Loan mod: Go it alone?
Part 2: Nuts and bolts of mortgage modification
By Jack Guttentag, Monday, May 11, 2009.
Editor's note: This is Part 2 of a two-part series. Read Part 1.
Last week, I went over the steps involved in getting a loan modified. This article examines which, if any of these steps, may require a borrower to seek help.
The bottom line is that many, perhaps most, borrowers can handle it all themselves, but some may need an assist here or there. And some may want to delegate the entire responsibility.
Negotiating the Deal: Firms hustling for modification business sometimes pretend that they have the knowledge and skills needed to negotiate a favorable deal with the loan servicer. In fact, a modification is not negotiated -- it is granted (or denied) by the servicer, applying rules or principles set out by the investors who own the loans. In the case of modifications under the Making Home Affordable (MHA) program, the rules are set by the federal government, but these do not override investor rules. If the documents governing the servicing of a particular loan -- known as the Pooling and Servicing Agreement -- prohibits a particular modification, the MHA program will not help.
Delivering Information to the Servicer: Legitimate firms in the modification business know the information that each servicer wants and where to deliver it. This is their principle stock in trade. But borrowers can now obtain this information from my Web site, see Mortgage Servicer Information.
Assuring the Accuracy of Information Provided: Filling out the servicer's questionnaire form correctly is a challenge to some borrowers, but free help is readily available. One of the purposes of HOPE NOW, the alliance of servicers, investors and counseling agencies established last year to help borrowers in trouble, was to provide free counseling. Borrowers can call 1-888-995-HOPE, or they can find a HUD counselor in their state by going to http://www.hud.gov/local/index.cfm.
Follow-Up: Mistakes happen in modifying loans because the process is complex, and servicer employees may be overworked and/or undertrained. Either the borrower or the borrower's designee should follow up the request for modification to make sure the papers haven't been lost and the case is in an active queue. If the request has been rejected on the grounds that the borrower is not eligible, the borrower or the borrower's representative should find out why and attempt to confirm the reason is legitimate.
Many, if not most, borrowers can do it all themselves, perhaps with some assistance from free counselors. But some borrowers are clueless -- they need to be represented, not just counseled. They want someone to "take over" the process for them and follow it to a conclusion. ...CONTINUED
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Submitted by Lora Horsley on May 11, 2009 - 4:51am.
To open up an already battled scared industry to yet another program which is littered with scams and misinformation, is like giving all of us (Realtors)our pink slips! This Administrations interpretation of our industries issues have been so poor that one can only shake their heads in wonder. Keep these stories coming, we need all the help we can get when trying to deal sincerely with a very mistrustful public.
Lora Brown Horsley, GRI
Coldwell Banker Residential Brokerage
40-42 Main Street
Topsfield, MA 01983
Cellular 978-375-6180
Submitted by chis eliopoulos on May 11, 2009 - 7:44am.
This is a great article describing one real issue in our industry.
This modification business unfortunately for the consumer it is a scam (at least here in CA).
Every ambulance chase attorney is now in the modification business.They are aggressively advertising using every source of media available, and most of the ads are very deceiving and down right lies. The sad part is that if one cannot reduce the principal amount of the loan, the majority of borrowers wont be able to carry on with just an interest reduction.We have so many cases that people paid for modifications,got the interest of their loan reduced only to be in the same position a year latter.I was asked from many modification companies to send them paid referrals and I have not so far,because when I ask what are going to do about reducing the principal amount of the loan, most all of them start talking about focusing on the interests.I advice my clients to contact their lenders personalty.Most of them have done well after they overcome their mental state of indimidation.
Submitted by Marty Boardman on May 11, 2009 - 8:29am.
First of all, there are many services that people pay for that they can do themselves for far less money. A few examples include income taxes, wills, oil changes, etc. And since most of the readers of this site are agents I would like to point out that people can buy and sell their own homes without the help of a realtor and save thousands.
