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.