Why does the Loan Modification process take so long?

Published: 23rd March 2009
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All banks are different. It can take anywhere from 30 to 90 days for a decision to modify a loan.

The reasons for this are varied. Banks originally were not set up with entire loan modification/loss mitigation departments dedicated to handle the large scale loan modifications that we are dealing with. It is not uncommon for one loss mitigator to have hundreds of files under their management. They do not have the staff or the procedures in place to handle this situation that is happening and also need to have the support in place to train new staff in office procedures for loan modifications while still conducting normal business.

While you are applying for a loan modification you will still receive collection calls if you are late on your payments and the foreclosure process, if it has started will, still proceed until the modification has been signed. You can push to have all foreclosure actions halted while you are undergoing the modification process - this depends on the lender.

It helps to understand the process from the banks' point of view to understand why it takes so long.

Primarily when you want to speak to the bank to have your loan modification, you are emotionally involved in the process. This is your homestead and you are worried as to whether you are going to be able to keep your home. The longer the situation goes on for the more desperate you feel. The bank is not emotionally tied to this property. The people you speak to and who work on you file do not know you or where you live. They clock-in in the morning and clock-out at closing. If your file has not made it to their desk yet, it is not their problem.

All of the paperwork that has to be faxed or emailed to the bank for one loan must be scanned into a banks computer system so that any representative that looks at your account can speak to you regarding your file. This with some institutions can take up to ten days, not withstanding if they didn't get the fax or e-mail or some thing was not clear and they could not scan the document. You will not be called and asked to send it again. You have to wait the required amount of time, then call, then fax it again if necessary.

Your financials are reviewed to make sure that they meet with the banks' criteria for income/expense ratio to make sure that you can meet the new terms if your loan is modified. This can take weeks.

Usually in this process the bank might need some supplemental paper work like pay stubs or tax returns that need to be faxed to them and the whole scanning in process done again.

Once your file has been pre-approved it must go through underwriting. Then three or four underwriters might separately look at your file to make sure that it meets with the banks guidelines.

The bank may even request an appraisal of the property or may send some one out to look at the property as part of the final underwriting.

This is all happening in conjunction, while the banks and lenders can change their whole criteria for loan modification. New updates are sent out all the time and the investors who many of these lenders and Services work for may review and change their criteria daily.

However if you would like to speed up the process, there are a few things that you can do:

1. When ever you fax some thing to your lender, make sure you follow up with a call to make sure that it was received.

2. Always write down the name of the person that you spoke to, their extension and the date you spoke to them.

3. Send the bank everything that they need all in one go. Because spacing things out or sending several faxes can cause paperwork to become lost or mislaid.

GFS is a company that provides financial services across a broad spectrum and includes real estate and mortgage professionals with over twenty five years of combined experience. You can get all the help that you need to understand the loan modification process by down loading the simple and economical e-book from http://www.diyloanmodkit.com, which will give you a full step by step guide to understanding how to do your own loan modification with out having to pay a company or an Attorney. It comes with all the forms that you would need and answers many questions that you may have. This process can easily be done on your own if you have the right information. For more about loan modifications please visit http://www.diyloanmodkit.com

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