Homeowners facing difficulties can sometimes find themselves in a position where they're unable to pay their mortgage. When confronting such terrible circumstances, the options can be time sensitive and overwhelming. You may have decided on a loan modification as your initial course of action hoping to avoid foreclosure or the short sale process. If this is the situation you find yourself in, you may be wondering how long a loan modification should take and why the bank is taking so long to approve it?
One significant problem with the loan modification process is that it can take a very long time, seemingly forever. The time involved to get all the paperwork together on your own end is brutal enough. Not to mention all the time it takes to have the bank review everything. There are indeed steps you can control to minimize some of the wait time. For example, you can have many things in your package organized and laid out in a way that's friendly for the bank. However, some of these processes are out of your control and involve other people.
When you apply for a loan modification, there are many people at the bank that get involved. Some of which extend beyond the bank depending on how your mortgage was initially set up. The loan modification process can typically go between 30 to 90 days sometimes longer if it's a complicated situation. The bank is going to look at your hardship letter and determine the severity of your current financial situation. They're going to look into whether you are dealing with a temporary circumstance or something ongoing and permanent.
Before starting the process, you will want to be familiar with your Banks guidelines and how they internally work for loan modifications. Some banks have made the process more difficult than it actually needs to be. For example, the bank may not initiate the process to Borrowers unless they're two or even three months behind on their payments. This restriction can create a bottleneck concerning an efficient flow of information. It's not unheard of to discover the bank has lost documentation requiring you to resubmit forms. A good practice would be to document absolutely everything while keeping notes from your phone calls. Setting up a separate file folder in your emails would also benefit you. This way you can track who you've spoken to and understand where the bank is at with your paperwork.
The bank in some instances may initiate a process called dual tracking. Many people applying for a loan modification may not be aware of this. The bank may be running two internal processes simultaneously within two different departments. For example, the Modification department in the bank might be working on due diligence validating claims within your application, while the foreclosure department is initiating its internal processes. If the lender is leaning in the direction of denying your request. They may not indicate this right away, but the bank may have a lot of paperwork already prepared to move to the next step of foreclosure. This can further put you behind the eight ball eliminating other options that may have been on the table initially.
Probably the most substantial delay you will face is when the bank involves the underwriters that backed the original loan. The underwriters will review the process and determine if the existing payment structure is sufficient. This process can be quite involved with lots of paperwork going back and forth between them and the bank.
In conclusion, the loan modification process may seem like a good idea initially. However, the problem is it can consume a lot of valuable time leaving you in a tight spot in the end. You may have options on the table initially, but after going through a long process, your back might be up against the wall.