Negotiating 101 – Tips For Negotiating Your Own Loan Modification!Dealing With Objection
This section is dedicated to the psychology of negotiating LOAN MODIFICATIONS. In most instances, when you first call your lender, they will be helpful…then something happens! They switch from customer service role, to debt collector role and things become interesting. Obviously the main key is to always stay calm and remember that they did not put you in this position. Also remember that they are overwhelmed with cases, get yelled at all day long, and do not get paid very much money. Below are some tips and tricks that we have found useful when dealing with loss mitigation.
Building Trust, Rapport, And Satisfaction
If you are entering into a negotiation, you will be in a much stronger position if you can convince the other side of your qualifications. This is why we spend so much time doing our research with the INCOME / EXPENSE WORKSHEET and running COMPS. Your first priority is to convince the decision makers that you can do what you propose. The whole point of this is to build trust! Next, spend some time building a rapport with the negotiator. Ask about where they are located, how busy they must be, ask them about their background and experience, even talk about your family. The more of a real person they view you as, and greater the chances they will go to bat for you when you need them to. Lastly, get ready for some flexibility. You don’t want to be thought of as a deal breaker, but a deal maker who understands that you must create a mutually beneficial relationship that both you and the bank are okay with!
Dumb Is Smart
Remember, things are not always what they seem! Sometimes it is a good idea to play “dumb” to gain more information from the other side that they might not volunteer if you are a Mr. Know-It-All! Listening is the key to this concept, so even if you have a razor sharp mind, play “dumb” and gain the strategic advantage.
You Have Got To Do Better Than That
If in your negotiation you reach a gap that you are not sure how to bridge, a simple statement “you have got to do better than that” can work wonders. The point of this is to get them to the point where they say “this is the best that we can do for you”. This does not cost you anything and is a good way to push the envelope without causing a fight.
Take It Or Leave It
If your lender tells you that this is the deal “take it or leave it”, you do have some options. Obviously, you could take or leave the deal depending on your situation. Before you do, first try and change the parameters of the discussion by offering an agreement with an alternative. Let’s say you are trying to get a 3 month forbearance, a principal balance reduction of $50,000, and an interest rate adjustment from 7% to 6%, and they say we will reduce your interest rate and that is it…”take it or leave it”. A good response could be “okay, I might accept the lower interest rate if you can give me a 6 month forbearance on my payments to help me cover the lost benefits of the principal balance reduction.” Now you have taken back control and changed the pace of the negotiation.
The Two Dreaded Personalities
1. Mr. Intimidator
Here is a quick story. We were once negotiating a short sale with a loss mitigator from one of the nation’s largest banks. We sent in the short sale packet and made our initial phone call. The loss mitigator claimed that she never received the packet and asked us what the offer was for. We told her and she immediately yelled “this is an insult….do not call me back until you have a higher offer” and then hung up. She did not even see the paperwork, the statistics, or the offer yet! We knew instantly we were dealing with a Mrs. Intimidator. We tried calling back and every time she would not even let us speak more than a few sentences and then she would cut us off and say “I told you to get me a higher offer…you are wasting my time so don’t call me back again until you get something higher.” This posed a huge problem because the offer was actually a really good offer…she was in Ohio and we were in Arizona, so she had no Idea what market values were or were doing (declining). Everytime we called her we stayed calm even when she yelled at us.Finally, we called back about 2 weeks later and as fast as we could talk (before she hung up on us), we told her how hard we were working, everything we could about the family losing their house, how market values had declined, regurgitated market statistics such as foreclosure rates and short sales in the neighborhood, and told her that if she does not take a second look at the numbers we were going to let the house foreclose. She said she did not care and hung up. We waited and the next day she called us back and apologized for her attitude. She claimed she thought long and hard about this family’s situation and from that point on was our best friend. Literally overnight the whole tone and pace of the negotiation changed for the better. We had the auction postponed, got an acceptance for our short sale, and completed the transaction. She realized that bullying us around was not the answer and changed up her strategy!
2. Mr. Know‐It‐All
This is the most difficult personality type to deal with. These are the people that you cannot tell anything to. They can be in another country and claim to know exactly what is happening here in Arizona. They have done this a thousand times and you are just another file they have to get finished before the end of the day! Flattery with the know-it-all can get you anywhere you want to go. Once the know-it-all is convinced of their superiority, their guard goes down. The key here is to give minimal information and many “you know” statements. For example, say something like, “with the declining housing market and my loss of all my equity, I cannot afford my new interest rate. You know what is typical since you have done this a thousand times. Let me send you a proposal that you are familiar with and we can use that.” Also, do not challenge them directly, this will only infuriate them. Instead stroke their ego!
Last Piece Of Advice
If you come to a standstill with your assigned home retention mitigator, you can always attempt to move it up the chain of command and speak with their supervisor. In most cases, your negotiator will not volunteer their contact info so you may have to call customer service and ask for the manager of _____________ (your negotiator). It may be a good idea to ask for the name of your negotiator’s manager’s phone number on your initial contact for your file.
CONTACT ADJUSTMYLOAN.COM IF YOU GET STUCK
If you still stuck, AdjustMyLoan.com is a national LOAN MODIFICATION COMPANY based out of Phoenix, Arizona. The Loss Mitigation Experts, professional LOAN MODIFICATION NEGOTIATORS, and affiliated Forensic Loan Auditing Attorney’s at AdjustMyLoan.com are always here to help if you get to a point where you cannot handle the LOAN MODIFICATION yourself. We have years of loss mitigation experience and can help you audit, package, propose, and negotiate your LOAN MODIFICATION. We are also a member of the Better Business Bureau, have a log-in system so you can see your LOAN MODIFICATIONS progress, charge NO UPFRONT FEE’S, have a MONEY BACK GUARANTEE, and have many happy client referrals for you to review. We understand that the hardest part for a homeowner to do is remove all emotions fromt he negotiation. If you need us, just give us a call at 1-800-557-7573 and WE CAN STEP IN AND GET THE JOB DONE!
WHAT IS A LOAN MODIFICATION AND WHY WOULD A BANK ACCEPT A LOAN MODIFICATION?
LOAN MODIFICATION DEFINED!
An ARIZONA LOAN MODIFICATION in its simplest form is the alteration of your current loan terms in order to lower your monthly payment and keep you out of foreclosure. Loan modifications typically involve a reduction in the interest rate on the loan, an extension of the length of the term of the loan, a reduction in the principal amount you owe, or any combination of the three. A lender might be open to modifying a loan because the cost of doing so is less than the cost of default, and/or the borrower owe more than the property is worth.
