Tips for getting a mortgage loan modification

On the other side of the table, representatives of loan servicers also offer tips for homeowners seeking a modification. They include:

• Be flexible. Loan modifications come in "lots of flavors" and not everyone is qualified for the federal government's Home Affordable Modification Program, or HAMP, says Gregory Hebner, president of the MOS Group, a loss mitigation outsource company in Irvine, Calif. HAMP is guideline-specific, not negotiable and requires full income documentation.
• Label your documents. MOS receives 54,000 pieces of paper every day from some 3,000 borrowers, according to Hebner. To survive that storm of paperwork, homeowners should submit a complete package, put their names and loan numbers on every document and call to confirm that all the pages were received. Don't scratch out mistakes: Hebner says every document has to be "pristine."
• Release your tax return. Homeowners are required to not only submit income documents, but also sign IRS Form 4506-T, which allows the servicer to access the homeowner's federal tax returns. "The biggest reason they don't succeed is that they aren't able to provide substantive proof of income," Hebner says. "It's by far the No. 1 issue."

Success story

Initially, she called Countrywide Loans and later Bank of America to apply for a loan modification. She also approached local attorneys, who wanted a $4,000 retainer -- money she might have borrowed had the attorneys not quit the business when California enacted a law that banned advance fees on their loan modification services.

"It wasn't that I didn't know how to prepare a profit-and-loss statement," Langlois says. "It was that the lawyers knew how to finesse the application. That was valid to me because I thought that in dealing with a bank, they are the sharks and I am the tuna, and I didn't want to get eaten."

After a year without relief, she finally found help through Los Angeles Neighborhood Housing Services. Within days, she submitted a complete package and received a loan modification. The new loan is 10 years interest-only with an option to pay principal and a first-year interest rate of 3.5 percent. That's a savings of $800 per month -- and an end to negative amortization.

"I'd love to say they looked at my potential and wanted to help me," she says. "But they don't tell you why they say yes."

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