Why Does My Lender Keep Rejecting My Loan Modification Application. What Am I Doing Wrong?
Homeowners call us on a regular basis befuddled and confused. They claim their lender keeps rejecting their loan modification application. They believe they qualify for a loan modification. Yet, the lender keeps rejecting their loan modification application. In some cases, the homeowner discovers the lender never had any intentions of giving them a loan modification in first place.
However, most of the time, it’s because the homeowner doesn’t know what they are doing.
The loan modification application process takes time and patience.
Lenders also require a lot of personal information and for the file to be submitted in a specific way.
However, during this process, homeowners might also fall further behind on payments. This could cause the lender to deny their loan modification application.
Thus, this may also force the homeowner into filing for bankruptcy. However, homeowners need to remember that a bankruptcy DOES NOT STOP a foreclosure. It will only delay it.
In many cases, the lender already knows that the homeowner does not qualify for a modification. Yet, they allow the homeowner to submit anyway. Thus, wasting everyone’s time when the homeowner could have used the time to look for another solution.
My Lender Used These Excuses to Deny My Loan Modification Application
Lenders reject loan modification applications for a number of reasons. Some of them are actually legitimate. Some are just plain bullshit:
- A lender will reject a loan modification if it is incomplete or untimely filed. Believe it or not, this is quite common. This is because homeowners don’t supply any supporting documents to the loan modification application.
- Lenders reject applications for “insufficient finances.” This is usually because the homeowner didn’t supply any income information.
- Believe it or not, you do need to show a hardship to get a loan modification. If the lender suspects you’re applying for a loan modification just to save a few bucks, they will deny the application for “Lack of hardship.”
- The lender claims you have already received the maximum number of loan modifications they allow. Most of the time, lender is lying to you if they give you this excuse. You are allowed to apply for a loan modification once every two years.
- The Lender also denies your application saying the “investor” doesn’t allow loan modifications. This simply is not true and mortgage servicer is lying to you. REMIC rules that govern mortgage backed securities (MBS) say the mortgage servicer has full discretion with the day-to-day operations with the servicing of the loan. The Trustee of the MBS and the bond investors have no say in the decision to give you a loan modification or not.
- You missed a trial loan modification payment. Homeowners need to make sure they make all their trial payments either early or on time. Your 15 day grace period in your original mortgage doesn’t apply with trial payments for a loan modification.
However, a common reason for a loan modification application to be denied is an error or violation on the part of the mortgage servicer.
Common Mortgage Servicer Loan Modification Violations
Federal regulations require a mortgage servicer to follow a certain process for a loan modification application. Congress passed these laws as a result of the 2008 financial crisis. they designed to prevent the lender from committing fraudulent. Some of these violations include:
- The lender or servicer fails to provide loan information requested by the borrower within 30 business days.
- The servicer fails to advise the borrower within 5 business days of the receipt of the application if more information is needed.
- It is illegal for the lender to file a Foreclosure Complaint or seek a Final Judgment of foreclosure while the application is being reviewed. This is called dual tracking)
- Failing to issue a decision within 30 business days of receiving a complete loan modification application
- Informing the borrower that they must be in default in order to apply for a loan modification
If you have gone through the loan modification application process and your lender denies it saying that you never qualified, this could be a violation of federal law.
My Lender Says I Never Qualified for a Loan Modification. What Can I Do?
If lender denied you a loan modification because they claimed you never qualified for one, they may be in violation of the Fair Debt Collection Practices Act (FDCPA). The servicer and lender may also be in violation of other laws protecting consumers.
If you need more information about how loan modifications work, call us at 888.737.6344. We can also refer you to licensed loan modification expert or one of our lawyers with experience in foreclosures and loan modifications.