For borrowers who can prove their ability to consistently repay a modified loan, the bank will allow certain changes to their loan terms. Sometimes the changes can be temporary, such as an interest rate freeze for a period of a few years, or more permanent such as stretching out the length of the term from 20 to 30 or even 40 years. Anything is possible…from interest rate reductions, stretching out amortization, reducing the principal balance, to adding an interest only feature are all commonly asked for modifications.
At the end of the day, the whole goal behind an ARIZONA LOAN MODIFICATION is to negotiate an affordable and sustainable monthly payment that suits your income level. Banks do not want to revisit your file and typically will not give you another chance so make sure you create, and acquire the appropriate modification terms. Also, keep in mind that your banks loss mitigation department will take into account your entire monthly budget (income and expenses) so do not over estimate what you can afford for housing. If requested, your lender should send out an INCOME /EXPENSE form for you to fill out. Be honest about your total monthly expenses and income. Use the form to determine what you can afford for a new mortgage payment…and since it will be based on your specific situation and backed up by your bank statements / paycheck stubs, you will have the negotiating power to ask for that specific amount. (Compared to you just pulling a monthly payment from the air and proposing that to the bank)
WHY WOULD A BANK MODIFY A LOAN?
The general perception by many troubled homeowners in today’s market is that banks do not want to foreclosure on their home. This thought is not necessarily true. No bank wants to foreclose on a property in a declining market, but their decision to foreclose or LOAN MODIFY is based simply on the numbers. What we mean by this is that your lender(s) truly only care about one thing…which solution is going to net them the most money! As long as you are paying on time, your bank has a valuable income producing asset that gets sold and resold as a mortgage backed security on Wall Street. When you stop making your mortgage payments, your loan gets transferred to the loss mitigation department. From this point forward your bank is losing money. The following is a general scenario to help you understand the expenses a bank incurs once you stop making your payments.
Let’s say you owe $350,000 on your house and it is currently worth $305,000. You have an interest only loan that is set to adjust the beginning of next year. You can no longer afford your payments for whatever reason so you stop making them.
Balance Owed: $350,000
Today’s Market Value: $305,000
Interest Rate: 6%
Amortization: 30 years
Interest Only Payment: $1750 / month
Cause Of Loss To The Bank
Approx. Amount Of Loss ($)
Missed Interest Only Payments (8 Months = Avg. AZ Foreclosure Process)
$14,000
Total House Depreciation
$45,000
Attorneys Fees And Trustee Paperwork Costs
$1,500
Holding Costs Once They Become The Owner (4 Month Avg. Time To Sell)
$7,000
Selling And Closing Costs To Sell An REO (Real Estate Owned). Remember that most properties are selling at a 5% discount from market value plus the Realtor and closing costs involved with selling real estate…estimated 10%.
$30,500
Total Estimated Loss
$ 98,000
Now we know that this scenario is a general estimate of expenses, but we believe that this information should help you build the foundation of your loan modification proposal. BANKS DO NOT WANT TO BECOME HOMEOWNERS AND WANT TO MINIMIZE THEIR LOSS! As you can see, the bank stands to lose almost $100,000 on a $300,000 house…if your scenario for a LOAN MODIFICATION is better, and you can prove it through documentation, then you stand a great chance of a successful LOAN MODIFICATION.
WHY CHOOSE ADJUSTMYLOAN.COM TO CONDUCT MY LOAN MODIFICATION?
There are many so called “LOAN MODIFICATION” companies out there that are simply NOT QUALIFIED to help you re-negotiate your current loan terms with your lender(s). Most are simply loan officers and brokers that can no longer do loans due to the current credit crisis so they began marketing themselves as “LOAN MODIFICATION EXPERTS“. Anyone can package and propose a LOAN MODIFICATION to a bank , even you…but do you really think the bank is just going to give you the best deal right away? Absolutely not…what you need is the professional negotiating experience found in the AdjustMyLoan.com LOAN MODIFICATION TEAM.
Do not allow just any ARIZONA LOAN MODIFICATION COMPANY “look-a-like” to conduct your LOAN MODIFICATION. Imagine the difference a few interest percentage (%) points can make on your monthly payment! Imagine being able to wipe out that negative equity you have and obtain a PRINCIPAL BALANCE REDUCTION on the principal amount you owe! WWW.ADJUSTMYLOAN.COM is an ATTORNEY BASED LOAN MODIFICATION COMPANY where your LOAN MODIFICATION is audited, packaged, proposed, and negotiated by a staff of PROFESSIONALLOSS MITIGATION EXPERTS that specialize in LOAN MODIFICATIONS and utilize the findings of a FORENSIC LOAN AUDIT by a trained real estate Attorney to get the job done.
WHY IS IT IMPORTANT TO HAVE A FORENSIC LOAN AUDIT DONE?
A FORENSIC LOAN AUDIT is considered by many to be the “secret” to obtaining a loan modification with your lender(s). Sometimes called a FORENSIC LOAN DOCUMENT REVIEW or MORTGAGE AUDIT, the main purpose is to determine if there are violations of federal law! Almost 70% of loans conducted in the last 7 years, and almost 95% of all sub-prime loans have major RESPA (Real Estate Settlement & Procedures Act) and TILA(Truth In Lending) violations. The only way to find these violations is to conduct a FORENSIC LOAN AUDIT by a qualified person…in most instances a trained Attorney! If found, through an Attorney ran negotiation process, most lenders choose to renegotiate the terms of the loan to something more affordable to avoid litigation! The whole goal here is to uncover any predatory loan practices and push for a favorable LOAN MODIFICATION. If you are researching different companies to conduct your LOAN MOD, please take into consideration whether or not they are performing a detailed loan review by an Attorney! Don’t be fooled by loan/mortgage companies that jumped into the LOSS MITIGATION BUSINESS yesterday…hire a company that has real experience negotiating LOAN MODIFICATIONS and can fight for you.
ADJUSTMYLOAN.COM is a NATIONAL LOSS MITIGATION COMPANY that specializes in ATTORNEY BASED LOAN MODIFICATIONS. Our team of LOAN MODIFICATION SPECIALISTS is comprised of Attorneys, processors, professional negotiators, short sale and foreclosure experts, loan officers, Realtors, and financial advisors. Our state of the art facilities are located in downtown Phoenix, Arizona. We believe that our experience and relationships with most major lenders, as well as the fact that we conduct FORENSIC LOAN AUDITS on every file by a qualified Attorney gives us a strategic advantage over our competition! We are members of the BBB, have many referrals and testimonials to prove our business ethics, and a proven track record that produces real results! Plus, our pricing is so competitive we wouldn’t understand why you would want to go anywhere else!
Disclaimer: We are not giving you legal advice…please contact a qualified real estate attorney for specific legal questions you may have about your situation.
