The Importance of Paperwork

I would estimate that over 95% of all homeowners currently in foreclosure attempt to modify their mortgage. For a large portion of these homeowners the difficult they face in modifying does not come from lack of income but rather from lack of well-organized, properly detailed paperwork.

In putting together a HAMP (or any type of modification) packet you need to keep a few things in mind:

1. Prove Everything. The bank will not take your oral verification of income (personal or rental) as sufficient proof. People lie to banks all the time. Your explanation that you receive $1000/month in rental income in cash is useless. You need to show the bank proof. Any time you receive rental income (cash or otherwise) deposit it in a bank account. Use the same bank account every time. When you submit bank statements highlight the rental income so it is easy for the bank to determine how much you receive. In addition, while the bank statement proof is great a bank statement plus a lease is better. Have your tenants sign on for a certain period of time. It gives the bank faith that you'll continue to receive that income.

2. Profit/Loss Statement. I had a man a few days ago show me his pay stubs. He couldn't figure out why he didn't qualify for a modification because he had already shown the bank everything they requested of him. His pay stub was for $187.45. He is a waiter that earns 90% of his money in tips. All of his taxes are removed from his hourly wages. He claims to be making somewhere around $50,000/year but only "proved" to the bank that he was making $9,000/year. If a large portion (or really any portion) of your income comes from tips or commission, or if you are self employed, you'll need to submit a Profit/Loss statement. You can wait for the bank to request it but they will. So find an accountant or put one together on your own and submit it with your packet.

3. Detailed Bank Statements. The bank does not want to see a snapshot of your ending monthly balance. A friend could loan you $4,000.00 at the end of each month just to boost your balance. Believe me, it happens. What the bank needs to see is everything coming in and out. I realize I keep saying the same thing over and over again, but if you receive cash deposit it first. Create a paper trail. Don't listen to anyone who tells you a snap shot is sufficient. You must produce a detailed breakdown. If you search through you online banking information you'll find it.

If you feel confident handling all of your paperwork on your own be sure to make sure everything is broken down in great detail. If you go to a lawyer or agency make sure they have experience putting together these packets. I have met far too many modification "professionals" who have never heard of HAMP and never worked with a Profit/Loss Statement. There are great people out there who can help you for a reasonable fee. Find them and get your modification.