subject: You Got The Trial Period, Now What? [print this page] by Mark Korte on 06/07/10 by Mark Korte on 06/07/10
www.loanmodworkshop.com
Hooray!! The bank has offered you a trial period and you are on your way to saving your home. While this milestone is definitely a step in the right direction, don't pop the champagne just yet. Trial periods for the MHA modification are usually 3 months long, and in no way guarantee approval of a permanent modification. Trial periods are often granted with no underwriting of the homeowners expenses and monthly income. What the bank usually fails to mention is that often times these trial periods will last up to 6-8 months and sometimes longer. This means that you have to continue making your trial period payments well beyond the 3 month trial period.
What the homeowner should do?
After the homeowner has successfully made 3 payments on time (very important that they are on time, no grace period on these), they should call their lender and determine the next step. Usually the bank will advise that the homeowner keep making their trial period payments each month and they should have a decision on a permanent modification soon. "Soon," can take several months. A good rule of thumb is that the bigger the lender, the longer "soon" will end up being.
The homeowner is also going to have to send several docs to the lender again and again. This is the most frustrating part of the modification process. The only thing that will help ease the frustration is understanding that it IS going to happen and to be prepared to keep sending documents to the bank. The homeowner needs to confirm receipt of docs, everytime they are sent in.
Acceptance or Denial
After the bank has had sufficient time to review their case, they will send you a denial or approval letter. The approval letter will have the new terms of your loan and some documents to sign. The denial letter will only be a one page letter. If you got an approval letter with an affordable payment, great, you are on your way. Make sure to return everything to the lender as quickly as possible. They usually do not give you a whole lot of time to accept their offer (1-2 weeks). Lenders can be very strict about their deadlines, so don't mess around when you reach this point.
If you get a denial or an approval with a unaffordable large increase in payment, then you need to contact the bank. Often times, underwriters use bad information as the basis for their decision. If you nip any discrepancies in the bud right away, their is a good chance you will not have to start this whole process over. Once the lender has sent you a decision, it is very difficult to get them to reopen your case. YOU, the borrower have to be very persistent (phone calls 3-4/week), unless you don't mind starting over. The best thing to do when you call them is simply ask questions. If the rep sounds unsure or does not know, ask to speak to a manager. I would usually lead with the question, "what was the gross income, the underwriters based their denial/payment increase on?" This question gets to the root of a lot of problems.
Key Points
-Trial periods frequently go well beyond the stated 3 months
-Be prepared for multiple submissions of your income docs
-Denials are often times based on bad information
-Be persistent, ask a lot of questions and call the bank frequently after you have made all of your trial payments.