WOW, First off, we want to say it is amazing at the number of “Fly by Night” Loan Modification Companies we are seeing popping up everywhere! It is sad that homeowners are going to be bombarded with “Foreclosure Consulting” companies who promise to “Modify” their note for an upfront fee. BEWARE OF ANY LOAN MODIFICATION COMPANY TRYING TO CHARGE YOU A LARGE UPFRONT FEE FOR THEIR SERVICES! AdjustMyLoan.com offers FREE LOAN MODIFICATION CONSULTATIONS AND DOES NOT CHARGE ANY UPFRONT FEE’S.
So, how can you tell the reputable Loan Modification Companies from the bad Loan Modification Companies? Research! Any reputable Loan Mod Company should give you easy access to learn about their company, employees, and background. Many of these “Knock-Off” Loan Mod Agencies are nothing more than loan officers and brokers that couldn’t hack it in the loan industry any more and are jumping over to the loan modification industry so they can make a quick buck. These are the same people that put you in the loan that got you in trouble…why would anyone want to go back to these same people for help???
At AdjustMyLoan.com, we believe in transparency. Any potential client of ours gets a “Worry-Free Guarantee” when dealing with us. First, we have an amazing staff of highly educated and skilled employees that consist of a Paralegal that manages our Loan Mod Negotiation department, highly trained Loan Modification Negotiators, Loan Modification Processors, customer relationship agents, a compliance officers who double checks all of our paperwork, and a trained real estate Attorney who conducts Forensic Loan Audits to uncover any Predatory Lending Violations that may have occured durring loan origination! Second, WE CHARGE NO UPFRONT FEES, offer a Money-Back Guarantee, and only get paid if we complete a Loan Modification on your behalf. Third, we have an on-line database system that allows you to log in and see the status / notes on your loan modification file. Fourth, we are brick and mortar…located in downtown Phoenix, Arizona in a building we own (were not going anywhere). Fifth, we are members of the Better Business Bureau, D&B, and Privacy Guard so you can verify our business ethics. Lastly, we have many testimonials and referrals for you to verify our ability to get the job done.
Oh, and we also put everything we say we are going to do in writing, have a 3 day rescission period just in case you change your mind (you get all your money and paperwork back), and offer free advice how to handle your own loan modification on our website.
OUR FREE LOAN MODIFICATION CONSULTATION TAKES ABOUT 15 MINUTES AND COULD CHANGE YOUR LIFE! Imagine lowering your monthly mortgage payments and freeing up cash flow to pay off your other bills. Once you get pre-qualified with us, we will help you complete a full application, gather the necessary documentation your lender(s) will require, then we take over from there. We do all the work, and you enjoy all the benefits!
LOAN MODIFICATION PROGRAMS, SERVICE, AND ADVICE- That is what AdjustMyLoan.com offers our clients! If you are interested in learning more, please visit our Loan Modification Website or call us today!
We believe that our experience and relationships with most major lenders, as well as the fact that we conduct Forensic Loan Audits on every qualified file by a trained real estate Attorney gives us a strategic advantage over our competition! Call us today and take advantage of our FREE LOAN MODIFICATION CONSULTATION!
When asking for a LOAN MODIFICATION, it helps to understand the different options that are available. Officially, a lender cannot modify any part of your loan without your notarized permission (unless you signed a power of attorney). In most instances, your lender will review your proposal and give you a response within a few weeks depending on how behind you are on payments, and if there is a pending foreclosure or not. Let’s review the different loan modification options you have:
Interest Rate
The most common type of LOAN MODIFICATION and the easiest to get approved is an interest rate reduction! This can be a permanent or temporary adjustment that allows you to manipulate your monthly payments. This modification is perfect for those that have high interest rates or adjustable rate mortgages. If you are able to show a steady history of making your payments at your current rate, but the rate adjusted and now you cannot afford the payments, then most lenders will have no problem re-adjusting the rate back down to its previous percent. Ideally, the best case scenario would be to lower your interest rate below what it was in the past. The way to do this is explain how you were living on the edge for so long scrapping by barely able to make your payments. Say that you desperately want to continue making your monthly obligation, but you have to improve your situation.
Most lenders are willing to lower interest rates to qualified homeowners facing foreclosure as long as they are not also requesting amortization lengthening or a principal balance reduction. If you are only looking to lower your monthly obligation, then ask for a very low interest rate and expect to be negotiated up. Communicate without any emotions as if you could care less if you lose your home to the auction.
Length Of Amortization
This concept refers to the term, or length your loan amortizes for. Most mortgages amortize for 30 years, but in some instances you can request the length of your loan to be extended to 40 years. This is another way to make your monthly mortgage payments more affordable because you will be spreading your cost over a longer timeframe. Odd ball terms like 37 or 44 years will not be considered, so stick to multiples of 10. Lastly, in our opinion, this is not a very good option and typically does not turn around a troubled homeowner’s problem…just postpones it for another day. The reason is because more than likely you have little to no equity in your home right now. If you extend out the length of the loan, then that means you will be paying out more interest and less principle for a longer period of time. That means that today you might have avoided a problem, but when you go to sell in 10 years, you will have very little to no equity in your home and have to come out of pocket to sell.
Principal Balance Reduction (Decreasing The Total Amount You Owe)
By definition, a principal balance reduction is where your lender(s) will forgive you of a portion of the total debt you owe. A Principal balance reduction is the pinnacle of all loan modifications, and the hardest one to get! In plain English, you simply do not owe your lender(s) the money any longer and is the sought after modification for anyone that has negative equity in their home! Lender(s) absolutely hate doing this and 99.9% of the time they will tell you they do not offer this option until all other solutions have been exhausted. The reason is because they will have to report the loss to upper management and shareholders…plus, the loss is not recoverable (like it could be if they short sold the property and got you to sign an unsecured promissory note for the difference).
In a declining market, principal balance reductions are more common because more than likely your property will be worth much less than what you owe so there is very little reason for you not to walk away. Plus, your lender(s) will have to deal with the deficiency eventually so they will choose to go with the solution that nets them the most money with as little work as possible. A forensic loan audit (discussed in other blog postings) will uncover any predatory lending violations that may have occurred and give you the greatest chances for a sucessful Principal Balance Reduction. If violations are uncovered during the Forensic Loan Audit, you can place legal weight on your lender(s) and get them to reduce the total principal amount you owe!
Principal balance reductions help in more ways than just reducing the total amount of your debt. It also reduces your monthly payments and the amount of interest you pay over the life of the loan. The following table shows the payment difference after a $100,000 principal reduction:
Interest Rate: 6% Amortization: 30 Yrs.
Loan Amount: $450,000 Payment: $2,697.98
Loan Amount: $350,000 Payment: $2098.43
Payment Difference: $599.55 per month!
