In the current economic downturn many homeowners have become at risk borrowers. Help has arrived for these folks in the form of loan modifications.
Along with this new boom in loan modifications have come the predators looking to overcharge and take advantage of people in need.
With that in mind I have laid out my recommendations for at risk borrowers in search of help.
Loan modifications are performed by many lenders with no fee to the homeowner. However these lender initiated modifications can come at a price.
Lenders are negotiating with a few things in mind:
- Their Best Interest
- Maximizing Their Returns
- Minimizing Their Losses
HUD-approved Housing Counseling Agencies perform loss mitigation/loan modification services for free. These agencies are supported by our tax dollars.
Many of these agencies have become overwhelmed with cases.
Like any other government run enterprise the level of service will not always be stellar. Unfortunately, I have seen cases where borrowers were turned away being told they did not qualify for a modification when in fact they did qualify for help.
So if you choose this route and you are told that you don't qualify, don't give up.
As for the LO's out there who think this is their opportunity to collect fat checks, be careful who you work for. Make absolutely sure that the company handling your clients is based on honesty, integrity, being completely above board and actually works your files diligently in the best interest of the homeowner.
I have seen many companies out there collecting large upfront fees and letting files languish with no work being performed on them. In many states the up-front fee is illegal, don't get involved with anyone who is breaking the law.
If this describes your company get out and take your clients files with you. This could cause you major problems in the long run. No amount of commission is worth ripping off consumers in distress. Imagine the heartache caused to the trusting family who loses their home because of you and your company.
There are attorneys out there who have also jumped on the bandwagon and see this as a way to augment the lost real estate income they had before the bubble popped. If you decide to hire an attorney to work on your loan modification negotiation I suggest a thorough interview prior to doing so.
Ask these questions:
- How many modifications have you completed?
- What will be the costs?
- Flat fee or Hourly?
- Get names and numbers of satisfied clients you can speak with.
With that in mind, a good attorney with loan modification experience could be a great way to fix your toxic loan.
I personally prefer the loan modification company with on staff attorneys.
My belief is that this type of company has the diversity of experience needed to negotiate through the maze of roadblocks put up by lenders. This type of company should employ people with backgrounds in real estate finance, real estate sales, real estate & foreclosure law, loan processing and more.
By pooling these different types of experience and bringing them to bear on your behalf you get the best of all worlds.
But again caveat emptor, there are companies out who tout these benefits without actually being able to deliver.
I recommend a full interview with them as well:
- Go to their office if at all possible
- Meet their "on staff" attorneys
- How many modifications have you completed?
- What will be the costs?
- Flat fee or Hourly?
- Get names and numbers of satisfied clients you can speak to
Finally if you are in trouble with your mortgage remain calm, collect all of your documents and seek help right away.
A call to your lender could go a long way, at the very least it will let them know you have a problem, want to resolve it, and are interested in what options they have available.
Just don't forget your lender / servicer is a debt collector and as such they ALWAYS have THEIR best interests at the heart of any relief offered. Study what they offer with a discerning eye and ensure it is something that you can live with.
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A distressed homeowner CAN modify his own mortgage but, in most cases, a distressed homeowner would be better served by having an uninterested party modify his mortgage.
ReplyDeleteThe key word is "distressed." In negotiations, "he who cares the least wins" is standard strategy. A distressed homeowner cares very much, and, with foreclosure bearing down on him, it's not likely he can convey the same sense of coolness and composure under strain that a third party, with no interest in the outcome, can. That's why a hostage doesn't negotiate his own release.
So long as, after paying the loan modifier his fee, there's a net gain to the homeowner, I think the fee-for-service model of loan modification makes more sense for most people. In practically all cases, a skilled negotiator can, in my opinion, obtain a better result than a distressed homeowner negotiating on his own behalf. Unless one is a trial attorney yourself, what do you know about skillful negotiating?