Real Estate

 

Loan Modification Facts, Myths and Fiction Guaranteed To Set The Record Straight

What You Need To Know About Loan Modification
When it comes to a homeowner attempting to obtain a loan modification, there is a lot more myths and fiction out there than there is facts.

If you want to get the facts, hold on tight, take a deep breath and relax!

If you are one of the millions of homeowners caught up in this foreclosure mess that has rocked our economy, what you need is the truth: not myths, fictions or hype and that’s what you’re about to receive.

What is a Loan Modification?
A loan modification is a lengthy process in which a lender agrees to modify the original terms of a mortgage. This is typically done when a borrower cannot afford the current terms and is either headed into foreclosure or is already there. Or, the borrower sees foreclosure looming in the immediate future and requests that his or her loan be modified. A loan modification can come in various forms:

  • The term of the loan is lengthened, (30 years to 40, 15 years to 30, etc.)
  • A cap is placed on the interest rate
  • The interest rate is reduced
  • The interest rate is changed from an ARM to a fixed
  • The lender agrees to a reduction in the principal
  • The lender agrees to eliminate or reduce late fees or other penalties

There may be other remedies, but it is important to note: the borrower IS NOT getting anything for free! In each scenario, the borrower will end up paying on the backend. For example, if a cap is placed on the interest rate, the borrower will probably have to agree to switch to a lengthened mortgage.

In other words, the (lender, servicer and/or investor) is going to recoup the adjustment in some other shape, form or fashion. Many borrowers go into a loan modification thinking a portion of the loan is going to be forgiven, wiped out or altogether forgotten by the lender; nothing is further from the truth! You will repay: just in some other way!

Can An Attorney Force a Lender To Modify a Loan?
The answer is, “NO!” A thousand times no! The people selling, “Bait and Switch Guaranteed Loan Mod Programs” are promulgating this fiction. All of them mislead borrowers into thinking the Loan Modification will be a slam dunk. They also claim to offer a “Free consultation” but this is actually a high-powered sales pitch with a HARD CLOSE!

They are going to use every trick in the book to close the sell and get your money, UPFRONT! What you are normally paying for is what they call a, “Forensic Loan Audit” performed by one of their experts. They claim their experts can pick ANY loan apart and take those findings and FORCE lenders to modify your loan. This is not a myth; it is a BOLDFACED lie!

Once you pay that upfront fee, you can kiss that money goodbye! These “Loan Mod” companies that “GUARANTEE” Loan Mods are popping up and shutting down at alarming rate. I recently received an email from a couple that got a telemarketing call from a company called, Housing Assistance Help.

The sales rep guaranteed his company could stop the foreclosure process by getting their loan modified. He insisted on sending over a courier to collect the $3000.00 upfront fee. By the time I got around to checking this company out, their website was gone, pooof?

Here’s my caveat when it comes to dealing with these fly-by-night “Loan Mod” companies. DON”T DO IT! If you want to go the route of someone handling this issue for you, seek out a qualified attorney that is licensed in your state and is knowledgeable in this area. But DO NOT pay any of these Johnny Come Lately “Loan Mod” companies a dime. They cannot guarantee results and if you are already hard pressed financially and pay up and they can’t deliver, you’ll be in worse shape!

The Reality of Loan Modification
The reality is, loan modification is a roll of the dice! I wished that I could give you more positive news, but that would mean I would have to engage in misrepresentation of the facts. It would also mean that I would have joined the caravan of misleading hucksters who provide stressed out homeowners with false hopes.

The fact is no one can guarantee a Loan Mod approval! What they can guarantee is that they will give it their best shot but just in case it doesn’t happen, you better have a PLAN B! It is a fact that applicants who properly present all of the requested information in a timely fashion and meet all of the “FDIC Loan Mod Program Guidelines” are still being denied.

Now that I’ve got all of the negative stuff out of the way, as I previously stated, you should have a “PLAN B!” If you apply for a loan modification and it gets approved, then GREAT! But if it doesn’t or if the lender leaves you hanging, with a PLAN B, you won’t be caught off guard!

Author, Joel Marks of REODr.com

 


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