NOTE: Anytime your lender agrees to take a loss on your loan, they have the right to 1099c you for “Phantom” or “Earned” income. When you propose a principal balance reduction make sure that you ask your lender to put in writing that they are waiving their ability to 1099c you for the forgiven amount. We are not offering you tax or legal advice so we urge you to speak with a qualified CPA, Accountant, or Attorney for professional advice.
More Information About Principal Balance Reductions
A Principal Balance Reduction can be done on a fist and second lien, however, it is typically only done by second lien holders. This is due to the fact that the second lien holder knows if the house is at or below market value and goes to foreclosure, more than likely their lien will be wiped out and they will receive nothing. Since they realize this, they are much more likely to grant the reduction and try to maintain a performing asset, then to receive nothing in the foreclosure auction. A Forensic Loan Audit is the “Secret” to obtaining a principal balance reduction and is typcally done by a qualified real estate Attorney like the one found at www.AdjustMyLoan.com. Basically this is where we audit your loan paperwork and look for any Real Estate Settlement & Procedures Act (RESPA) or Truth-In-Lending Act (TILA) violations. If found, you will have the legal weight needed to ask for and recieve a Pricipal Balance Reduction!
Typical violations we uncover by a Forensic Loan Audit:
Broker disclosures were never made
Risk factors for credit were not disclosed
Your FICO scores were not properly disclosed
RESPA booklet was not recieved on time (or not at all)
Some documents were not signed or notarized properly
There is no ARM disclosure or the ARM disclosure is not accurate
There is no Final Hud-1 in the file or the Final Hud is not accurate
Notice of Right to Cancel (two copies) were not given to each borrower
Truth in Lending Notice of Right to Cancel is not filled out properly by the lender
A good faith estimate (GFE) was not given within three days of taking the loan application
No payment schedule is included in the loan documents or the payment schedule is not accurate
Truth in Lending info was not recieved (or mailed) within three days of taking your loan application
There is no copy of the promissory note (it is unclear who owns your loan…or who is entitled to enforce it)
Three Day rescission period was not provided for clients who sign and loan funds on same day (non-purchase money loans)
Truth in Lending Statement does not accurately disclose the finance charges, APR, amount financed, or total of payments
What If I Have More Than One Lien Or Lender?
If you have more than one lien on your property, there are two scenarios that can occur: one bank owns both notes, or you have two different banks each owning a note. This is where things get more complicated.
If your notes are owned by the same bank, you are in the best position for a principal balance reduction. Your lender does not want to own your home and does not want to have non-performing assets on its books. By reducing your principal balance on the second lien, they can keep your loan in good standing and profitable. Most seconds are worthless in their eyes and it is possible to negotiate your second down to 10% of what you currently owe as long as you can prove that you can afford the payments on the first. IT IS VERY RARE THAT YOUR BANK WILL DISCOUNT BOTH THE FIRST AND SECOND MORTGAGES.
When your notes are owned by two different banks, Principal Balance Reductions can get difficult. When one bank owns both loans and realizes that it will be more profitable to discount the second to save the first, then it will make sense for them to do so. But when one bank owns just one note, and is in the 2nd lien position, they realize they are facing a total loss and might prefer to foreclose and just get the loan off their books instead of negotiate. This does not mean that it is not possible…just more difficult and drastic discounts typically do not occur. A good strategy is to try and get the first to absorb some of the loss in order to find a happy middle ground and convince both banks that this is the best course of action.
NOTE: The most difficult part of a Principal Balance Reduction is if your bank is just “Servicing” the loan and does not own the note. This is typical for many loans that were “Securitized” and sold to Wall Street. In many instances your lender wants to help you, however, they will have a fiduciary duty to the investors who purchased these Mortgage Backed Securities and not to you. Hiring professional help at this point if you really want a Principal Balance Reduction is recommended!
ONLY A FORENSIC LOAN AUDIT BY A QUALIFIED ATTORNEY WILL GIVE YOU THE LEGAL WEIGHT YOU WILL NEED TO ASK FOR ANYTHING OTHER THAN AN INTEREST RATE CHANGE! YOU NEED TO HIRE A COMPETENT ATTORNEY BACKED LOAN MODIFICATION COMPANY THAT CAN HELP YOU PACKAGE, PROPOSE, AND NEGOTIATE THE BEST LOAN MODIFICATION ON YOUR BEHALF! ADJUSTMYLOAN.COM WORKS WITH A QUALIFIED REAL ESTATE ATTORNEY THAT SPECIALIZES IN FORENSIC LOAN AUDITS. OUR PROFESSIONAL LOAN MODIFICATION NEGOTIATORS UTILIZE THE FINDINGS FROM THE FORENSIC LOAN AUDIT TO NEGOTIATE YOU THE LOWEST MONTHLY PAYMENT POSSIBLE! WE HAVE A GREAT TRACK RECORD OF GETTING PRINCIPAL BALANCE REDUCTIONS AND CAN HELP YOU MODIFY YOUR LOAN TODAY!
A DECEMBER 10TH, 2008 CNNMONEY.COM ARTICLE ON A CONTROVERSIAL FDIC LOAN MODIFICATION BILL GIVES OVER 1.5 MILLION HOMEOWNERS HOPE!
WOW, it’s about time the government started taking measures to ensure LOAN MODIFICTION PROGRAMS. A recent CNNMoney.com article talks about how FDIC chairwoman Sheila Blair’s LOAN MODIFICATION PLAN is getting some support from Democratic lawmakers. Even though the Bush administration is refusing to enact the bill, once the new Congress takes office next year, the bill should gain momentum! AdjustMyLoan.com obviously has been BIG proponents of government ensured LOAN MODIFICATION PROGRAMS because we believe the biggest hang up when negotiating LOAN MODIFICATIONS has always been the bottleneck that occurs when loan service providers have to ask investors (those that actually own the notes) permission to modify terms. In most instances your mortgage company doesn’t even own the loan they are servicing. Instead, your loan was packaged and sold on Wall Street as a Mortgage Backed Security. The problem occurs when you begin to default on your loan, need a LOAN MODIFICATION, and call your lender for help. They send you out some paperwork, and you fill it out immediately and send it back in. As the months pass you by, you become frustrated at how slow the process is and the lack of organization your lender displays. What you don’t know is that your lender has to ask the investor permission for the modification, and this is actually stalling the process. The investor has little incentive to modify the loan and would rather foreclose to write the bad loan off their books. With government backing, LOAN MODIFICATIONS should be an easier / faster decision, and many more homes can be saved. This is just the incentive the investor would need to choose LOAN MODIFICATION over FORECLOSURE! Below is some experts from the article that you should read:
Bair’s guarantee plan
With Treasury Secretary Henry Paulson giving little more than lip service to Bair’s plan, the chairman unveiled its details last month.
