Home Loan Modification Articles

Contemplating loan modification? Some simple truths...

In a June release, Biz Journals reported, "Nationwide, 321,480 foreclosure filings were reported in May, which is six percent lower than April 2009, but about 18 percent higher than May 2008. One in every 398 U.S. homes received a foreclosure notice last month." According to a CNN article published on June 9, 2009, ..."approximately $75 billion of the total $700 billion bailout fund (known as the Troubled Asset Relief Program or TARP1) was allocated to banks specifically to modify loans and help taxpaying homeowners." Interpretation; U.S. Mortgage holders are in trouble and the government wants homeowners to modify their loan instead of falling into foreclosure.

So what is a home loan modification? Home loan modification is the process by which a lender makes a change to an existing home loan. This modification is usually comprised of a reduction in the interest rate, a change in the length of the term, and deferral or forgiveness of past due amounts. Specifically, a loan modification is not a re-finance, but a change to the existing home loan.

Why do lenders modify loans? The answer is simple-Loss prevention. From a monetary standpoint, it is significantly less painful for the bank or lender to modify a loan than have that loan go into foreclosure. The foreclosure process is very tedious and extremely costly for both the lender and the homeowner. A successful modification of a home loan means the lender also stands to receive a portion of TARP's 75 billion dollar bailout.

Main stream media writers have jumped on the loan modification gravy train. These "loan mod" articles are easy to write and sell. Simply repeat and rewrite what someone else previously wrote or said and paste your byline on it. The same mantra is endlessly repeated in differently constructed articles. "It is a time consuming process, and can be costly....hire a lawyer. If you can't afford a lawyer...do it yourself!" The press allocates many column inches toward advocating lawyers or the "do-it-yourself" approach, but the press doesn't do loan modifications. So what, if anything, do they know?

Who does loan modifications? There are many answers to this question and many avenues the homeowner can take. One of the more time consuming and costly ways to modify a home loan is to retain the services of a lawyer. The words Lawyer, inexpensive and expeditious can all be considered mutually exclusive. There are also call centers, companies that hire dozens if not hundreds of "salesman" to acquire your information and then sell it to other entities. Similarly, there are information brokers. These organizations represent themselves as loan modification specialists, but also do nothing more than gather and sell your information to as many companies as they can. The end result of this will be numerous unwanted phone calls and email spam campaigns. On the same note, there are individuals who represent themselves as a legitimate enterprise but are generally no more equipped to handle the modification process then is the kid down the street. These individuals accomplish little in the way of loan modification and jeopardize the security of your information. The "do-it-yourselfer." is, by definition, the homeowner seeking modification on his own. Generally speaking, the simple lack of experience, inability to follow through, and gross time commitment required, coupled with the need for extraordinary patience, and calm collectivity tends to leave the borrower frustrated and dissatisfied. Lastly, there are the non-profit organizations mandated to assist homeowners in foreclosure. Hope Now, a plan Congress endorses, is a government subsidized coalition of regulators, service providers, lenders, and community advocates attempting loan modifications for troubled homeowners. The success ratio of these "not for profit" organizations has been less then exemplary.

There is ample proof as to how complicated and time consuming the whole process of loan modification can be. According to a CNN article released on June 16, 2009, an individual named Kevin Richmond decided to tackle loan modification on his own after being laid off at the beginning of January. Mr Richmond lost $63,000 of annual income. Shortly after acquiring this hardship, Mr. Richmond took it upon himself and called his lender seeking a loan modification. He was denied the application for the modification because, the lender said, he had not yet missed a payment. A back and forth struggle with his lender has dragged on for six months. Mr. Richmond is still, today, in early June, seeking a way to successfully modify his loan to a more affordable monthly payment. What went wrong? Was this individual not prepared for this type of negotiation? Did he not have the time needed to complete the negotiation? Was he not versed enough to know what the lender wanted to see in return for the modification? Where did he go wrong? In reality, there are an infinite number of ways he could have gone wrong, but it can likely be attributed to being "ill-equipped" and "ill-advised" about the loan modification process.

We all choose to hire people based on their expertise; to take care of things in our life which we're unable or unwilling to do for ourselves. This may be due to lack of knowledge, time or patience on our part. Whatever the reason, we trust these service providers will - in a professional manner - give us the service for which we pay. That is WHY we pay for them. Should an individual opt for free child care or pay for the services of a licensed, bonded and insured facility to watch the children. Do we choose the free medical clinic if we are able to go to a trusted family doctor instead? With any item or service we need in our lives, we must decide if it is within our realm of knowledge and ability tos acquire or achieve it on our own, or if it behooves us to seek professional assistance. Loan Modification is a very important step toward getting back on financial track. Think carefully about who is going to take care of this process. Should you pay the hefty fees often associated with hiring a lawyer? Should you phone in to a call center or, perhaps, engage the services of an individual running a "business" out of his home. Should you contact a Non-Profit and speak with a volunteer who is ill-trained to take care of your single largest asset? Do you honestly feel you are best equipped to take care of the situation yourself (remember you are the person who signed off on the loan and got yourself into this situation in the first place)? Sometimes people hire a professional because that is exactly what they need. Is a professional needed when trying to save your home from possible foreclosure? That's the easiest question of all.

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