BiggerPockets

We have been very successfull at helping people modify their loans. [REMOVED] What they offered you is not a modification.

Response should be how to help Bad Money with their situations. Solicitations for loan modification companies will be removed.

No offense to Mitsu, but most people who try to go through their bank to get help fail. And I mean by a huge percentage. Google your lender and modification complaints. The reason loan modification companies are around is because they fill a need, and that need is for people to get their loans modified so they can save their homes.

While Obama's plan focuses on primary residences, you can get your investment property modified. The laws of economics still apply, no matter how many properties you have. It just have to work in the lender's favor, or they will choose foreclosure or short sale. Mitsu is correct, I've seen lenders reduce the rate to 2% fixed and reduce principal as well, but it's all based on what they have to do to make your payment affordable, assuming that modified amount is less expensive than the alternative (foreclosure). And it's not exactly easy getting your modification package through your banks loss mitigation department. If it were, you wouldn't see page after page of complaints from people trying. That, and you may not qualify based on your application. Without knowing how the lender decides, you're going about it blind.

Good luck. Don't deplete all your assets and rack up debt trying to save a house that you can't save. I hope you can get a modification. The key will be if the reduced income. When they run the numbers, will they be able to modify your payment so you can still meet your commitments, but also make sure that modification is cheaper than a foreclosure.

Good luck, sir.

John, how can we verify the number 'most?' I'm willing to guess that it's easily 90% or higher that try and fail. Perhaps we can go to various sites where people discuss their success and failure and tally up the results? Shouldn't take long, a sample size of, say, 100 would probably give us an answer, right? I'm guessing 9 out of 10 will have failed. [and those temporary adjustable rate freezes Countrywide was mailing out last year don't count.] Fair enough?

Here's what the average borrower is up against. They have to deal with the loss mitigation department that won't talk to them unless they're behind in payments, and people usually find they've been dealing with collections agents half the time when they thought they were talking to loss mitigation. Some spend time trying to get their loan modified only to find out they have to be late to have a chance, and when they fall behind, the collection department tries to squeeze them for money telling them they can't get a modification unless they catch up on late payments or fees. Read all the abuse that happens while people try and go through this process.

When the borrower does finally send in their documents for the modification application (you can usually find what the servicer requires right on their website), much of it will be misplaced. Continuously. At some point, a 'negotiator' will be assigned to the loan, though there's no negotiating going on. When I was dealing with Saxon while trying to help an old woman so she could get a reverse mortgage, I never once was able to speak with the negotiator. He did return 2 emails, though, and couldn't be bothered to tell me whether they'd accepted my refinance offer until AFTER the foreclosure sale date!

For people lucky enough to have their modification package assembled, it has a shot. But they don't know what makes them a candidate for modification and what doesn't. Do you? I mean, can you look at the package and get an idea who will fail and who will succeed? Which person will see a greatly reduced payment, and which person has no shot at all?

Can you do a NPV calculation to make sure the "affordable payment" you're shooting for is not so low that foreclosure becomes the cheaper alternative for the sevicer/investor. Do you know which type of income can be ommited from the calculation or which expenses are often forgotten? Do you know when you need claim the spouse's income or when it isn't necessary? Can you look at the income and expenses and tell if the person is a good candidate or not?

If you can do all this, then there's no point is hiring a company like mine. Assuming you can submit the completed package and get it into loss mitigation, you stand every chance of getting the same result as us (over 96% success rate). I'm being charitable when I say the average person who tries has a failure rate of 90%. It's probably higher. And the modifications I see them get are often disappointing. The servicer is required to serve the interests of the investor, not the borrower.

Shall I do a quick accounting from a Wells Fargo forum or Countrywide forum to see what type of failure rate there really is? Either that or we need to call a lender and see if they'll tell us.

And just to let you know, it's not a magic process. It's based on selecting only candidates you know will be approved (it's all about reducing risk) and using the best processing company around, one that does hundreds of modifications a month for other modification companies like ourselves (they know the modification process backwards and forwards, and they have relationships with every lender and their mitigation agents) You do that and you'll increase your chances greatly, not only of success but achieving a significant modification.

