Loan Modification?

33 Replies

I am upside down on two houses, but I have never missed a payment. I recently went on disability and am facing a financial crisis. I contacted both lenders (B of A, Citimortgage) and they will modify for 2.65 points and $3500 closing costs - $7000 - 8000
up front! Obviously I can't pay this. My son thinks I should let the rental house go into foreclosure - I have always paid my bills and have great credit (I have run up my credit cards keeping up with mortgage payments), at my age (62) I am loathe to destroy my credit - any ideas?

please be careful having an outside person/company 'assist' you with loan modification. there is nothing that they can do to modify your loan that you cannot do yourself. don't waste your time/money.

it appears that they are offering you a refinance. call them back and get the paperwork for a hardship modification. they will ask a lot (A LOT) of personal info (to ensure that you are claiming hardship), but it can be worth it.

I agree that paying someone about $2500 (average fee) is insane. If you had $2500, you pay your mortgage with it. Some of them have you put that on a credit card. Guess what, you get further in debt, and most of the fee is not refundable if they don't do anything that is helpful.
What you need to do is call your lender's HOPE or workout dept. This number can be found on each of the lender's websites. If you can't find the number, call the customer service number and tell them you want the HOPE or workout dept. Talk to them and tell them what's going on, and how you've been paying your mortgage up until now. You need to look at your finances and decide if you can afford either house, and at what monthly payment. If you can, (the bank will make a decision about this too) then work to make that goal happen. Lenders have reduced rates down to 4% range. They are more likely to work with you on your primary home than an investment, but can help on both. If they can't help you keep your home, then they will suggest a shortsale, or a deed in lieu. There are more forums here that can help you with that. Please, let us know how it goes.

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.

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.

I've heard this statement multiple times. But its always from someone in the loan modification business. I'd like to see some real data that backs this up. Googling for complaints and finding a bunch doesn't support the contention that loan mod companies are more successful than borrowers in getting their loans modified.

I can offer another, more cynical, reason for loan mod companies to exist. People are desperate and uneducated about their options. That makes them easy prey for someone who offers them a "service" even if it means paying the equivalent of two or three house payments. So, these companies spring into existence to satisfy that "need". Or, more correctly, to exploit the opportunity.

Not saying that's you, Greg. But we've had recent posters who wrote about going to a weekend boot camp to learn about doing loan mods. Then, starting a business doing them. Naturally, the guru running the boot camp tells the students how much they can make doing this. So, after a weekend of setting in presentations, they know enough to do this? But borrowers can't do it on their own?

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.

To answer you question, I think the basics of loan modifications can be learned in a weekend, sure.

I don't think it's all that difficult. It's time consuming and it's based on knowing criteria the servicer uses in determining the size of the modification and maximizing the borrowers savings (there's no set of guidelines for this yet, but it's starting to shape up).

So I support the idea of people taking a weekend class to learn loan modifications, though I never heard of such a class.

It's better than going into something blind when hundreds of thousands of dollars (over the life of the loan) are at stake. You don't get many chances to save that kind of money, so make it count.

Here's a great reference right here.

http://www.mortgagebankers.org/files/Conferences/2008/RegulatoryComplianceConference08/RC08SEPT24ServicingJordanDorchuck.pdf

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

Yes some individuals can handle their own modifications. It depends on the lender/mortgage holder. Some lenders work direct with homeowners, some only work with third party entities. Others can only be handled with attorneys.

If you choose to modify your loan....start with the cheapest option (doing it yourself), then work you way up the ladder.

The real key to your situation is in the opening statement, "I'm upside down on two houses."

It takes 36 months to rebuild credit after a foreclosure. The peace of mind that comes from releasing one's self from an unprofitable, stressful, situation is priceless.

Don't sweat it....it's only stuff. Listen to your son.

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."

John,

Because I think this is a cool site, I'll see if I can get an answer for you from a servicer. Fair enough? I doubt the results will differ from the online forums, but we'll see.

I'm just curious what you consider a reasonable fee? And what guarantee, if any, should the client get. Also, what if you could save the client, say, $300K or more over the life of the loan. What fee would that deserve? Just curious about what you think is reasonable and if you think the low cost companies have the same success rates as the higher cost companies.

