Here's the truth. You've been searching for it, I'm gonna give it to you!
The truth is not something you want to hear. But, I'm here to give you the facts, whether you like them or not. It's my job to tell the truth, because I know the truth!
If you are experiencing problems with your mortgage, be it late payments, skyrocketing interest rates that result in payments you can no longer afford, default due to job loss, medical, divorce, or other reasons, you most likely have seen advertisements about loan modifications that can help you to save your home. Even those who are considering a modification because they have a rate adjustment coming up need to read this!
This option is advertised even more than a short sale, and like a short sale, not everyone who has a mortgage issue qualifies for a loan modification.
To make matters worse, loads of 'would be' modification companies are asking for your money for a program they are pushing, and in many cases, are unable to actually perform the service for which you have paid. As a result we see SCAM everywhere! Truthfully, these companies might be able to get SOME resolutions in the form of a loan modification, but if you are in default, a modification is NOT necessarily the option you will get. Here's a list of reasons why you should be careful about seeking a loan modification:
- If you are not behind on your payments: -Unless you can prove that you a default is imminent it is not likely that you will be qualified for a loan modification. Loan modifications are designed to prevent foreclosure where possible, but this does not mean that just because your payment is about to go up that you qualify for one. You must prove that you have a true hardship. Wanting a modification just because your equity has been sucked up by declining property values does not make you a candidate for loan modification either. Understand, I am in no way condoning that you skip payments on your mortgage in order to show "imminent default"! If you can afford to make your payment, you should do so! Your best option is to see if you qualify for a mortgage refinance under FHA Secure or some other program.
- Not all lenders are even entertaining modifications! - Take for instance a client I am working with right now. He has a mortgage, sold to him at 11% for 2yrs, with the interest rate scheduled to adjust in June of 2009. The company who holds the mortgage note is NOT the originator of the loan, and purchased this loan from a company that is no longer in business. This lender (PMH Financial, LLC) is not a company that entertains workouts for their borrowers. They want all of the funds to reinstate the loan, or nothing at all. NO repayment plan, NO forbearance agreements, NO loan modifications! While I have been able to negotiate on my client's behalf, and have been able to postpone the sale date long enough to allow my client to obtain funds to reinstate, this is not the type of solution we borrowers have come to expect due to the hype about modifications. In this case the borrower can afford to reinstate (many thousands of dollars), and will be able to make the payments (even after the rate jump next month) but many many other borrowers with this company cannot afford to reinstate, which ultimately means: loss of home. REO agents are LOVING this company (though I've heard through the grapevine they are slow to pay expenses)!
- Government programs don't force lenders to modify loans. - Making Home Affordable has been designed to help homeowners to modify their current loan to save/prevent them from foreclosure. Did you know that to date, only 14 lenders have signed onto this program? That's 14 out of hundreds! In addition, these lenders are in no way required to provide loan modifications, they simply get incentives if they do provide one to you. This means that if a lender doesn't want to give you a modification, you most likely aren't going to get one.
- Financial information submitted by borrowers does not qualify them for modification. - Borrowers are working out their mortgage default and foreclosure matters by themselves. This is good and it is bad. One way it's good is because they can save the money they would pay a professional consultant or attorney, and apply it to their past due amount on the loan. Those who are lucky enough to get the modification they are looking for have had the "perfect" situation. It's bad because they don't understand what the numbers look like, or how they work. They may disclose too little information, or too much! Without understanding how the financial aspect of a modification works, they could be shooting holes in the boat before they even begin heading to shore!
- Time is of the essence! - While not impossible, the farther along you are in the foreclosure process, the more difficult it becomes to be approved for a modification. On average, I have found that most lenders want 40% of the balance due on a loan to consider modification. This means that if you are behind 6 months and owe $12,000.00 and accrued costs and fees add up to an additional $6,000.00 you should have $7,200.00 in savings to apply towards a contribution. This is extremely difficult for many borrowers. To save in this economy is difficult enough. Don't wait until the last few weeks to try to resolve your problems, get professional advice immediately!
These are the major issues I have seen in the clients I work with. Many of them attempt to resolve their foreclosure default on their own, many of them have gotten scammed out of money from loan modification companies and even attorneys, yes attorneys! If you are going to hire a professional to do the work of a resolution for you, you need one who understands loss mitigation, the foreclosure process, and what the lender is looking for! You may not like the answer you get, but you need to understand why you may or may not qualify for certain workout plans, and obtain more than one opinion! This is the largest investment you are likely to make in your entire life! Make smart decisions!
My company offers free consultations to homeowners. We do not take on every case, and are not permitted to work in some states. However, helping homeowners is what we do! No matter were you are located, you owe it to yourself to get an opinion from 1st Choice Mortgage Resolutions! Even if it is just a second opinion. View my profile or check out my company's website for direct contact information.