First, housing payments for delinquent borrowers two months or more late would be reduced to 31% of gross monthly income. To get there, mortgage rates could be set as low as 3% for five years, before increasing at an annual rate of 1 percentage point until they hit the prevailing market rate. Loan terms could be extended to as long as 40 years.
Each loan will be tested to see whether it is more beneficial to modify or to foreclose.
Second, to encourage servicers and investors to participate, the government would share up to 50% of the losses if a borrower who had been helped ended up in default anyway. The risk of re-default had been one obstacle to getting lenders on board with systematic modification plans. This guarantee takes the program a step further than what’s currently being done.
In addition, the FDIC would pay servicers who process mortgages $1,000 for each re-worked loan.
At a national housing forum this week, Bair reiterated how important it is to step up the pace of loan modifications. There are likely to be 2.25 million foreclosures by year’s end, Bair said, citing statistics from Federal Reserve Chairman Ben Bernanke. Usually, there are only 800,000 to one million.
“We are falling behind the curve,” Bair said. “We are way above where we need to be. There are a lot of unnecessary foreclosures going on that can be prevented through more aggressive loan modifications.”
Currently, we have been getting two type of modifications for our clients. Temporary LOAN MODIFICATIONS, and permanent LOAN MODIFICATIONS. Our temporary LOAN MODIFICATIONS typically place any arrears the homeowner has (missed payments and late fees) on the back side of the loan. A temporary interest rate of 2-3% is implemented for a period of 1-5 years. Our permanent LOAN MODIFICATIONSalso place any arrears on the back side of the loan and the homeowner receives a permanent interest rate of 5-5.5%. We have also been extending out the length of the loans as long as 40 years and getting PRINCIPAL BALANCE REDUCTIONS for those that have large second liens or PREDATORY LENDING VIOLATIONS on their loans. We have seen monthly payments drop anywhere from a few hundred dollars a month to over $1700 a month.
These are typical LOAN MODIFICATIONS we have done and are not guaranteed…(nor is there a promise to stop your foreclosure). Each homeowners situation is unique and our FREE LOAN MODIFICATION CONSULTATION reveal if you pre-qualify for any of our programs. DON’T WAIT UNTIL IT IS TOO LATE! DON’T WAIT FOR YOUR LENDER TO REACH OUT TO YOU. DON’T LET YOUR LENDER DICTATE THE TYPE OF MODIFICATION YOU RECIEVE. WE FIGHT FOR YOUR MODIFCATION AND GET YOU THE BEST LOAN MODIFCATION TERMS POSSIBLE! Our professional LOAN MODIFICATION NEGOTIATORS will audit, package, propose, and negotiate a LOAN MODIFICATION on your behalf. Visit our LOAN MODIFICATION WEBSITE or call us today.
Loan Modification Company AdjustMyLoan.com Investigates The 10 Ways To Stop Foreclosure!
In this post we are going to take a look at the different ways to Stop Foreclosure. We explain these options in order to give you a better understanding of your situation and show you how a Loan Modification by a qualified Loan Modification Company like AdjustMyLoan.com can help you Stop Foreclosure and stay in your home. Pay special attention to the first five options because these are your choices if you are trying to save your house. Understanding available solutions will help you formulate your plan giving you the best chance for a successful outcome. Remember, we are not giving you legal or tax advice and recommend you contact a professional to verify our information.
1. FORBEARANCE
“Forbearance” is an agreement with your bank/lender to Stop the Foreclosurein exchange for paying the overdue amount (called “arrearages”). The arrearagesare paid in either one lump sum, or a schedule of payments over a period of time (typically 6‐12 months). In some cases, your lender may even allow you to pay reduced monthly payments until you get back on your feet. More than likely, they will INCREASE your monthly payments to cover your owed arrears. Of course, your lender will only agree to forbearance if you can afford to resume your monthly payments. For example, if you got behind on your monthly payments because you lost your job, but were recently rehired, your lender might consider forbearance. Unfortunately, most homeowners Facing Foreclosure cannot come up with the money to make up back payments, nor can they afford higher monthly payments.
Bottom Line: To take advantage of this solution, you must be able to:
1. Pay the arrearages in a lump sum and be able to resume your monthly payments, or
2. Afford higher monthly payments (i.e. your original monthly mortgage payment plus a portion of the arrearages) until the arrears are paid off.
2. LOAN MODIFICATION
“Loan Modification” means changing the terms of your mortgage. (Also called “recasting” the mortgage.) For example, lowering the interest rate, increasing the loan amount, extending the amount of time you have to repay the loan, and/or other changes that your lender agrees to. A lender will typically consider a Loan Modification if you will be able to make your new mortgage payments after the change. For example, if you lost your job and got a lower paying job, your lender may lower your monthly payments, but increase the number of years you must pay your mortgage. There are temporary and permanent loan modifications and each lender will try and put you in a loan modification program that is in their best interest! Hiring a company like www.AdjustMyLoan.com will give you the professional representation you deserve so you receive the BEST LOAN MODIFICATION TERMS possible!
Bottom Line: To take advantage of this solution, you must be able to show your lender that you can afford the new monthly payments once the loan is modified.
ADJUSTMYLOAN.COM is a NATIONAL LOSS MITIGATION COMPANY based out of Phoenix, Arizona that specializes in LOAN MODIFICATIONS and forebearance agreements. Our professional staff is ready to help audit, package, propose, and negotiate a loan modification on your behalf. We offer FREE LOAN MODIFICATION CONSULTATIONS and DO NOT CHARGE ANY UPFRONT FEES for our LOAN MODIFICATION SERVICE. Call 1-800-557-7573 today and get the professional help you deserve.
3. FHA “Partial Claim” LOAN
If you have an FHA‐insured (Federal Housing Administration) loan, you may qualify for a one‐time “partial claim” loan. To qualify, our mortgage must be delinquent 4‐12 months and you must be able to resume full mortgage payments. When your lender files a “partial claim”, FHA/HUD (Housing and Urban Development) pays your mortgage current. However, in exchange for the “partial claim” loan, FHA/HUD puts a lien on your home and gives you an interest‐free loan that is due when your mortgage is pain in full (for example, after a refinance or when you sell your house). In other words, you have to eventually pay FHA/HUD back for the amount of money they paid your lender, but you don’t have to pay them back until you pay off your mortgage or sell your house. Visit www.hud.for more information.gov
Bottom Line: To take advantage of this solution, you must:
1. Have an FHA‐insured mortgage.
2. Not already have a “partial claim” loan from FHA/HUD.
3. Be delinquent at least 4 months, and no more than 12 months.
4. Show that you can afford to make the monthly payments in the future.
5. Remember that, sooner or later, you will have to pay back the amount of the “partial claim” loan.
4. REFINANCING YOUR MORTGAGE
“Refinancing” is when a lender (either your current lender or a new lender) gives you a new mortgage to replace your current mortgage. Of course, the new mortgage will likely be more than your current mortgage because the points, late payments, and other fees will be added to it. Unfortunately, most homeowners Facing Foreclosure cannot refinance because they do not have good credit or enough equity in their house. “Equity” is the difference between what your house is worth and the amount of the loans against it. For example, if your house is worth $300,000 and you owe $250,000 on a 1st mortgage and $15,000 on a 2nd mortgage, you have $35,000 in equity because $300,000 house value, less $250,000 representing the mortgage less $15,000 second mortgage = $35,000 equity.
