For the millions of Americans facing the possibility that sometime over the next 12 months they will lose their home, the one big idea put forth by the government and lenders to keep this awful inevitability from happening is the loan modification.

It seems like a good idea. A loan modification, as defined by the U.S. Department of Housing and Urban Development, is a permanent change in one or more of the terms of the mortgagor’s loan, which allows the loan to be reinstated with a payment the homeowner can afford.

Unfortunately, for one reason or another, from incompetence by the mortgage servicers to the system being overloaded by so many foreclosures to the lack of follow-through by homeowners, the loan modification process has more often than not proved endless and fruitless.

For the millions of Americans facing the possibility that sometime over the next 12 months they will lose their home, the one big idea put forth by the government and lenders to keep this awful inevitability from happening is the loan modification.

It seems like a good idea. A loan modification, as defined by the U.S. Department of Housing and Urban Development, is a permanent change in one or more of the terms of the mortgagor’s loan, which allows the loan to be reinstated with a payment the homeowner can afford.

Unfortunately, for one reason or another, from incompetence by the mortgage servicers to the system being overloaded by so many foreclosures to the lack of follow-through by homeowners, the loan modification process has more often than not proved endless and fruitless.

With that as a backdrop, this column wants to give a shout out to a small loan modification company in Irvine, Calif., called Homeowner Toolbox Inc. (HTI), which created a software program called CounselorDirect that allows agencies besieged with consumer requests for loan modifications, short sales and other relief options to better manage and streamline the process.

HTI has also created a Web site, www.counselordirect.com, that provides a free, self-assessment tool for homeowners seeking a loan modification.

The product was unveiled in April and HTI has been smoothing out the wrinkles ever since.

"There wasn’t any software out there for people who were trying to do modifications," explained Andy Firoved, HTI’s CEO, as to the reason his company decided to create this program.

While it’s not a difficult software program to create, the problem has been, especially over the past year, that home-loan modifications have been a kind of moving target. So, while the loan modification business is not new, the snowballing need for the process by millions of consumers meant that lenders had to come up with more and more alternative programs.

Then, of course, the federal government got involved through President Obama’s Home Affordable Modification Program.

CounselorDirect not only includes the government-sponsored modification initiative, said Firoved, but the programs lenders have been forced to create over the past 24 months.

The CounselorDirect site strives to do three things: 1) be easy to manipulate; 2) create a relatively stress-free, self-guided process; and 3) provide immediate feedback. In terms of the latter, HTI’s programmers devised a nifty, tri-colored "Success Probability Meter."

Looking like a fancy, dashboard speedometer of the pre-digital era, the meter’s central indicator swings around from red to yellow to green noting the probability percentage of getting your loan modification approved. It’s actually kind of cool.

"There has not been a Web-based program that homeowners could log onto and put their information in to see what their chances for a loan modification are," said Sheri Powers, director of The Unity Council, an Oakland, Calif., nonprofit community development corporation.

"I looked at other software, and those were primarily for the counselors to interface with the servicer," Powers said. "That’s all well and good, but what we really needed was to get more homeowners starting the process so that they are working with a counseling agency that can go and advocate for them." …CONTINUED

So many people within The Unity Council’s operating area were facing mortgage foreclosures that it specifically offers help through its program of Foreclosure Prevention and Intervention. As part of those ongoing efforts, the organization has adopted CounselorDirect technology.

HTI implements CounselorDirect for neighborhood social service organizations such as The Unity Council. In fact, mortgage relief organizations can direct interested parties to a private-label version of the CounselorDirect software, which offers a host of advice and information on the process and timeliness for possible modification or other relief.

The idea is to free agencies from the flood of calls, allowing staff to allocate resources to processing cases instead.

The Unity Council had come to the conclusion it was not reaching the number of people that were needing help with the loan modification process. In addition, the homeowners coming to the council seeking help had tried to get a loan modification program established and "failed several times over."

"We’re using CounselorDirect software basically to provide an easier access point for clients getting started with the loan modification process," explained Powers. "What the tool does is get into the nitty-gritty of budgeting. Once homeowners complete the income and expenses sections (of the financial worksheet), they get immediate feedback from the Probability Meter."

The meter works in real time and moves up or down as each piece of financial data is entered into the online financial worksheet (required as a key part of any loan modification package). The worksheet varies based on the lender (and also includes eligibility for the Making Home Affordable Program), but the idea remains constant, helping the homeowner identify the necessary lifestyle and budgetary changes needed to qualify for a lender’s modification program.

"What we are instructing our clients to do is put in their actual expenses and information," said Powers. "Even if they get a low probability reading, that doesn’t mean they can’t do a modification. By using this program you can start the counseling process a lot quicker. When you actually go into it, you can see how the meter moves around, giving the consumer immediate feedback."

The most surprising thing in developing this software was learning how many people were so close to qualifying but were not communicating the proper information, said Firoved. "Few homeowners understand that they can be denied a modification for simply being off by as little as $10 in either direction from their lender’s unique sweet spot."

Homeowners often attempt the loan modification process on their own without understanding how the process works, said Powers. "They think this is something that can be completed in a month. It doesn’t happen so quickly. It could take six to nine months to get a modification approved."

So you might as well start right now and try your luck on the probability meter.

Steve Bergsman is a freelance writer in Arizona and author of several books, including "After the Fall: Opportunities and Strategies for Real Estate Investing in the Coming Decade."

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