Loan Modification

Do you want a loan modification?   Chances are, if you are reading this, the answer is ‘Yes!’  Chances are also that you’ve tried approaching your lender already for a reduction in payments and been unsuccessful.

The reality is that lenders deny some 90% or more applications.  The much-hyped “Obama plan” – i.e., the Making Home Affordable HAMP loan modification, a link to the guidelines of which can be found at Home Affordable Modification Program is widely deemed a failure by industry professionals.

A troubling trend in the industry over the past few years is the incidence of scam artists and fly by night loan modification companies. Many of these have arisen out of California and Florida, two of the hardest hit foreclosure states. 

By the program’s current termination at the end of 2012, only hundreds of thousands of modifications will ultimately be issued (which doesn’t discount for all those who re-default after receiving a loan mod), a far cry from the projected 3-4 million homes it was supposed to save from foreclosure.

There are ‘proprietary’ or ‘in-house’ loan modifications out there as well.  These are work-outs offered by the servicer/lender themselves, rather than through the government.  These existed before HAMP, TARP, the housing crisis, etc., and were the traditional way loss mitigation departments handled defaulted loans without foreclosing.  Sometimes these programs are better or more flexible than HAMP, because the lender is not constrained to the very finite waterfalls and net present value test that the Obama plan dictates. Unfortunately, each investor (i.e., the entity that actually owns the loan, which may be quite different that the servicer, which is the bank with whom homeowners interface) has its own standards, guidelines and formulas, so these can be somewhat of a black box.

They charge anywhere from $2500-5000 for a loan mod, some or all of which is typically paid up front.  When encountering these outfits, the best advice is to run away.

Free assistance is provided by any number of different entities, including NACA and non-profit housing counseling agencies, including the HOPE hotline .

We also provide free counseling/consulting to folks in distressed situations who are interested in pursuing a loan mod.  To work with us, the first step is to complete the loan modification questionnaire below, which will provide some preliminary feedback as to feasibility.

The most frequently cited reason for denial of loan modifications is homeowner unresponsiveness and/or missing documentation.  Most of the time, homeowners can handle these themselves, which is why we provide the free report.  To the extent some extra consulting is needed, we are always here to help.