Processing a loan modification file is very similar to processing a mortgage loan, and even more similar to processing a short sale package, if you are familiar with either of those processes. Basically, you collect all of your client's income and expense information and submit it to the lender's loss mitigation department in one complete package. If you don't include everything in the original package, however, you could seriously jeopardize your client's chances for a successful modification, not to mention your chances for getting paid as a result.
The first thing you need to know is that you cannot forget to write the loan number on every single individual page within the submission, because the lender may easily misplace any page that does not have a loan number written on it. Save yourself hand cramps and hours of extra work by buying a .pdf writing program, such as Adobe Acrobat Pro. First, scan in the entire submission package and open it with the program. Then create a small .jpg or other image file of the loan number. Lastly, cut and paste the file onto the top or bottom of each page. Then you can print it out again, and you're ready to send it into the lender.
But what needs to be included in the submission? You will need to collect and send to the lender all of the following documentation.
Loan Modification Package:
* Cover letter, stating what's in the submission package
* Client Authorization Form, signed by all borrowers, one for each different lender (if more than one)
* IRS Form 4506 – T, Request for Transcript of Tax Return, one for each borrower
* Two months’ worth of paystubs, all borrowers
* The last two years’ tax returns, all borrowers
* Year-to-date Profit and Loss statements for each business owned (self-employed and entrepreneur borrowers only)
* Hardship letter
* Schedule of Real Estate Owned, especially if they own more than one home
* 1003 Loan Application
* Recent appraisal or county property value assessment
* Copy of personal budget for all borrowers, including everything from debt payments to utility bills, from the monthly food budget to gym membership dues, and everything else the client's spends money on
Besides all that documentation that you'll send directly to the lender via fax and/or overnight certified delivery, you'll also want to collect and file the following items for your own use and records.
For your own records:
* Signed contract for your services (have an attorney create this for you)
* Signed legal disclaimer and release (could be part of the contract, have an attorney create this for you)
* Credit report, if they have a recent copy
* Most recent statements for all mortgages
* Check for your services (some states do not allow you to collect a fee for handling a loan modification for a client unless and until the work is complete and the modification was successful)
If you do a good job collecting all this stuff beforehand, but are unsuccessful in modifying your client's loan, you can often convert the client into a short sale listing (if you are a real estate broker) or refer the client to a short sale expert. You may yet be able to help your client and earn a few bucks after all (depending on your state's mortgage and real estate broker referral laws).
