Handling a loan modification on your own may have seen like a simple application process but when your bank replies with a denial letter, you may be wondering where you went wrong. Here are 5 common reasons for an application for loan modification to be denied.

  1. Insufficient or missing documents: The bank requires a lot of paperwork to be submitted and verified, including proof of income and/or current hardship. If even a single required document is missing, your loan modification can be denied.
  2. You were late submitting your documents: Your bank will require all documentation to be up to date, including requiring the most current income information, so you may have to send in several similar documents every month during the application process. You may also have to resend documents if they were “lost” in a specific time frame; failing to do so can leave your application open for denial.
  3. Missing information on the loan modification application: A single missing signature or missing loan number may seem like a small mistake that could easily be forgiven but could actually be the reason for your loan modification denial.
  4. Incorrect information on the loan modification application: If you miscalculated your income or net present value, whether by under or over reporting it, your loan modification can be denied. The bank has specific requirements, so if you are self-employed it is important to properly calculate your income so as to not under report any income. While others need to carefully calculate their income so as to not include any monies the bank does not consider income. Also misreporting your debt-to-income ratio is also grounds for a denial.
  5. Hardship listed on loan modification does not fall within bank’s guidelines: Or you may be one of hundreds facing the same type of hardship. It is important to stand out when you write your loan modification hardship letter. Your bank is also likely to deny your loan modification if they feel that you will not be able to afford the modified mortgage rate.

In some instances, you may be lucky enough to resubmit your loan modification application and supporting documents; however, for others it may not be so easy. If you have received a denial for your loan modification, your best bet is to reach out to an experience foreclosure defense attorney for help. Merritt Law Office of Lakeland, FL has over 18 years of experience and has handled hundreds of cases involving foreclosure defense. Contact our office to discuss all of your options and to try and save your home.