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

I'm just curious what you consider a reasonable fee? And what guarantee, if any, should the client get. Also, what if you could save the client, say, $300K or more over the life of the loan. What fee would that deserve? Just curious about what you think is reasonable and if you think the low cost companies have the same success rates as the higher cost companies.

If it was a lawyer doing this work, and they charged their usual rate to do the work, I'd consider that fair. In that case, I wouldn't care if they got it done or not, because lawyer charge for their time, not for their results (usually.)

Saying you save the client $300K over the life of the loan is bogus. I'm sure that number is making some assumption, like the client would make every payment, which is rarely the case.

Charging some reasonable rate, commensurate with the training of the person doing the work, would, IMHO, be acceptable. I'll pay a good lawyer or CPA a couple of hundred an hour, because they are legally liable for the work they do. If someone has no sort of license and the liability that goes along with it, and has no formal training in this sort of transaction, then I would say they are entitled to very little compensation. Maybe above minimum wage, but not much.

I guess I could just follow Colorado law. As far as I can tell from both the "Colorado Foreclosure Protection Act", and opinions on this matter issued by the state, if you're not a lawyer, a licensed real estate agent, or a licensed mortgage broker, the fee you can charge is set by the state. Zero.

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 ‘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.

No offense, John. But that is absurd.

Your reasoning makes no economic sense. The benefit is not being valued, but the credentials of the man who got you that benefit is, regardless of outcome. Wow.

Oh, the real way to value that amount I mentioned would be do a NPV on the cash flows. .

Let me get this straight.

You would pay a larger fee for someone with a PhD and every other qualification you can think of, for a service that netted you, say, $100
Than you would for, say, a unskilled teenager whose service would net you $100,0000?

And you would know these amounts ahead of time. Just curious how your mind works

Wow. So you would rather pay someone $

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.

You avoided the question. I said if you knew the outcome ahead of time.

And the teenager would get you $1 Million

And the man with impeccable skills and credentials would get you $100

I just wanted to see you still valued the credentials of the worker or the value his labor brings you.

I think it wiser to pay either by the job or for a result.. Hourly wage promotes laziness

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

Greg,

You are again wrong on many accounts. There have been mortgage consultants a very long time. And almost universally, they do a very poor job. And they have been generally incompetent that whole time. The only sane conclusion that can be drawn is many more DON’T use consultants than do AND are successful without them. I bet less than 5% of files use a consultant. And that is generous. Of course consultants don’t want to hear that. They want to believe they are really needed and even when told the truth point blank, don’t believe it. Again, typical and why so many posters here and so many people who work for servicers/lenders have a general poor opinion of consultants. Ask any bank/servicer and they will tell you the same thing. There are certainly more consultants today than a few years ago for sure. That makes things worse not better. Again, I have no problem with a good one. But I have met one every couple years on average over the years of my loss mit/RE career.

I don’t know how many times we have to say it. Borrowers are better off without a consultant because most are worthless and slow down the whole process because they think they provide a service but don’t really understand the process. My years of experience have taught me this. I would never expect a consultant whose job it is to convince others they are needed to ever understand or care about the truth. But it is what it is.

I don’t have it backwards. Just because a homeowner says the lender wouldn’t listen doesn’t make it true. How many people out their say, well, the lender gave me the loan I asked for. It is the bank’s fault. I can’t afford the property anymore because my mortgage reset or I get a mortgage that I can’t afford. But it is the lender’s fault, not mine. If they go through the process trying to keep their home, can’t afford to keep it and the bank tells them so, they then go on a forum and say my bank won’t work with me. THAT is BS. You bought something you can’t afford (not in every case obviously). YOU signed the paperwork. I would expect nothing else from a homeowner who thinks it ok to have their loan reduced because they made a poor financial decision and think they “deserve“ to keep it. Again, NO. Lots of complaints only mean more of the blame game. It is not my fault. This is the new American way it seems. And consultants play right into it. Oh, Mr. Homeowner, the big bad bank wants your house. I can help you. They lose your paperwork on purpose. I know things, etc.