The bottom line is that people hire professionals to provide them with services that they don’t feel comfortable doing themselves or don’t have the time to do. What nobody is talking about is that there is a need for professional representation in regards to loan modification because the lenders are not talking to their borrowers.
I have a client right now who has made multiple phone calls to his lender (Wells Fargo) for help modifying his loan. Each time he calls he gets a different representative on the phone and he has to explain his situation all over again. He even visited his local Wells Fargo branch manager a few weeks ago and she hasn’t called him back yet. Everyone keeps telling him to call his lender (the media, the government, the state attorney general), but the lender doesn’t want to listen. He’s stuck and wants help.
Finally, there is a way to tell if a loan modification company is legitimate. I found my loan modification company the same way I found my realtor, mechanic, attorney and my daughter’s pre-school. I got a referral, reviewed proof of performance information, and toured their place of business. That’s how most people make an educated buying decision and the same rules apply when choosing a loan modification company.
I’m a client and independent representative of Choice Loan Consulting in Gilbert, Arizona and can be reached at mboardman@choicelc.com
My blog: www.freerealestateeducation.com
Submitted by Alvaro Ramirez on May 11, 2009 - 9:49am.
I agree with professor Guttentag in that a loan modification is never negotiated and that the guideliness are already stated in the PSA. In most PSAs however the servicer (lender) has the liberty of restructuring the mortgage note as long as they can demonstrated that it was done in the best interst of the investment.
This article also states that guidelines are already set in the investor's contract(PSA) which means when you talk to your servicer and they say they have to check with the investor on your loan to see if they approve you or not for a modification is incorrect. Investors don't typically make decisions on a per loan basis. Their contracts already dictate what to do.
This past February at the ASF (American Securitization Forum) www.americansecuritization.com, where investors convine. The top servicers Wells, Chase, Countrywide (Now BofA) and GMAC executives said to investors they would have to do 10,000 modifications a day to keep up with the current demand not including what's coming down the pipeline. Non-profits don't have the capacity to handle the volume. So let us remember that close to a 70% of loans were originated wholesale that is to mortgage brokers. So the solution has to include the mortgage professional to get involved. Therefore giving room for the business oportunity.
Whe we meet with borrowers we will spend about 1hr with them understanding their situation without any oblications on their part and do encourange them to do this on their own. Arming yourself with information is the key. I belive this process will force a borrower to arm himself with knowledge to make the process less painful.
Providing the information to the servicer in the proper manner however is not necessarily the reason why they will modify. Even when the PSA says it's okay to modify the loan should it be needed, the modification payment must have a greater value than that of the default value of the collateral. This simply means that even if you qualify for a modification, should the servicer determine that the foreclosure of the property will bring a higher value they will still foreclose.
I enjoyed the article and it is informative. The problem legitimate modification companies have is that they are not yet organized and don't speak with one voice. In California a few months back the State Assembly Finance Committee had a hearing on the foreclosure crisis and our company was the only for-profit organization to testify along with state regulator and non-profits.
You can always visit our website and send your friends to gain needed knowledge for free. www.hrahelp.com or call us. Stay Strong!
Submitted by Adrienne Pulu on May 11, 2009 - 1:04pm.
From what I've gathered from homeowners that have tried to go through their lenders to modify their loans is that not much help was offered. When assitance was offered, it was some type of repayment plan or forebearance, usually adding another couple hundred to the homeowners already unaffordable mortage. It's a numbers game and if the homeowner is good at manipulating their numbers, then yes, go through your lender for a loan modification, but for most of us who are not good at that, you do need help! I do agree that there are scams out there, like any other business, but there are also great Real Estate attorneys, Loss Mitigation Specialist and REALTORS (like myself) that offer real help. I've been in the trenches, I am in the trenches. My opinions are not hypothetical, but are real life situations and we do offer legitimate services to homeowners that want to keep their homes long term.
