason for a loan modification as well. Think about it this way, you are actually adding more debt each month just to try to stay in your home, and that is a ticking time bomb. Increased Expenses will also trigger loan mod eligibility. Perhaps you have unexpected medical expenses, or legal fees. Many borrowers have seen their mortgage payment jump up due to an adjustable rate increase, which is a very good reason to request a loan workout. Your financial hardship may either be a temporary one or a permanent one, and depending on your specific situation the bank may offer you a temporary solution or a permanent loan modification. If you need a long term solution, then be sure to tell them that you do not expect your situation to go back to where you were before.
The acceptable reasons for a loan modification may include other various situations - each homeowners situation is slightly different but as long as one of the above reasons is present you will be considered a good candidate. The only way that you can effectively relay just what your circumstances are is through your loan mod application. The financial statement that you fill out must prove in black and white that your current monthly income, monthly expenses and bank balances all fit within the standard approval guidelines. You may want to use a loan modification software program to help you with these important calculations. All of the necessary figures will be provided for you automatically, and you can avoid mistakes and have confidence about your application.
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