Bottom Line: To take advantage of this solution, you must:
1. Have good credit and /or enough income to qualify for a new loan, and/or
2. Have a substantial amount of equity in your home; sufficient to meet the lender’s guidelines.
5. ANOTHER LOAN (i.e. 2nd mortgage, 3rd mortgage, etc.)
This is a new mortgage in addition to the mortgage(s) you already have on your house. The money from this loan is used to bring your mortgage current and stop the foreclosure. Unfortunately, the new loan will have a high interest rate (similar to most credit cards) and cost 5‐10 points. A “point” is 1% of the borrowed amount. For example, if you borrow $10,000, 10 points =$1,000. Also, since it’s another loan, keep in mind that you’ll have higher monthly payments. Beware of this trap, because if you cannot afford your current monthly payment(s), how will you afford higher monthly payments?
Bottom Line: To take advantage of this solution, you must:
1. Have a lot of equity in your house, and
2. Be able to afford the additional payment each month.
6. DEED‐IN‐LIEU OF FORECLOSURE (DIF)
A “Deed In Lieu Of Foreclosure” is when you voluntarily give your house back to your lender and move out. In exchange, the lender Stops the Foreclosure and agrees not to sue you for more money if the house is sold for less than the amount you owed. Since a DIF does not wipe out junior liens (i.e. 2nd mortgage or other liens), banks will usually not accept a DIF because they do not want to inherit the junior liens against the house. Also, you will not receive any money for your house when you use a DIF.
Bottom Line: In general, to take advantage of this solution, you must only have one mortgage. If you have a 2nd mortgage, 3rd mortgage, etc, most banks will not accept a DIF.
7. SELL YOUR HOUSE TO A REGULAR HOME BUYER
Unless your financial situation has improved, selling your house is one of the best -and in most cases, the only- way to stop the foreclosure. Although you probably want to stay in your house, the truth is that selling your house and moving is a lot less painful than Losing Your House To Foreclosure and having to move anyway. At least if you sell your home, it will be on your terms - not the lender’s -and your have a better chance of getting some cash out of your house. Plus, you’ll Stop the Foreclosure and save your credit. If you decide to sell your house to a regular home buyer, you can either try to sell it yourself or use a real estate agent. If you sell your house yourself, you’ll save money on real estate agent commissions. However, it will probably take longer to sell…time you don’t have. You will also have to spend time and money advertising andshowing the house to potential buyer. You will also have to understand how to write up a contract and where to go to complete the transaction (title agency). If you sell your house through a real estate agent, you’ll probably sell your house a lot quicker and probably at a higher price. But you’ll have to pay a commission to the agent (typically 6% which, on a $300,000 home is $18,000).
Bottom line: To take advantage of this solution, you must:
1. Have enough time (typically 3 ‐ 6 months, or more considering current market conditions) to find a qualified buyer and close escrow before the foreclosure auction.
2. Have enough equity to pay the real estate agent’s commissions (if you use an agent), and
3. Have enough time and money to perform all necessary repairs or you can sell the property as is for a lesser price.
8. SELL YOUR HOUSE TO AN INVESTOR
If you don’t have enough time to sell your house to a regular home buyer, don’t have enough equity to pay a real estate agent’s commissions, and/or don’t have the time or money to perform repairs, then selling to an investor is probably your best bet. An investor won’t pay full price for your house, but he/she can close quickly, pay you all cash, and buy your house in “as‐is” condition. This allows you to stop the foreclosure, save your credit, and get cash to move and/or pay other expenses and bills.
Warning: There are a lot of beginning investors out there who are not as experienced in this sort of situation. They may have good intentions but often will create a bigger disaster for your situation when time is of the essence is handling your matter. What you need now is an experienced team of professionals so if you choose this option, please call 602‐626‐3598.
Warning #2: Whatever you do, don’t let anyone talk you into paying for help without first verifying the person’s company and expertise! It is not likely that a paid, so‐called professional will be able to help you with your situation. Get all of the facts and check the Better Business Bureau before you do anything.
Bottom Line: To sell your property to an investor you must sell our house at a discount because the investor will have costs to fix your home to resell it. Just be sure to find a reputable company or investor that you know you can trust!
9. A SHORT SALE
A “Short Sale” is an agreement with your lender to accept less money than they’re owed as full payment for your loan. This solution often makes sense when you owe more than the property is worth. For example, if you owe $500,000 but your property is only worth $420,000, a short sale may be your only option. Rather than trying to negotiate a short sale yourself, call a professional who is experienced in negotiating with lenders. A short sale requires selling your property to an end buyer who will live there, or an investor who will Negotiate With Your Lender on your behalf. There are no guarantees that the lender will accept the short sale. Keep in mind that your bank does not want your house back! It is considered a non‐performing asset and they cannot have too many on their books! They want to work something out with you. As part of the short sale agreement, the lender prohibits you from receiving any proceeds from the sale. In other words, the investor cannot give you any money for your house.
Bottom Line: To take advantage of this solution, you should talk to an experienced Short Sale Negotiator. AdjustMyLoan.com has such professionals on its staff that can help you, however we only do Arizona Short Sales! Ask us for more information about your lender’s recourse on short sales. We have an informational report we can give you when we meet called How Property Owners in Foreclosure / Short Sale can avoid paying Taxes on 1099.
10. BANKRUPTCY
It is very important you understand how bankruptcy works and we suggest you meet with a bankruptcy attorney before considering this option. Many people use bankruptcy as a scare tactic. There are several different “chapters” of bankruptcy. Some are work‐out others are wipe‐out, but here is the general idea. When someone files bankruptcy it’s almost like someone builds a “bullet‐proof” barrier around the house. No one can touch you! However, you are not free of all responsibility and most people do not understand that. We are not bankruptcy attorneys, but you need to know the difference between a Chapter 7 and a Chapter 13 bankruptcy so you know what happens. Like we mentioned earlier, some bankruptcies are “work out” others are “wipe out“. The two that we will focus on are the Chapter 7 and Chapter 13. These are the most common in your situation. Chapter 7 is the “wipe out” and Chapter 13 is the “work out”. Bankruptcy is a federal court action designed to help individuals repays their debts or eliminate their debts depending on their circumstances. Chapter 13 bankruptcies are designed to reorganize debts in an effort to repay all debt. Chapter 7 bankruptcies are geared more towards liquidation of assets. Both Chapter 7 and Chapter 13 immediately stop the foreclosure process and any creditors from taking further action against you.
