8 Ways To Improve Your Mortgage Modification Application

By Mike Rockwood

A brief review of this scientific principle can help you balance your family´s budget through a mortgage modification. That´s right, high school physics to the rescue!

File inertia is a term I coined after observing hundreds of mortgage modification applications (aka 'files') processed by banks. My acute observation and deduction capabilities led me to postulate this breakthrough principle! So, in the spirit of all great 'scientific discovery' I will share it with you.

Applications (files) that are moving tend to remain moving. Files once stopped, tend to stay that way. It seems like a 'blinding glimpse of the obvious', no?

Here is how an appreciation of this new principle can help you help your family. There exists a force in mortgage modification process that is acting upon every application, slowing it down or stopping it altogether. This 'drag' is the fact that the banks are overwhelmed. They have been for 18 months and it´s not getting better any time soon. So, the system is biased towards rejecting your papplication for any available reason and sending it to 'rework' for updated information, missing docs, missing signatures, missing signatures on missing docs...Whew! Here´s how smart applicants deal with file inertia.

For anal retentive types, this will be easy (and, do not read into that statement any insinuation that the whole process has a relationship to excrement). And, for others with less obsession with details, I will make it easy for you. Your application has to be perfect. Not only do you need to provide all the information that is required but you must also organize it and present it in a way that is perfectly understandable to an inexperienced, barely trained loss mitigation agent. Items such as missing documents, unsigned Tax forms, expired form 4506-T and inadequate income documentation make it vulnerable to rework.

I have eight recommendations for you:

1. Document Income correctly and show it clearly. This includes, notarizing self-employed P&L, including annual award letters for SSI and EDD income, showing calculations for monthly gross amounts and explaining precisely how you calculated recent 1099 income.

2. Document rent income correctly.

3. Your front-end DTI (Debt-to-Income) must be right. This is the total monthly payment on the 1st mortgage (PITIA) divided by your gross household income. It must be greater than 31%.

4. Make sure your back-end DTI (total indebtedness as percent of gross household income) is less than 70%.

5. Get a copy of your credit report. Make sure you have included on your budget, all current debts that show-up. That´s not to say you have to list them as current monthly debt payments, just be sure all of them are dealt with in your application.

6. At the end of your budget - after income taxes, debt payments and costs-of-livingyou should have about $0 left each month.

7. In order to be reviewed, seriously reviewed, you must be in default. Most require that you be more than 60 days late before they send your file to the collections department. That´s where you want it to be in order to get considered for a modification.

8. Construct it like you are there live, presenting it in person. Include a cover letter, a table of contents page, and notes to clarify every little thing.

If you take these 8 tips seriously you will get file inertia working for you. It can be one piece of high scool physics that really pays off for you.

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