So it is possible for the average Joe to achieve the exact same modification as we do given the same circumstance, but it's highly unlikely. Just as it's possible for me to beat Kobe Bryant in a game of basketball, but my chances are equally as unlikley.

Jon, I have to go to work soon, so I'll post some links I've grabbed at random and I'll let you determine if the average person is finding success with modifying their own loans. Fair enough? You decide.

http://www.consumeraffairs.com/finance/countrywide_mortgage.html

http://www.complaintsboard.com/complaints/wells-fargo-home-mortgage-c120875.html

bank of america succesful modification

http://www.consumeraffairs.com/finance/citi_mortgage.html

http://www.consumeraffairs.com/finance/saxon_mortgage.html (my least favorite lender)

http://www.ripoffreport.com/reports/0/245/RipOff0245188.htm

http://www.loansafe.org/forum/stop-foreclosure-tell-us-your-story/1583-loan-modification-process-wells-fargo.html

http://loanworkout.org/2009/02/countrywide-idiots/#comments

http://www.loansafe.org/forum/success-stories-homeowners-who-fought-back-won/5562-bank-america-loan-mod-success.html

A series of complaints about the difficulty of doing this, or even a sampling of statements of success doesn't answer my question. I don't think this question is actually answerable, at present. The only source of valid data would be the loan servicers. They could, in theory, provide statistics about how many loans have some attempt at modification, how many of those actually get a mod, and how many of those mods are actually successful. Success being that the borrower is still there after some number of years. And then, the servicer should be able to say how many of those were negotiated by a mod consultant and how many were done directly with the borrower.

If such statistics were available, I would guess they would show a higher percentage of successful negotiations completed by consultants than by borrowers. Why? Because the consultant would know enough about the process to tell the borrower they had no chance of a successful negotiation, and therefore, the servicer would never even hear about the attempt. Individual borrowers, not knowing one way or another, would call the servicer and fail to get a mod because they don't qualify.

I also suspect that most of the people offering loan modification services have little more than a weekend's training, and that only a piece of that training actually dealt with the modification process. The rest of it deals with how to advertise your service, how to convince clients to sign up, and how to navigate the state laws which govern these services.

I'm sure there are ethical, honest loan modification companies out there who will truly work for the clients best interest, and will charge a reasonable rate. I think the are more of these companies that will gladly take a huge fee and saddle the borrower with a modification that still results in foreclosure. Or make a few phone calls and say "sorry, they bank wouldn't budge."

Greg,

First of all, your numbers are way off. I would reverse them. As a former servicer/lender, for every 1 person who successfully uses a consultant, hundreds will go through the process without a consultant. Why? 99.9% of consultants are worthless and use scare tactics like saying over 90% of those who try to deal with their lender on their own will fail to help gain business. It just isn't true in my experience. The borrower is better off without a consultant IMHO. Now I am not judging which group you fall into, just telling you the facts from the bank side of the fence. And yes, the process is long and arduous. And yes, some of the bank employees are not what I would consider competent.

The bank doesn't want to take anyone's house. They will follow their guidelines to keep people in their homes. The guidelines of the investor they are probably servicing the loan for since in almost all cases they don't hold the paper on the loan.

Your 2nd paragraph in your second post is mostly correct. But the collections department (or whatever they call it) handles the loan until it so many month's behind. The collections area has essentially no knowledge of what happens in loss mit and the file goes to loss mit only after the collectors fail in their trying to work out a deal. You do have to be late to qualify for a workout. If you didn't, everyone could just call and say as long as we are reducing loan payments, lower mine too please. They aren't making this up as they go along. It is entirely guideline based.

You're again right. The homeowner doesn't know whether they qualify for a workout. And neither does the consultant unless they are very knowledgeable. The loss mit department takes the info, puts it into their spreadsheet and it tells them what to do. You either qualify (based on your income and expenses) or you don't. Again, you are right. There is very little negotiating because everything is pretty cut and dried.

