Is your bank looking out for YOU…or themselves?

It seems like everyone you know has become a loan modification expert overnight, and there are countless stories of Average Joe calling up his mortgage company, demanding relief and winding up having $100,000 knocked off his principal balance, having his rate dropped from 8% down to 2%, and getting his term extended to 40 years. Now old Joe is paying $375 per month for his $500,000.00 home. Should be a simple matter for you to go out and with an afternoon’s worth of phone calls get something similar, right? Let me ask you this: Do you know Joe? I’d wager that the person who told you the story doesn’t know Joe either. Neither did the person who told them.

Joe may or may not be a real guy, who’s to say? What I can tell you is that if Joe really did get that kind of deal, 2 things are absolutely certain. 1) Joe didn’t do it overnight, and 2) Joe had a lot of help. The fact of the matter is that loan modifications can be had without hiring an outside company to do it for you, but your chances of getting a better deal will increase dramatically with professional help. For example, given enough time, I could build my own house too, but since I work in an air-conditioned office for a living, and don’t really know a lot about construction, I’d probably be in my house a lot sooner, and the house would be much safer, if I hired someone who actually knows what he’s doing. Things like doors and windows and such would probably work better too. Modifying a loan is the same way.

There are, literally hundreds of things that the average homeowner doesn’t know about their mortgage, nor should they in normal circumstances. Unfortunately, the need for a loan modification is way outside normal circumstances, and what you don’t know can absolutely hurt you. Add to that the fact that policies and procedures vary greatly among different mortgage companies and even different branches and divisions of the same mortgage company, and you could fill an encyclopedia with the amount of things that need to be understood. Without a competent professional to assist you, well, it’s quite possible that the roof could cave in on you’re homemade house.

There has been a recent trend among government agencies, banks, and the media to steer homeowners away from Loan Modification Companies (LMCs) on the basis that any company who charges a homeowner for something they can do themselves for free is either fraudulent or just taking advantage of you. While there are always going to be unscrupulous people out there, and you should definitely check the references of any company you are thinking of hiring, it’s patently absurd to think that the banks have your best interests at heart. To use Chase as an example, when you call their loss mitigation department, the automated voice tells you two things immediately: “Beware of third parties who charge for their service because Chase is dedicated to helping individual homeowners….blah , blah, blah.” And the next thing you hear is their disclaimer: “This is an attempt to collect a debt, and any information obtained will be used for that purpose.” And every other bank out there has a similar disclaimer. Does that sound like they’re trying to help you?

The banks are aware that you do not do this for a living, and they will capitalize on your lack of knowledge and understanding. They know that if they deny your application for modification, over 50% of you will not attempt to re-apply, and will do whatever you can to continue making your unaffordable mortgage payments. They win. Of those who do decide to try again, they know that they can offer a forbearance or a repayment plan instead of a modification, and because you may not understand the difference, another large percentage of you will sign up and allow them to again not modify the loan, but instead commit to 12 months of even higher payments to get caught up again. Again, they win.

Now I’m not saying that all mortgage companies are big evil corporations, but the truth is that they are in business to make money, and the more the better. If they can convince the majority of their borrowers that a modification is impossible or out of reach, they get to continue collecting interest payments at your expense, keeping the coffers full. Hiring a professional to do the legwork for you eliminates that risk almost entirely. In a lot of cases, those loans who have a third party LMC go to a different department, and get assigned to a negotiator who is experienced in dealing with LMCs, and knows that there is a certain amount of knowledge behind the modification request. This helps because it puts the homeowner on more even footing with the bank, and, in most cases, allows for a quicker turnaround time.

Weather you are building a house, facing a jury, learning Japanese, or applying for a loan modification, it just makes sense to get professional help. You need to make sure someone is really looking out for you, instead of putting you in a position of weakness.

Should You Hire A Loan Mod Company?

Let’s face it, over the last several months, Loan Modification Companies, or LMC’s have received a tremendous amount of bad press. The big lenders, as well as the federal government have all come out and discouraged the general public from hiring LMC’s to do something that anyone can do for free. This is absurdly inappropriate advice.
If a homeowner is having difficulty making their house payment, ,the chances are good that they are working as much and as hard as possible in order to get the needed income to keep the home. This means that they don’t have the time to sit on hold for hours, waiting to talk to someone who has no vested interest in seeing their needs met, and has no authority to make a decision even if they care to. Wading through countless automated phone systems telling you to press ’1’ for some option that doesn’t help, or they don’t understand. Then they are put on hold again, only to be transferred to someone else who doesn’t care and has no authority, etc, etc.
When a homeowner personally calls their lender or servicer and actually gets to speak to a real, live human, invariably, the first thing they are ‘offered’ is some variation of a forbearance or repayment plan.  Not a modification. Unfortunately, the average homeowner isn’t knowledgeable enough to know the difference most of the time, and winds up getting stuck with an even higher payment than the one they currently can’t afford. Having an advocate that knows your budget, your expenses, and how to navigate through all the bank’s hurdles is more than a luxury, it’s nearly a necessity.
An LMC can separate fact from fiction, and handle the hours of phone calls and faxes. They can set up the file correctly the first time so that a loan modification is more likely to be accepted. They have the know-how via experience to get the right people on the phone, and weed out the re-payment schemes to get to the ultimate goal: a fair modification to the terms of your loan.
I fear that if the public at large chooses to follow the bad advice given by the Banks, the Government, and the general media, this crisis we are in will continue much longer than necessary. The truth is, LMC’s offer an extremely valuable service to people who would otherwise have no one on their side.

