3 Signs Your Loan Mod Is Stuck in Limbo

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Progress revamping the loans of millions of financially-troubled U.S. homeowners is going at a glacial pace — and the banks aren’t helping speed things up. If your loan modification is at a snail's pace, see if one or more of these reasons apply.

Let’s take a look at the facts, first. According to the Federal Reserve, 3.2 million U.S. mortgage borrowers are at least 60 days behind on their mortgage payments, thus placing them squarely on the road to foreclosure.

One off-ramp that these late payers would likely love to take is the loan modification, also known as the loan workout program. These programs, usually negotiated by banks and lenders, might reduce loan balances, or more likely, cut the interest rate that homeowners are paying or extend the length of the mortgage loan from 30 years to 40 years, thus cutting monthly payment amounts.

The trouble is, getting a loan modification approved is tougher than getting through a Green Bay beer line wearing a Brett Favre jersey.

Unfortunately, the loan modification process is so new, and so un-transparent, that many mortgage customers may not even know they’re stuck in loan modification jail.

Let’s amend that by listing some big “red flags” that tell you your loan mod application is in mortal peril:

You haven’t heard back from your lender. Banks have been conspicuously slow in answering their telephone and responding to their e-mail messages from loan modification customers — and that’s after the homeowner has filed an application for a loan workout. If you haven’t heard back from your lender within six weeks of filing an application, it’s time to break out the heavy artillery and call a lawyer. Say what you want about the legal-eagle populace, but a good lawyer can get your phone calls returned.

You’re asked to duplicate information you’ve already provided. Whether it’s intentional or accidental, the horror stories are beginning to accumulate over loan modification hold-ups, particularly when it comes to the lender’s atrocious handling of homeowners' paperwork. (Here’s a good rundown of some brutal loan mod experiences, from the lips of homeowners who’ve survived the process).

If you’re being asked to resend personal financial data that you’ve already sent, a good rule of thumb is to expect “delay tactics” going in, and have copies of records on hand that you can resend — but only once. If you’re asked more than once, go ahead and call that lawyer again — or file a complaint with your state’s Better Business Bureau.

Your lender says they never got your loan modification application. “We didn’t get your application” is a headache-inducing response more and more loan modification customers are getting these days. Look at it from the bank’s point of view — they buy more time, and if they’re really lucky, can cause you to give up in frustration if they throw up enough roadblocks. So if you hear the “we don’t have your application” speech, prepare for it by stashing a paper trail, including copies of registered mail (a big “must-do” for loan mod customers); phone call and e-mails with your lender, and names and phone numbers of bank employees you’ve spoken with throughout your loan modification process.

To keep these barriers from crashing down on you, be persistent. Call your lender every day if you have to, and make sure you can back up everything that you’ve done. And if all else fails, get some good legal help.

The stakes are too high to fall prey to any reindeer games from banks and lenders. But, believe it, they’ll keep playing those games unless you fight back — and hard.

—For the best rates on loans, bank accounts and credit cards, enter your ZIP code at BankingMyWay.com.

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