Adrienne Pulu
REALTOR Salesperson
Century 21 All Islands
7 E Kaahumanu Avenue
Kahului, HI 96732
c. 808-281-0051
Submitted by Wenceslao Fernandez Jr, BS, Realtor, CDPE on May 11, 2009 - 1:23pm.
Thank you for sharing. This article does in fact detail the difficulties our industry continues to face.
What I have found are some seemingly legitimate companies who at least try to make an effort to trully help homeowners.
Modifications typically work for those who want to keep their property and have income which is on its face, reliable and adequate.
Obviously, the reliable part could end without warning. However, the adequate part may turn out to not be quite so adequate. I mean, if you were earning $3,000/mo and based on this income your mortage was for $200k and now your income is $1000/mo and your credit cards and other expenses and dti are now through the roof...well...you get the picture.
However, if your situation is such that a modification is possible, then look as well for someone who can at least help you bargain with strength.
What I tell homeowners is to seek someone affiliated with a company able to audit or forensically review the mortgage documents in order to determine if any laws were broken (predatory, usury, interstate, RESPA, etc).
If so, these people should be able to at least try to make an honest first attempt to get this loan modified to the homeowner's advantage (since it is no longer the homeowner who is potentially in trouble if the lender broke laws while pursuing the loan and all through underwriting practices and post closing).
These servicers should either be directly linked with qualified attorneys who can file a case against the lender in federal court and pursue a modification this way, or refer the homeowner to one of these qualified attorneys.
Obviously, the homeowner could skip the middleman and try to find one of these attorneys from the get go if they suspect their loan has possible legal issues that could protect them and help them come from a stronger negotiating position against the (alledgedly) irreputable lender.
If it turns out there are no irregularities with the documents and that the entire lending process was properly done, then the homeowner may still try the "voluntary modification" by themselves using a government agency (which as stated in the article and some answers takes longer), or through a service company carefully researched and which charges reasonable flat fees and follows the homeowner's state's laws and/or other ethical standards.
http://MiamiRealEstateKing.YourKWAgent.com
Certified Distressed Property Expert
Miami-Dade County, Florida.
Submitted by Jeff Manson on May 11, 2009 - 2:59pm.
I definitely think it is worth wile doing it yourself for a couple reasons. One major reason is there are a lot of people looking to take advantage of people already in a bad situation. I also think that the banks are willing to work with home owners to help them out more so than in the past. I have a friend that just did a loan mod with his bank and they reworked it into a 40 year loan with the first 3 years at 3% interest only and than the 4th year 4% interest only and than after the 5th year it goes to 5% interest only until the 10th year. After 10 years it converts to a 5% fixed P&I loan. Now that is almost free money. I guess the figures that the property will have equity in 10 years and in the mean time you couldn’t rent a house for what they are paying on the loan. Now that is a pretty sweet deal.
Jeff Manson
American Dream Realty Hawaii
Submitted by Marty Boardman on May 11, 2009 - 6:57pm.
Jeff,
I'm happy to hear that your friend was able to get a loan modification on his own. However, his story is the exception, not the rule. Check out this story, called The Runaround, from ABC News on April 17th, 2009:
Maxine Waters a California Congresswoman recently attempted to help a few of her constituents get a hold of their banks in order to re-negotiate the terms of their loan. What she thought would be a simple telephone call turned in to hours of being placed on hold and speaking mainly to automated voices.
After hours of trying to help Congresswoman Waters said, The average American trying to negotiate a loan modification will not be able to get it done,"
While the federal government and banks say they're trying to help homeowners avoid foreclosure through various help lines and more, an ABC News investigation has found that the process of reaching out for help can be disorganized and frustrating, hardly consumer friendly, even when a prominent member of Congress is on the line.
Here's a link to the video:
http://www.youtube.com/watch?v=JczIimq22mE
Choice Loan Consulting in Gilbert, AZ has helped hundreds of homeowners successfully modify their loans. If you email me at mboardman@choicelc.com I can provide you with actual loan modification approval letters addressed to our clients from their lenders.