Communication

Communication is what separates us as humans from the rest of natures creations. Well, that and opposable thumbs. But communication is by far more important, especially of you need a loan modification. Read on as I utilize my thumbs to type out an explanation.
Weather you use a company like mine to help you with your modification, or choose to go it alone, communication is the ultimate key to getting your loan mod done as quickly and effectively as possible. If you are being helped by a third party, they need to know all the details of your loan, your financial situation, and anything else that could be relevant to your need. Likewise, if you are dealing with the mortgage company directly, being able to articulate your position, along with your needs and desires in the process is paramount.
On the flip-side, they need to be communicating with you as well. If communication is completely one-sided, it’s no longer communication, it’s a monologue. The third party has to be able to speak to you clearly, and without resorting to industry lingo you don’t understand. The mortgage company must impart to you or your agent the requirements it has, and ask the necessary questions to get the problem resolved.
Good communication begins with the first call you make, be it to your lender, or a third party. This is when you state your problem, and spell out what you expect in a resolution to it. If you are doing it yourself, this is when the lender makes it’s first request for information and documentation, and if you’re getting help, this is when the third party will do the same. The difference is that the third party can at this time also go over what to expect from the process, and let you know their opinion, based on experience, of what you can expect in a final modification scenario.
Don’t get me wrong, I like my thumbs-they make it so much easier to hit the space bar. But when it comes to getting your mortgage loan modified, the ability to speak and listen are far more valuable assets. Modifications can be done without thumbs, but not without communication.

The Obama Plan-Simplified

Recently, President Obama produced a plan  to help out approximately 9 million families in jeopardy of losing their homes, called the ‘Making Home Affordable’ plan, or MHA. Since it’s release, there has been a lot of confusion on how the plan works, and who will qualify. Here is a broad overview of the plan and who will benefit.
The basic idea of the plan is to get your monthly payments as close to 31% of your gross income as possible. This can be done via a refinance, or by modifying the terms of your existing note to get you in the ballpark. In order to qualify for a refinance, you must owe 105% or less than the home’s market value. Since that is a rarity these days, we’ll focus on the modification side.
In order to qualify, you must first have a payment that exceeds 31% of your gross income. This is your Housing Debt to Income ratio. You also must occupy the property as your primary residence, not an investment property. And it must be a Freddie Mac or Fannie Mae securitized loan. At present these are the only types of loans being considered for the MHA plan.
Under the plan, the lender will do whatever it can to get the payments to that 31% threshold, and put the homeowner on a three month trial period at that payment. Once three consecutive payments have been made, the modification documents will be drawn up and sent to the homeowner for signatures. Once those documents are returned to the lender, the modification will become permanent.
It is important to note that during the ‘trial period’, payments must be on-time, and in certified funds, but once the mod is permanent, payment options will be normalized.

Begin It

Loan modifications are becoming more and more commonplace in today’s market. This is due to several factors; the down economy, the prevalence of Adjustable Rate Mortgages, layoffs nationwide, etc. Even as widespread as the phenomenon is, people still find it daunting to begin the process of trying to get their loan modified. The fact is, it’s not that difficult, but it requires time and preparation.
If you are currently behind, or fear you soon will be, you need to act. Don’t wait for the lender to start harassing you about your debt, be pro-active. Sit down and figure out your finances. Is there a way to increase your income? Can you live without some luxuries? Can some of your expenses like credit cards be negotiated down? Once you have a clear picture of where you are and what you can do, then you need to tell your story.
If you are going to be considered for a modification, the lender will want to know why. You will have to compose a letter explaining in detail what lead to your current situation. Pride will have to take a back seat on this one, because the Hardship Letter is very important, and must tell the whole story. The lender wants to help. But they need a good reason, so make sure you spend quite a bit of time on this aspect.
The next phase is to contact the lender. Now this is a very long, tiresome, and frustrating task to say the least. A good portion of folks out there choose to hire an independent 3rd party to log the hours on the phone, send the faxes, write the emails, etc. just because it takes too much time to be able to do it themselves. Others choose to go it alone. Either way, a modification is possible, but you must begin it before you can end it.