Hi Chris,

There is only one way to protect your credit if you are current on your loan and send your lender a "qualified Written Request" first. Then, if you default and the lender does report late payments ony our credit report it is illegal for the lender to do so and money due the borrower! AND the lender has to remove the late payments. Please understand the "short sale" will still be reported by you will get all the late payments removed and money in your pocket! How about that for a strategy?

The "Help for Homeowners' program is now offering loan modification applications and processing to borrowers who are current on their mortgage, in addition to those who have slipped behind. To qualify for an application the borrower has to show some type of hardship.

That could be simply a lower income than the borrower previously had or higher expenses.
The bank statements showing the decline of savings would be one of the supporting documents.

The lender will require the borrower to state the nature of the hardship in writing, provide income documentation, asset verification. They won't make you cash in your IRA or 401K, however non retirement accounts and regular assets are expected to contribute to making payments if you have some. If you have less than a month's worth of income in your savings, checking and other liquid assets, they will probably let you keep that much (for working capital)

The ideal modification candidate is a borrower who can demonstrate that they can make steady payments on into the future, provided they get a wee bit of interest rate, principal and / or payment relief.

Several conditions will attach to the loan mod: If you are not already escrowing your property tax and insurance into the mortgage payment, they will require you to do so in the new loan mod. If you currently have an "assumable" mortgage, the modded mortgage is no longer assumable. They will demand that you set up an automated payment from your checking. (That one is pretty tough if your income is irregular, like self employed people)

The link to the Obama white house is posted below. "Help for Homeowners"

The lender bank is in business to make money for their stockholders. If you're still paying on time, you're not currently a problem for them. Only when you've stopped paying, and you are experiencing financial repercussions in terms of credit hits, are you both feeling some pain and are they seeing it as a problem they need to address.

There could be many reasons for this:
1. They are overwhelmed with the requests every day and the shortage of people to handle all of the cases, so you will observe that those closest to foreclosure get a higher priority for a decision to be made.
2. there isn't any way to confirm that what you say is true...in that you can't afford your payments, or that you only have so much money in the bank. It is just what you say, and there is no substantiation in the process at the point that you request the loan modification or short sale. You could have other bank accounts you're not showing, or money that isn't declared.
3. They are attempting to minimize their risk. And they, (like our government although they sometimes act like they do), cannot throw money at every problem account to fix it. Some situations will just NOT get handled.
4. A homeowners estimation of their level of importance is not always the same as the lender's. For example, there are some that just don't like their house anymore, and now that it's underwater, they want the bank to accept less than what's owed. If everyone else is doing it, why shouldn't they? Others could possibly work another job, (when their hours were cut), or find other means to make their payments but don't want to because it seems easier to walk away because the house is worth so much less and they don't have confidence that it will come back very soon. It's difficult sometimes to see who has real hardships and who could possibly make it work with a little time and creativity. Who's to judge?

The goal is to make them listen to your situation and act on it, to the best solution for both you and the lender. That takes submitting a clean package, being persistent, and efficient in your communications

Unfortunately it most often requires you missing some payments before you get their attention. HOWEVER, I believe some of Obama's programs try to help you if you are not late on your payments. Maybe another person here can elaborate on those programs, as I'm not as up to speed on that.

Chris,

Banks do this because they would rather have the people try to get back on their feet than to have everyone rolling over and giving up right away. Lets face it a lot can change in 3 months and they know this. This is more of a benefit than a curse if you really sit back and think about it.

I'd love to see what others think.

Good Luck!

I think its mostly because the banks are overwhelmed as it is with short sales and foreclosures that they just push off the people until they truely are in the hole.