Reasons why most Loan Modifications are denied. 
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After reading this page, go to Calculate Your Mortgage.

Note:  Do not depend on Servicer representatives to coach!  Making  Home Affordable (HAMP) is based on Gross Income ratios: PITI - principal, interest, taxes, and insurance - has be OVER .31 of Gross Income to be eligible; Traditional modifications are normally based on Net Income minus all household payments.*  If you apply for Traditional and are denied based on ratios, you are most likely being reviewed for the WRONG modification.

* Individual investor guidelines may vary and therefore requirements and outcomes can vary.

While documentation is required, the numbers presented by you are the most important and drive the decision.  If you would like Operation Restoration to review your numbers, please fill out the worksheet under the Making Home Affordable or Traditional lesson and send it in via email or fax.

Warning:  Servicers are accepting payments from Borrowers when they were actually not eligible (borrowers did not meet eligibility formulas for either Making Home Affordable (HAMP) or Traditional.  Then borrowers are denied.  Please make every effort to a) know what type of loan you have and b) the formulas by which you are being evaluated.

Important: Do not give up.  Request assistance from the CEO or President area of your Servicer.  If you are denied and you believe you were eligible based on your calculations, request a detailed explanation about how the negotiator determined his/her decision.  Many times you can adjust your numbers based on this explanation.

The following are reasons denials occur. Please make sure you check your documentation first before speaking with your Servicer.

Most denials occur from:
1)  Presenting documentation or information that does not meet guidelines (formulas).
2)  Not verifying income correctly or completely.
3)  Missing information either because documents were not uploaded completely by the Servicer or because the Borrower did not send a complete package.
4)  Loan numbers were not written on all documents.
5)  There were Missing signatures on the financial worksheet, tax returns, hardship letter or affidavit, or the 4506T tax form.
6)  Modification paperwork was sent in when a repayment plan had already been put into place for the Borrower. To correct this, call and BACK OUT the repayment plan from the system and then fax in paperwork 3-5 days later (make sure to call the Servicer first to make sure their system is clear of any other plan).

Why is the news reporting that a multitude of people are receiving trial periods and no modifications?
1.  Verbal answers were given but borrowers, when asked for supporting documentation, could not provide it.
2.  Occupancy - Borrowers gave numbers on rental or 2nd homes when the property had to be owner-occupied.
3.  Self-employed Borrowers did not give correct supporting documents, like Profit and Loss.  (See Making Home Affordable and Traditional Modification lessons to find Profit and Loss sheet templates).
4. N.P.V. is negative.  Servicers input numbers into a "calculation model" which gives them a "Positive" or "Negative" score.  NPV is used with evaluation of HAMP eligibility for Fannie, Freddie, non-government sponsored (Conventional) loans using HAMP, and VA loans.  Basically this tells the Servicer which is more financially beneficial - to modify or to foreclose.  Borrowers should always ask for the reason if they receive a "Negative Score".  (A more detailed definitiion about NPV is below). To ensure compliance, call the HAMP Solution Center at 866-939-4469.
5. Payments during trial period were not completed by the end of the trial period. If the Borrrower is being evaluated under HAMP, by HAMP regulations, the Servicer cannot modify again under this plan.  The Borrower should try to fit Traditional guidelines.

Negative NPV. The Home Affordable Modification Program requires a calculation of the net present value (NPV) of a modification using a formula developed by the Department of the Treasury. The NPV calculation requires Servicers to input certain financial information about Borrower income and the loan including the factors listed below. When combined with other data in the Treasury model, these inputs estimate the cash flow the investor (owner) of your loan is likely to receive if the loan is modified and the investor’s cash flow if the loan is not modified. Based on the NPV results the owner of your loan has not approved a modification.  Borrowers should request what input values were used (to avoid errors in Servicer input) and ask what factor caused the NPV to be negative.
Available N.P.V. Inputs
a. Unpaid balance on the original loan as of [Data Collection Date]
b. Interest rate before modification as of [Data Collection Date].
c. Months delinquent as of [Data Collection Date]
d. Next ARM reset date (if applicable)
e. Next ARM reset rate (if applicable)
f. Principal and interest payment before modification
g. Monthly insurance payment h. Monthly real estate taxes
i. Monthly HOA fees (if applicable)
j. Monthly gross income k.Borrower’s Total Monthly Obligations
l. Borrower FICO
m. Co-borrower FICO (if applicable)
n. Zip Code
o. State 

Recommendation: If you are denied a loan modification, always call in and ask for the representative to look in the notes to give you an explanation of the denial. Most likely the notes will not be complete and will not give a sufficient explanation. Ask to be transferred to a supervisor or escalation area to determine the reason.

Please note: Mistakes sometimes occur in the input of numbers. Please request verification of the plan by which you are being evaluated and also verify that the Servicer has the correct numbers.


If you need additional guidance or Servicer executive level intervention, write help@operationrest.org or call the number listed under Contact Us.

This information is provided free of charge by Operation Restoration. Donations are critically needed to help this mission move forward. If this material has helped you or someone you love, please click on the Donate button below.  May God bless you.
                                                                                             - Anne Batte, Executive Director
                                                       Copyright 2009 Operation Restoration

Request for additional help

Thank you for contacting Operation Restoration. Please fill in the information below if you need clarification on material or guidance on strategy. We will contact you shortly. Notes: (1) While the information provided on the website is free to use (if it helps you in any way, please remember to donate), we are transitioning into a donation-based personalized assistance operation. As you know this arena is very specialized. This mission has spent extensive hours over the past 6 years to remain ahead of the curve. (2) Remember, your participation and team work are necessary as ongoing in-depth research is necessary to achieve leverage. Education empowers people to survive and succeed. We look forward to speaking with you. Sincerely, Anne Batte Executive Director