No, the bank/servicer don’t want their house. I will grant you not all employees of loss mit are the most helpful or the most knowledgeable. Sometimes they do get in trouble. But most, as has been said many times, know very little outside their little world and may not know the whole process (as they should granted). And I have never seen someone outright lie about what was going on. Has it happened? I am sure it has. A processor doesn’t care about one file. They have hundreds on their desk. They have better things to do than lie to borrowers because they know it will give them more work, not less. If you have evidence that someone lied, by all means, go after them. They should be punished or fired if they did. I have seen them make mistakes, sometimes to the tune of hundreds of thousands. I know because I cut the check. But is doesn’t happen as often as consultants want to believe and when it does, it costs the bank money (as it should).

And you also didn’t answer any of my questions. You said your success rate was 96%. I asked what it was if you count every one you talk to who didn’t qualify (who should be counted but you don’t to have supposed high success rates). I am sure it works out to the same as the bank’s own rate of success dealing with homeowners without consultants.

Please, by all means show us how wrong we are. I need to stop posting in the foreclosure areas. A new poster asks for help, gets solicited by multiple consultants and then never comes back after a few days. We then question the consultant about what they are saying and they always say the same things: How valuable they are and how bad the banks handle everything. But they can’t back it up. The endless cycle continues on forever. Believe what you want as far as success rates. We all understand were you are coming from.

Time to move on and actually help the original poster. They have been checking this thread if not posting.

Good investing and all the best.

Mike C

I was attempting to get a loan mod...and had been told that there is a really good chance that it won't go through. In researching what my next step should be I came across this http://www.youwalkaway.com/output24/InterectiveFlashCalculator.html. It made me think that it may make sense to just let my home go and rent. It's not the best scenario but I don't really have much choice if I don't get approved for a loan mod.

In the middle of all this 'heated' debate, has anyone noticed that the original two posters have not replied beyond their first post?? Looks like solicitation!! lol

Anyhow, I offer loan modification as an option to people who call me to buy their house. But I would recommend to anyone who is considering a loan mod to make sure that they do attempt it themselves first and then if they have no luck consider a company that has lawyers experienced in loss mitigation. However, I think it is safe to assume that an attorney would turn better results for the homeowner.

A 'consultant' that went to Joe Guru's weekend training will not be able to help you like an experienced attorney will. I think it is kind of the same reason you want a CPA that is experienced with Real Estate doing your taxes and not just any CPA. The same for Loan Mod Companies.

That’s just my thoughts

Thanks,

Greg

I can offer another, more cynical, reason for loan mod companies to exist. People are desperate and uneducated about their options. That makes them easy prey for someone who offers them a "service" even if it means paying the equivalent of two or three house payments. So, these companies spring into existence to satisfy that "need". Or, more correctly, to exploit the opportunity.
I am very dissapointed I missed this heated debate as I would have had a lot to comment on. That said, this statement by Jon is probably, by my estimation, the most accurate of all statements posted in this ridiculous solicitation thread.
The FACT is, most loan mod campanies are scams and frauds.
It IS true that a large majority of loan mods done by both the homeowner and the free federal governmnet provided counselors are failures. This is not because they don't know what they are doing, but due to the fact that lenders, and more over, the services, are choosing NOT to modify loans and electing to foreclose.
Many loan mod companies claim to have "success rates" and claim to take mortgage paymnets from $3k a month to $1500 a month. That is simply absurd and untrue. The past due amounts are commonly attached to the back of the loans, creating higher principle amounts, not reductions. In many cases, the loan payments increase rather than decrease.
Furthermore, homeowners are encouraged by the loan mod advisors to make their current financial situations look as poor as possible to create the best "hardship case". In doing so, many of these homeowners become victims, not just of foreclosure, but they also get arrested down the road for mortgage fraud.
These lenders are taking the hardship financial statements and comparing them to the originally submitted financial data presented when they applied for the loan. When large discrepancies are present, both documents are handed over to the IRS and the homeowner finds themselves arrested for mortgage fraud. OUCH!

Need to get a loan mod approved? You need some ammunition in your hands to get it done and loan mod companies certainly do not offer that ammo.

Please be careful having an outside person/company 'assist' you with loan modification. there is nothing that they can do to modify your loan that you cannot do yourself. don't waste your time/money.

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