Here is how Chapter 7 works. When someone files a Chapter 7 bankruptcy, all assets and creditor collections are technically frozen which is called an automatic stay. The person filing bankruptcy cannot buy or sell anything, nor can they give away their property. If they try to sell their home, the court could order the receiving party to return it to the custody of the court appointed Trustee. Unsecured debts such as credit cards, unsecured loans, etc. are typically eliminated, although you should confer with your attorney on the rules regarding this. Then the trustee or attorney who represents the court and the creditors will look at all the assets (house, car, furniture, and equipment) a thing of value and decide what must be liquidated to pay some of the debt that was wiped out. The statute provides that there are some minimal assets a person filing bankruptcy may keep. If the homeowners are involved in a pending foreclosure, a Chapter 7 will Stop The Foreclosure Process temporarily. Usually, your lender will request the court appointed Trustee to release the property from the automatic stay so they may continue with the foreclosure process. Once the property has been released from the bankruptcy, the foreclosure process starts up again.
Chapter 13 is a little different. When someone files a Chapter 13, they usually keep their assets and repay their debts in a debt consolidation plan. Whatever amount is agreed upon has to be paid to the Bankruptcy Court every month for the next 3‐5 years. The homeowner usually keeps their house, car, and other assets. The homeowner is required to stay current with the mortgage payments and pays the amount agreed upon. If any payments are missed, the trustee will dismiss the bankruptcy and the foreclosure process will begin again. Bankruptcy is usually a last resort and should not be used to stop foreclosure unless you have no other option or else you need the protection of a bankruptcy due to other circumstances. If you feel this may be your best option, please seek legal advice.
Bottom Line: To take advantage of this solution you should consult an experienced bankruptcy attorney. We are not in the business of giving legal advice and in no way are we bankruptcy experts. This information is deemed reliable but no guarantees or warranties are expressed or implied!
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In a news story that first appeared on October 6th, 2008, Countrywide (owned by Bank of America) agreed (because of a lawsuit) to conduct one of the first widespread LOAN MODIFICATION PROGRAMS due to its PREDATORY LENDING practices! The COUNTRYWIDE LOAN MODIFICATION PROGRAMwould help up to 400,000 homeowners modify their current loan terms (interest rate reduction, principal balance reduction) in order to keep them out of foreclosure and in their houses. Their initial plan was to begin contacting homeowners who qualify through the mail in the beginning of 2009 and halted many of it’s foreclosures in the state of California where its PREDATORY LENDING PRACTICES ran rampant. There is also some relief ($150 Million) for those that qualify who already lost their homes to foreclosure and another $70 Million for those that foreclosure is their only option at this point! COUNTRYWIDE’S PREDATORY LENDING PRACTICES were no surprise to us at ADJUSTMYLOAN.COM and we were happy to hear the announcement of COUNTRYWIDE’S LOAN MODIFICATION PROGRAM.
Now, according to a new story that broke on December 2nd, 2008, some of the investors that purchased MORTGAGE BACKED SECURITIES on Wall Street are trying to put a halt to COUNTRYWIDE’S LOAN MODIFICATION PROGRAM with a lawsuit stating that these “forced LOAN MODIFICATIONS” are a violation to their servicing agreement between Countrywide and themselves. Vague contract terms are at the heart of the new lawsuit and both Bank of America, many U.S. Congress / Government officials, and many homeowners are appalled that hedge fund’s might stop these LOAN MODIFICATIONSfrom happening! Below is the entire story from HousingWire.com that we wanted you to read:
A predatory-lending settlement that will see Countrywide modify as many as 400,000 loans, reducing payments due on mortgages it services by as much as $8.4 billion, has led a group of investors to sue Bank of America Corp. and Countrywide. In a complaint filed Monday morning by the New York-based law firm of Grais & Ellsworth LLP, investors say the language in their contracts require the Calabasas, Calif.-based servicer to purchase all modified loans out of affected securitization trusts. Countrywide has said it does not believe it is required to do so.
The case highlights the investor pushback often involved in implementing massive loan modifications, as well as the surprisingly vague language that was used in some critical contracts that guide the management of hundreds of billions of dollars’ worth of mortgages sent through the securitization process and into the capital markets.
Countrywide first announced the loan modification program on Oct. 6, as part of a settlement with 15 different state Attorneys General that had sued the lender over predatory lending charges. Officials at Countrywide have insisted for months that their pooling and servicing agreements allow for loan modifications without repurchase obligations, when such modifications are done to prevent a borrower default. Only recently, however, have investor prospectus’ added language making that right explicit.
Two reasons to modify, but vague contract terms
At issue here is a distinction between “retention modifications” and “distressed modifications” — something that HousingWire’s sources said has only become clear as the number of troubled borrowers has grown. Most of Countrywide’s pooling and servicing agreements that govern loans it securitized through early 2007 specify that any loan modifications it wishes to perform require it to purchase the loan from the trust fund at par value, plus accrued and unpaid interest.
Every one of the PSAs tied to various issuances named in the lawsuit — 371 of them in all — contains similar repurchase language, which suggest any and all modifications entail Countrywide’s purchasing the loan out of the relevant securitization trust. And the reason for this language is simple: prior to the housing mess, so-called “retention mods” were commonplace, with borrowers actively refinancing their loans to obtain a lower interest rate.
The language was innocuous enough: anytime a loan was prepaid because a borrower refinanced, the terms of the buyout were specified in the contract, whether the borrower refinanced through another lender or whether the servicer actively encouraged the borrower to modify the loan directly in order to retain the servicing income stream. From the investor’s viewpoint, the repurchase language meant that the source of prepayment on an existing loan — whether servicer-initiated or via another third-party — was irrelevant. The investor would receive par plus accrued interest.
Not exactly rocket science.
The problem is that the language used in the various PSAs in question, until very recently, never spelled out how to handle so-called “distressed mods” — modifications to loans for borrowers who cannot afford their mortgages. Back in 2005, that wasn’t a problem. It is now, of course.
Greenwich Financial alleges in its complaint that the language of the contracts on key Countrywide securitizations specified exactly how allmodifications should be handled, while Countrywide is taking the tack that the purchase clause in its PSAs applies only to “retention mods,” and that the intent of its initial contracts always allowed it to modify loans to prevent borrower defaults without triggering the purchase clause.
Officials at BofA and Countrywide said that the case “represents an unlawful effort to assert the rights of the trusts” and that the company was “disappointed in this attack on a program intended to keep as many as 400,000 at-risk families in their homes.”
