Caraballo & Associates

Welcome back to the 3rd part of our loan modification series.



Here is a quick recap of what we have covered thus far.

In part 1 we covered:

• A brief explanation of the situation.
• An explanation of basic rules to follow while going through the process.
• The issues/pitfalls you may run into throughout the process.
• Some of the more confusing aspects of the process.
• Trying the modification ourselves vs. hiring someone. (pros & cons)
• Questions to ask your customer service rep.
• Tips on how to stay on top of all the documentation and information being thrown around in the beginning.

Part 2 we covered:

• The initial and follow-up conversations with bank reps.
• Tips on how to make sure you are not GIVING you personal information away to the wrong people.
• How the “trial period” will affect a credit report and score.
• Where the money that is not being paid goes while in the trial period.
• How to separate real concerns from made up concerns.

In this part we are going to go rapid-fire style. All the details I would like you to pay attention to between the main phone conversation with the bank up until you receive your initial package.

Things to watch out for…

1.  Phone quotes may be different from one conversation to another with bank reps and also from the package from the bank.

In my example, I spoke to about three people that gave me three different amounts and three different dues dates for those payments. The problem with this is that if you do not pay the amount requested by the due date, you may be in breach of contract and they may be able to deny your modification based on this fact alone. One must pay very close attention to this as this is a very simple way to mess up the whole process.

In my case, my last conversation with the bank rep was in line with my initial paperwork (remember, I found a competent rep to deal with and held on to them as long as possible throughout the process.)

I have however heard some horror stories about the bank even sending three different packages with different due dates and amounts. If this is your case, I would suggest to stick with only one of the packages and trying to verify with someone which would be the correct version. DO NOT stop paying because of the confusion! If there are different version, you may simply want to stick to the first one (because this is the first one you received) and continue on that schedule until someone proved to you that it is wrong. This way you have documentation and followed the rules that at least one of the packages contained. This may help you not be in breach because it could have been the bank that messed up a few times.

2.  Bank rep may be hesitant to send some documentation in writing.

Unfortunately, due to the high volume of calls coming in about loan modification, banks are filling these seats with inexperienced people that may not really know what they are talking about. So they may answer a question but at the same time tell you that they cannot send you proof until after…that may end up being NEVER. So be careful with this.

In my case there were a couple of times that this happened to me. The first one was when one rep told me that I needed to provide three years worth of tax returns, so I asked for a document requesting all documents needed so I could collect them all at the same time and they refused. I asked the next rep I spoke to and they mentioned they did not know what the other rep was talking about. When I received my package, I WAS asked for my full tax returns but only for 2 years. This is why documentation is SO important!

Another time was when I spoke to a rep and they told me that I had to save money in order to establish an escrow account for my maintenance payments (association fees). Now traditionally, at least in my area, association fees are paid on a monthly basis by us (the borrower) straight to the association. Well I can tell you that up to this point I have not heard another word about this issue.

3.  One of the reps told me that the credit report will go back to normal after the modification.

I am not sure if they meant that my WHOLE credit report will go back to normal (which I seriously doubt) or that if the modification is approved, the credit will go back to looking like there is a normal loan and continue normal from there. (I hope this version is true) but I will have to share this piece of information after my modification is accepted (Hopefully)

I would like to leave you with a little advice.

First, do not worry yourself prematurely on how your credit is going to be affected. This is something you are going to have to deal with when the time comes. If you are trying to get a loan modification because you are having a bona-fide hardship, credit should be the last thing you should be worrying about. This can all be handled later.

Secondly, if you are in a trial period and this allows you to have some disposable income, please don’t spend the money irresponsibly. This is a time to reflect on your finances and find out how to straighten everything out with your mortgage loan and with your personal finances. I have seen too many people go into the trial period, have disposable income, not get accepted for the modification, have to move out of their home and not have any money to do it with.

Whether the modification is accepted or not, you should at least take advantage of the extra money you may have and begin saving it in case (knock on wood) the worst happens. If you spend it all frivolously, you may have many more financial issues in the future. Just a little food for thought!

Thanks for joining me again on this long quest. Our next part is going to be about what happened when I spoke to the home ownership counselor for the first time…Stay tuned.

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