I also dispute the fact they lose every document you send them. Yes, some are lost. But more likely, you didn't submit everything needed the first time and it a takes a long time to sort all the mail from those who can't seem to get the info correct the first time. Make life easy for yourself and get it right the first time. The process takes time as explained in the loss mit flow thread.

It is not a magic process as you say, I agree. But selecting only candidates you think will be approved to help them only so you can claim a high success rate is exactly the type of behavior that makes people suspicious of consultants, and generally speaking, rightly so. What is the percentage you actually help if you include everyone you talk to who don't qualify? It is probably less than the bank's workout rate and a more fair comparison than saying you have a 96% success rate. The bank's close rate is probably the same 96% if you only count those who qualify and not everyone who wants that workout option and doesn't qualify.

I fully admit the system is far from simple or easy to understand. These and many other reasons are why I don't focus my investor activities in the preforeclosure/REO area. It is not worth it in any way shape or form to me. And I understand the system. Others may disagree and like this market. They can have it.

Good investing

Mike C

Hey Mike,

Thanks for the reply, though my friend at EMC estimates about 15 - 20% who try it themselves are granted modifications. I find that number high, but I won't contest it. Your numbers are questionable, however. When did you compile this data? If done more than a year ago, it's meaningless as I doubt you even knew a loan modification company back then. And the only sane conclusion that can be drawn from these numbers is that there are more people who don't use consultants than there are that do use them. Why not compare results of people who use consultants vs. people who don't? As flawed as that is (consultants would have the advantage), at least it's not dishonest. I would genuinely like to see a comparison, and I'm confident that even using just average â"consultants', the results will overwhelmingly favor consultants.
Please back up your assertion that borrowers are better off without a consultant with some examples. It seems to me that the worst thing a borrower can do is let a lender help her with her modification since the lender is legally obligated through the service agreement to serve the needs of the investor over the needs of the borrower. So the lender's legal requirement would be to make sure she receives the least favorable modification possible.
Many things have changed since you worked for a lender. When you say that consultants need to scare customers with lies about their lenders to drum up business, you have it backwards. The best advertisement for my company is when a borrower tries to work with their lender. It is the incompetence of the lenders, especially the loss mitigation departments that have caused the need for consultants. The client I just signed probably would have lost his house because the loss mitigation employee gave him patently false advice that would have gotten his modification rejected. This is happening frequently. How can they not get fired for doing things like this? It can't be an innocent mistake, can it?
As for success rates, we very rarely miss. You claim that too, but I routinely get people qualified for modifications who were denied by lenders. In fact most of my clients tried with their lender first. So I'm skeptical about your success rates.

Ridiculous or not, that is the way it works. You pay lawyers, accountants, and most professionals for their time. If I fight a lawsuit, I may pay lawyers big, big bucks and still lose the lawsuit. A company may pay researchers to work on a project for years, and have no useful results.

People go to the doctor and hospital every day, DIE, and end up with big fees.

So, yes, I would pay someone skilled in an area where I needed help a large fee if they had the skills I reasonably thought would give me the outcome I needed.

If an unskilled teenager managed to accomplish something that generated a value of a million dollars there would be a huge element of luck involved. Perhaps luck that the teen stumbled onto some great idea. Or, perhaps luck that this teen had outstanding skills and I was lucky to find him and buy those skills for a minimal price.

Some professions are paid on a percentage basis. Real estate agents are paid a percentage of the value of their sales. Most sales professionals, where the used car salesman down the street or the guy selling Boeing airplanes to United, are paid a percentage of their results. That works because cash is actually changing hands in those transactions.

In a loan mod, the only cash that changes hands is from the client to the consultant. Charging based on "savings" that may or may not every come for a loan modification that may still result in the client being foreclosed on has no basis in reality. The only pricing model that makes sense is the professional model of an hourly rate.

And not to correct you, but you're wrong. You have to pay the processing company and the lawyers. And the consultant. Occasionally the appraiser.but rarely