How to Get a Loan Modification – Show Me the Money!


Getting a loan modification isn’t easy.  As I have often written, the loan modification process can be long, complex, and costly.  Banks and loan servicers routinely lose paperwork and make the process a thousand times harder than it needs to be.  Borrowers, however, need to do their part in making it easier to get a loan modification. One important part of this is being able to show reliable, documented income.

For a loan servicer to agree to a loan modification, the servicer needs to be convinced you have income.  In order to do this, the servicer will likely request paystubs or a profit/loss statement if you are self-employed.  Additionally, the servicer will also want to see your bank account statements, showing that you actually received this income.  If you don’t have a record of this, you make it much hard to get a loan modification.  If you plan to apply for a modification, be sure that you deposit your income into a bank account, and keep copies of your monthly statements.  This is especially true if you work for yourself or have rental income: if the servicer can’t see a record of it, they are less likely to consider it as income.

I often get asked about “prospective” income: income from future sources.  For example, some people wish to acquire income from renting rooms in their home or starting a business.  Generally, a servicer won’t consider uncertain income: you need to show consistent income before qualifying for a modification.

If you aren’t showing income and need a loan modification, don’t despair.   It is possible at times to get a “no document” loan modification or work out some other deal with the servicer.  However, to increase your changes of getting the modification, showing documented income is always the best course.

As for any loan modification application, create a paper trail and contact an attorney if you are not getting the results you need.