financialcounselor

Denied a Loan Modification? Don’t Assume the Reason will Make Sense

In Uncategorized on April 27, 2012 at 9:27 pm

One point I’ve tried to hammer home with this blog is that when it comes to applying to your mortgage company for inclusion in one of the government housing programs, such as their loan modification program, your request can be turned down for any number of reasons. And the most important thing to realize is that the reason does not have to make any sense to you whatsoever. I talk to people all the time who are denied loan modifications for reasons that are beyond anything a Hollywood writer could dream up.
Let me give you an example. A man named John told me that he was denied a loan modification because of the assets he owned. Now I’ve had a lot of clients get turned away by their mortgage company due to their assets, but here’s the thing that had John ready to blow a gasket: his assets consisted of one retirement fund that had a market value of $4,900. That was it.
I thought John was going to say he owned some valuable real estate or big-money stock investments or something. But nope, he had one measly IRA worth less than five grand. And John wasn’t over retirement age, so if he liquidated his IRA, he would have to pay a ton in penalties, not to mention the standard taxes. He’d be lucky if he was left with half what the thing was worth. And I’ve got to assume that a major financial institution is aware of the rules concerning retirement funds. So essentially, John’s mortgage company was saying “Hey, if you want help, then you cannot own anything worth anything.” I hoped they wouldn’t also make him sell his car.
I suggested we call the mortgage company to make sure they had the correct information. And we were told by the nice lady who kept mispronouncing John’s last name that there was no mistake, the modification was denied because of his $4,900 retirement fund.

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