Realities in Real Estate

Loan modification - Should you try it yourself, use a non-profit organization, or hire a professional?

We are not experts on this subject, but we talk with the experts a lot.  So here’s some important information we want to pass on to you.  

Anyone can work directly with their lender(s) and it costs you nothing. However, most of the people we know who have tried have been unsuccessful. Some have actually spent months talking with their lender only to have their home foreclosed upon anyway. This dispite the claim by the lender’s negotiator that the “modification proccess will put the foreclosure on hold”.

But as we said previously, lenders seem to be improving the process and their communication. So should you try it yourself or hire an expert negotiator to represent you?

First, gather all the paperwork you will need (most lenders web sites will help you with this information). If you are adept and successful at buying your own stocks, doing your own taxes (long form), etc., you might want to try it yourself. On the other hand, if you hire a professional to do these tasks then we recommend doing the same thing here. Trying to save some money here can cost you your home.

You can choose from; 1) non-profits and not-for-profits, 2) attorneys, 3) financial advisors. Be careful as this has become quite a fast growing cottage industry, so be sure you check with the BBB and attorney generals office web site, even if (especially if) they advertise they’re a non-profit.

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For the housing recovery to move forward at a more rapid pace, we need to dramatically reduce the number of new foreclosures. So this will be the subject of the next few posts.

Loan modification is where a lender agrees to restructure a homeowner’s loan to reduce their payments so they can afford to stay in their home. The borrower has to prove hardship and meet several other conditions.  Here is some important information from HUD (note this information changes nearly daily and you should check your lender’s web site too):

http://www.makinghomeaffordable.gov/modification_eligibility.html

 http://www.nls.gov/offices/hsg/sfh/nsc/faqlm.cfm

It’s imperative to note that your lenders first goal is to keep you making the current payments. Their second goal is to collect as much current information about your financial status to assist them in their collection process, in case you default. 

Until recently, most people we have talked to who called their lender for help, did not get the kind of apathetic treatment they anticipated. I cannot tell you how many times people have told us that when they called their lender they said ” You are current in your mortgage. We can’t help you until you are behind at least two payments.” This is not the progressive, kind assistance our government outlined when they passed the stimulus plan. Frankly it creates more stress and frustration with homeowners just trying to do the right thing, and they wonder “Why are these lenders getting my tax dollars for their support?”.  Under these conditions, even the most rational people make some irrational decisions that can have an adverse affect on their lives. However, due to pressure and incentives from the government, as well as some time to absorb the constant stream of changes affecting the banking industry, things seem to improving in this area. Lenders seemed to be wising up to the fact that in many cases loan modification is far less costly to the lender than foreclosure. We are hearing success stories where homeowners have received a lower payment plan.

Be sure to check out our next post about loan modification, “Should you try it yourself, use a non-profit organization, or hire a professional”?

Michael & Shannon Collins

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