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Reasons Your Loan Modification Request Was Denied

Posted on in Loan Modification

Trulia, a leader in the real estate industry, recently reported that refinance rates for a 30 year fixed mortgage in Waukegan, Illinois can be obtained for as low as 2.250 percent. Trulia further reported that the median sales price of a home in Waukegan is $91,250, a 30.4 percent home value increase as previously reported a year ago.

This may come as welcomed news for prospective sellers but for those homeowners facing financial difficulty, possible foreclosure and in receipt of a loan modification denial by their original lender, this news falls on deaf ears.

If you recently received a formal denial of your loan modification request in hopes of adjusting your original loan terms and to halt possible foreclosure status, your best line of defense is to contact an experienced foreclosure attorney to discuss whether any of the following infractions may have lead to the denial.

Lender Guidelines

Failure to fully understand the lender's loan modification guidelines can produce an immediate denial determination. Even if you applied through the federal government's Making Home Affordable (MHA®) Home Affordable Modification Program (HAMP®), failure to comply with all published guidelines, whether it was your lender or federal assistance program, will also produce a negative outcome.

Document Compliance

One of the most damaging factors, especially if you are seeking a trial modification to establish permanent modification terms, is the lack of producing all requested documents. Lenders will often require verification of your personal situation by requesting:

  • W-2 Income Forms,
  • Federal Income Tax Returns,
  • Divorce Decree,
  • Death Certificate, if applicable, and
  • Verification of outstanding liabilities.

All requested verification documents should be submitted to your lender within one complete packet. Even one inadvertently missed document could result in communication failure with your lender.


All requested documentation must be a true representation of your current financial situation. Accuracy is highly expected. Any deviance from the truth will endanger your loan modification request as well as possibly increasing your likelihood of having to file for personal bankruptcy. Due diligence conducted by your lender will uncover any instance of misleading or inaccurate documentation.

Hardship Letter

Lenders and federal home assistance programs requires the submission of a hardship letter. In his or her own words, a homeowner seeking assistance is required to describe the nature of financial events that led to their decision to request a loan modification.

Reasons as to why the homeowner believes they can satisfy new terms and why they should be considered a risk worth taking is to be indicated in the hardship letter as well.


All outstanding liabilities are to be documented. This is certainly not the time to borrow against available credit lines. The lender will be reviewing the requestor's credit report and any form of new debt will only diminish the homeowner's credibility as the lender may view this as fiscally irresponsible and immediately deny the loan modification request.

Consulting and retaining an experienced Lake County loan modification attorney knowledgeable of Illinois real estate foreclosure law and loan modification guidelines may be the best strategic defense. Serving the Lake County area since 1993, the legal team of Newland & Newland, LLP will ensure that all loan modification documentation is in compliance with lender or program guidelines, reducing the risk of an initial denial. Contact any one of our offices to schedule your free phone consultation today.

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