Any borrower that is behind on their mortgage loan payments and has submitted an application to their lender for a loan modification expects that the request will be approved. However, the decision to approve or deny a loan modification is purely at the discretion of the lender. Usually, it is in the best interest of the borrower and the lender to put a loan modification agreement in place. Sometimes, however, the lender will deny a loan modification request. 

There are several reasons as to why a loan modification could be denied:

  1. You have an incomplete loan modification packet.
  2. You have failed to produce the requested documentation.
  3. You do not meet the lenders’ criteria of hardship.
  4. You are not able to demonstrate the ability to pay modified payments.
  5. Your lender feels that you can still afford the current payment structure in place.
  6. You defaulted on a trial loan modification. 

What to do if your loan modification application is turned down

If you applied for a loan modification with your lender, but have been denied, some steps can be taken. You can either appeal the denial or fix the issues that you currently have with your application. 

Check the Details of the Denial Letter

Begin by looking at your denial letter, and what statements in the letter are the critical points for the denial of the loan modification. Credit usually is a big factor in decision making with lenders. Regardless of the reason why you are denied modifying your loan, the lender will, at times, state other options you may have if you are denied. 

Make Some Changes Regarding the Reason for the Denial

If you have a loan modification denied due to failure to submit certain documentation that has been requested, then you will need to provide that documentation to change the application status. If the lender communicates the reason for the denial is lack of income, you as the borrower will have the opportunity to provide information or documentation that shows evidence of a change in your household’s income.

Appeal the Denial

There are two classifications to appeal a denial. The first is if there are changes in circumstances for you.  The second is if the denial was, in fact, due to the lenders’ incorrect decision. You are required to provide documentation that would satisfy what is needed. That could be due to a change in your status or a mistake on the lenders’ behalf. If you recently changed to a higher paying job, then proof of that is required by the lender in order to be aware of the change in income within the household. 

Seek Legal Counsel

Attorneys experienced in working with lenders on behalf of consumers can review your situation and may be able to provide to see something the lender did not notice or provide you with an alternative recommendation. 

Wait and Apply Again Later

If you have the ability, allow some time to pass until there is a change in your circumstances and then initiate a new application. Perhaps you were unemployed at the time of the first application but have secured employment since that time. 

Do not give up! There can be other options available to you to try and keep your home out of foreclosure. You might consider seeking out some advice from an experienced attorney that specializes in this area, especially if you feel that there is an error in the loan modification decision. 

Debt Rescue Law is a trusted partner for many borrowers and can provide more information about the loan modification program. Give us a call at (833) 707-1234 today for a FREE consultation to get you clear of your debts and keep your home!

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