What the hell is all this fuss about loan modifications? The government says that everyone should be modifying their current home loans.
The government goes even further to provide financial incentives to institutions to provide them.
Lenders have begun to develop much more sophisticated loss mitigation departments to try and keep up with the humongous demand.
The media incessantly covers this issue, ranting and raving about the housing epidemic.
The list goes on and on! Then they (the government, lenders and media) tell us not to use "unscrupulous" companies out there and to conduct the entire process ourselves.
Would it be fair to say that a VAST majority of Americans are not, and do not, consider themselves: a.
keen negotiators, b.
mortgage professionals, and c.
as having the ability to sit on the phones all day with their lenders to work out a loan mod? Here's a better question; just what IS a loan modification? Well, here's an explanation, very short and sweet: A loan modification is a permanent change to your existing mortgage terms.
The goal is to come up with a new payment that the homeowner can afford, plus be able to pay the remainder of their bills.
See, that wasn't so bad, was it? Here are the most common methods: 1.
Lowering the interest rate (most common) 2.
Increasing the loan term (length in years) 3.
A reduction in the remaining principal balance (least popular) Great, something in plain English, that was fantastic! Here's something else that you might not know! Some loan modifications may only last for a period of 3 (three) to 5 (five) years and then the lender will reevaluate your situation at that time.
Other modifications are for terms of 30 to 40 years.
The length of these terms depends on your lender and your specific case.
Shorter terms usually come with lower interest rates to help the homeowner out for a few years and then the rate will increase.
Whew, this is great information! But that's not all folks, there's more! A loan modification is not be confused with a refinance.
There are no closing costs, no fee for an appraisal and no credit score qualifications.
The lender is simply attempting to work out a new payment for your specific case.
Loan modifications are also known as "Workout Programs.
" Now here is something that you REALLY might not know! To qualify for a loan modification, you must have verifiable income and show a financial hardship.
This hardship could be due to job loss, reduction in pay, reduction in hours at work, medical reasons, increased utility bills, increase mortgage payment, family issues and the list goes on.
The lender does not consider your property value.
In fact, the more upside down you are in the money that you have already put into your home (equity), the more your lender has to lose! Alright, now that we have ALL of that covered; let's look at your options.
You have basically two choices: contracting a company or doing it yourself.
Let's evaluate the first option; contracting a company.
When contracting a company you need to be very careful! Think about the reality of the situation; do you think that the loan modification problem was widespread 5 (five) years ago during the refinance boom? Absolutely not! Make sure to ask the companies how long they have been around.
Realize that most likely the company has not been around for more than 2 (two) years.
You would love to think that these are "loan modification professionals" that have been doing this sort of thing for years; but it simply is not the case unfortunately.
This is not proposing that because of the infancy of the companies that they can not be efficient and that they have not performed well.
Some may do a great job, just make sure to conduct your due diligence and feel completely at ease with who you will be working with.
Perhaps a respondent will be able to find a written, documented case of a company being around for more than two years that has consistently done hundreds or even thousands of cases.
The point is, this is somewhat of a new industry and many processors and mitigators have limited training and experience.
Again, that doesn't mean that they are ALL incompetent and that they are absolutely not to be trusted.
Quite the contrary and please allow for a dead horse to be beaten further but there are loan modifications companies that do a great job.
But, there are some critical components for you to consider:
As silly as it may sound, rely on your intuition and just see if they feel right.
If you feel like you have to take a shower after talking to them, maybe having them negotiate on your behalf wouldn't be the best idea.
So what's our next option? Why doing it ourselves of course! The Obama administration actually announced the Making Home Affordable Plan (released March 4, 2009) around the importance of modifying loans.
His administration says that if "you have to pay, walk away.
" The media keeps bashing the private sector loan modification companies every single day.
Heck, give your lender a call and see what the recorded message says! Most likely it will inform you to "beware of the bad loan mod companies and deal directly with them.
" But...
do they, the lenders, really have your best interest in mind? The point being that when you modify your own loan you need to do all the work and you need to consider the following:
As mentioned several times now; the Federal Government wants homeowners to conduct this process on their own.
However, the problem for most homeowners is that they don't understand the loan modification process and the government is really not providing any worthwhile tools or education (ever heard of a little inefficient program called HOPE NOW?).
So what is a homeowner supposed to do? If you want to modify your own loan you need to gather as much knowledge and information as possible.
This will take time, but it can be well worth it! If you don't do something, there is a very real possibility that you can lose your home.
However, before you think that the time and effort may not be worth it and you might as well throw in the towel, here are a couple of things for you to think about if you lose your home:
Do you want to pay a company thousands of dollars to modify your loan? Do you believe that they are vested in your file? Is the money paid (whether it be up-front, in installments or upon completion) worth it in order to save you time and the headaches? 2.
Are you willing to put in the time and energy that it takes in order to perform a loan modification? Are you willing to educate yourself on some of the complexities in the mortgage industry? Do you have the tough skin it requires to be repeatedly told "no" or that they can not help your case? Only YOU can answer these questions and the decision is completely up to you.
Best of luck and please subscribe to this RSS feed and tell your friends!
The government goes even further to provide financial incentives to institutions to provide them.
Lenders have begun to develop much more sophisticated loss mitigation departments to try and keep up with the humongous demand.
The media incessantly covers this issue, ranting and raving about the housing epidemic.
The list goes on and on! Then they (the government, lenders and media) tell us not to use "unscrupulous" companies out there and to conduct the entire process ourselves.
Would it be fair to say that a VAST majority of Americans are not, and do not, consider themselves: a.
keen negotiators, b.
mortgage professionals, and c.
as having the ability to sit on the phones all day with their lenders to work out a loan mod? Here's a better question; just what IS a loan modification? Well, here's an explanation, very short and sweet: A loan modification is a permanent change to your existing mortgage terms.
The goal is to come up with a new payment that the homeowner can afford, plus be able to pay the remainder of their bills.
See, that wasn't so bad, was it? Here are the most common methods: 1.
Lowering the interest rate (most common) 2.
Increasing the loan term (length in years) 3.
A reduction in the remaining principal balance (least popular) Great, something in plain English, that was fantastic! Here's something else that you might not know! Some loan modifications may only last for a period of 3 (three) to 5 (five) years and then the lender will reevaluate your situation at that time.
Other modifications are for terms of 30 to 40 years.
The length of these terms depends on your lender and your specific case.
Shorter terms usually come with lower interest rates to help the homeowner out for a few years and then the rate will increase.
Whew, this is great information! But that's not all folks, there's more! A loan modification is not be confused with a refinance.
There are no closing costs, no fee for an appraisal and no credit score qualifications.
The lender is simply attempting to work out a new payment for your specific case.
Loan modifications are also known as "Workout Programs.
" Now here is something that you REALLY might not know! To qualify for a loan modification, you must have verifiable income and show a financial hardship.
This hardship could be due to job loss, reduction in pay, reduction in hours at work, medical reasons, increased utility bills, increase mortgage payment, family issues and the list goes on.
The lender does not consider your property value.
In fact, the more upside down you are in the money that you have already put into your home (equity), the more your lender has to lose! Alright, now that we have ALL of that covered; let's look at your options.
You have basically two choices: contracting a company or doing it yourself.
Let's evaluate the first option; contracting a company.
When contracting a company you need to be very careful! Think about the reality of the situation; do you think that the loan modification problem was widespread 5 (five) years ago during the refinance boom? Absolutely not! Make sure to ask the companies how long they have been around.
Realize that most likely the company has not been around for more than 2 (two) years.
You would love to think that these are "loan modification professionals" that have been doing this sort of thing for years; but it simply is not the case unfortunately.
This is not proposing that because of the infancy of the companies that they can not be efficient and that they have not performed well.
Some may do a great job, just make sure to conduct your due diligence and feel completely at ease with who you will be working with.
Perhaps a respondent will be able to find a written, documented case of a company being around for more than two years that has consistently done hundreds or even thousands of cases.
The point is, this is somewhat of a new industry and many processors and mitigators have limited training and experience.
Again, that doesn't mean that they are ALL incompetent and that they are absolutely not to be trusted.
Quite the contrary and please allow for a dead horse to be beaten further but there are loan modifications companies that do a great job.
But, there are some critical components for you to consider:
- Many modification companies charge steep fees in excess of $2,000 and much higher
- The fee just mentioned is usually charged per property
- They do MOST of the work for you (you still need to provide a lot of initial and ongoing paperwork)
- Do you know the experience level and/or the people involved with the processing and mitigating of your loan?
- Is the person handling your modification properly trained?
- Is this particular business being conducted legally?
- Many states do not allow modification companies to charge up-front fees, EVEN if they are "attorney-based" or an actual law firm
- How good is their refund policy, if any, if they are not successful with your modification?
- What is their average time to modify a loan?
- Do they have a VESTED interest in your loan? Meaning, do they really care about this cause or are they just going to work to collect a paycheck?
As silly as it may sound, rely on your intuition and just see if they feel right.
If you feel like you have to take a shower after talking to them, maybe having them negotiate on your behalf wouldn't be the best idea.
So what's our next option? Why doing it ourselves of course! The Obama administration actually announced the Making Home Affordable Plan (released March 4, 2009) around the importance of modifying loans.
His administration says that if "you have to pay, walk away.
" The media keeps bashing the private sector loan modification companies every single day.
Heck, give your lender a call and see what the recorded message says! Most likely it will inform you to "beware of the bad loan mod companies and deal directly with them.
" But...
do they, the lenders, really have your best interest in mind? The point being that when you modify your own loan you need to do all the work and you need to consider the following:
- Do I know what I'm doing?
- How do I negotiate with the lender?
- Do I know the guidelines for the loan modification programs?
- Do I know what to expect from the lender?
- Am I getting the best modification?
- Do I know how long this is going to take?
- I've heard that trying to reach the right person to talk to is nearly impossible, is this so?
- Do I know how to process my file to qualify?
- Am I willing to put forth the time and energy necessary to do this myself?
As mentioned several times now; the Federal Government wants homeowners to conduct this process on their own.
However, the problem for most homeowners is that they don't understand the loan modification process and the government is really not providing any worthwhile tools or education (ever heard of a little inefficient program called HOPE NOW?).
So what is a homeowner supposed to do? If you want to modify your own loan you need to gather as much knowledge and information as possible.
This will take time, but it can be well worth it! If you don't do something, there is a very real possibility that you can lose your home.
However, before you think that the time and effort may not be worth it and you might as well throw in the towel, here are a couple of things for you to think about if you lose your home:
- Do I have money for renting?
- Do I have a security deposit?
- Will my credit qualify to rent?
- How much do movers charge?
- My children will be in a brand-new school
- I will not be in the same community and have the same friends and neighbors
- Renting is not tax deductible
- I no longer OWN my dream home
Do you want to pay a company thousands of dollars to modify your loan? Do you believe that they are vested in your file? Is the money paid (whether it be up-front, in installments or upon completion) worth it in order to save you time and the headaches? 2.
Are you willing to put in the time and energy that it takes in order to perform a loan modification? Are you willing to educate yourself on some of the complexities in the mortgage industry? Do you have the tough skin it requires to be repeatedly told "no" or that they can not help your case? Only YOU can answer these questions and the decision is completely up to you.
Best of luck and please subscribe to this RSS feed and tell your friends!
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