That said, Countrywide’s actions last year suggest there was at least some level of concern with previous contractual terms governing its securitizations. Early last year, Countrywide began adding explicit language to its PSAs that explicitly spell out its rights involving distressed mortgage modifications.
“The master servicer may agree to modifications of a mortgage loan, including reductions in the related mortgage rate, if, among other things, it would be consistent with the customary and usual standards of practice of prudent mortgage loan servicers. Such modifications may occur in connection with workouts involving delinquent mortgage loans. Countrywide Home Loans is not obligated to purchase any such modified mortgage loans,” a clause in a more recent Countrywide-led securitization, CWABS 2007-8, reads. The clause does not appear in earlier prospectus statements from the firm covering earlier deals.
In August of last year, Countrywide officials told the New York Times that the change in language was made “to clarify the original intent of the agreements.”
The question, of course, is whether the court will buy the unspecified and disputed “intent” of previous PSAs, or what was actually written and committed to record.
Harm to investors
The lawsuit seeks putative class action status, but the lead plaintiff at this point is Connecticut–based Greenwich Financial Services; CEO William Frey has been a vocal opponent of mass loan modifications that he says violate the contractual terms he and other investors originally agreed to.
He made headlines in late October by voicing a dissent to the mass loan modification programs being rolled out by key lenders, including Countrywide — a move that drew sharp criticism from lawmakers, including House Financial Services Committeechair Barney Frank (D-MA) for impacting the ability of servicers to funnel loans into the recently-enacted Hope for Homeowners refinancing program.
“We were outraged to read that two hedge funds, Greenwich Financial Services and Braddock Financial Corporation, are instructing the servicers of their mortgages to defy this national program and to insist on further socially and economically damaging foreclosures,” said Frank in a hearing last month. “We believe the law clearly allows for modification where such changes would involve a lesser loss than foreclosure, and the benefits to the whole economy of such an approach are obvious.”
Despite admonishment from legislators, Frey and other investors clearly believe the law rests on their side. Sources suggest the lawsuit is designed to more generally test the sanctity of contractual terms and clarify what are currently vague contractual rights assigned to investors. While the lawsuit names 371 different securitizations, Frey’s fund holds certificates in only one: CWALT 2005-36. The other securities named in the lawsuit, however, contain similarly vague language surrounding the rights of investors in distressed loan modification scenarios.
The complaint acknowledges that a question of law and a “justiciable controversy” exists over investors’ rights in Countrywide loan modifications, and seeks a declatory judgment from the court specifying that the lender/servicer must purchase all loans that it modifies at par. “The resolution of this controversy by a declatory judgment will materially affect the value of certificates owned by plaintiffs and members of the class on whose behalf plaintiffs bring this action,” the complaint reads.
Legal experts said the case will prove to be a strong litmus test for investors and for contractual rights in general. “It’s really amazing to think that Countrywide left this sort of ‘hanging chad’ in its PSAs,” said one legal expert, who asked not to be named in this story. “It’s really going to be interesting to see how this plays out.”
Disclosure: The author held no relevant investment positions when this story was published. Indirect holdings may exist via mutual fund investments. HW reporters and writers follow a strict disclosure policy, the first in the mortgage trade.
This story is yet to unfold, however, AdjustMyLoan.com has recruited ex-Countrywide LOAN MODIFICATION negotiators to work with us. We have a detailed understanding of how their loss mitigation process works, how LOAN MODIFICATIONS get approved, what are Countrywide’s LOAN MODIFICATIONpittfalls to avoid, and best of all, Countrywide LOAN MODIFICATION contacts that can help us get the job done. This is not an elevator pitch…we really do have ex-Countrywide Loss Mitigation employees that now work full time with us negotiating LOAN MODIFICATIONS.
AdjustMyLoan.com is a nationwide LOAN MODIFICATION COMPANY based out of Phoenix, Arizona that can help you lower your monthly mortgage payment with a LOAN MODIFICATION. We have a huge staff of LOAN MODIFICATION EXPERTS consisting of LOAN MODIFICATION NEGOTIATORS, processors, a paralegal, customer relationship managers, and compliance officers. We also utilize a trained real estate Attorney to conduct FORENSIC LOAN AUDITS on all qualified files to find any PREDATORY LENDING VIOLATIONS created during loan origination. We then use any found violations in our negotiations to get you the best loan terms possible. We offer FREE LOAN MODIFICATION CONSULTATIONS and charge NO UPFRONT FEE’S for us to package and propose your LOAN MOD. Call us today for your free pre-qualification consultation.
Below is an article I found in the Washington Post written by Jack Guttentag (Mortgage Professor) a finance professor at the Wharton School of Business in Pennsylvania. It is an older article, but it hits the LOAN MODIFICATION nail on the head talking about how most loan companies are actually servicing the notes for investors on Wall Street. Getting an approval on a LOAN MODIFICATIONcan be difficult because these servicers have a fiduciary duty to protect the investor, not the homeowner, and this is where frustration can cause failure when trying to negotiate your own LOAN MODIFICATION. The main point we want you to walk away with after reading this article is that persistence is the key when dealing with your lenders home retention department whether or not they actually own the loan or just servicing it. If you remove all emotion and negotiate strictly from a business position, and you show the bank that by accepting your LOAN MODIFICAITON PROPOSAL it will net more money than if it forecloses, you will have a real chance at getting your LOAN MODIFICAITON accepted!
At the time this article was published (Oct. 20th, 2007) LOAN MODIFICATIONS were not at common as they are today! Many major lenders are jumping on the LOAN MODIFICATION bandwaggon and trying to offer solutions to keep homeowners falling behind on their payments in their houses. At AdjustMyLoan.com, we believe that this LOAN MODIFICATION evolution will continue and more and more banks will create their own LOAN MODIFICATION PROGRAMS.
A LOAN MODIFICATION is a change in the loan contract agreed to by the lender and the borrower. The modifications getting attention now are those designed to reduce the payment burden on borrowers faced with impending interest rate increases that will make monthly payments unaffordable to them. Many are sub-prime borrowers.
Homeowners faced with this prospect, whether they are delinquent or not, should request a modification.
You are unlikely to get such a change if you don’t ask, and you should make the investment required to make the case. The stakes are very high: your house and your credit.
In most cases, the decision on a modification is not made by the firm that owns the loan. It is made by a firm servicing the loan under contract to the owner. The owner could be a single lender, or it could be a group of investors who own pieces of a mortgage-backed security collateralized by a pool of loans.
Whoever owns the loan, the servicing firm is contractually obligated to find the solution to payment problems that will minimize loss to the owner. If the lowest-cost solution is a contract modification, that’s great — everyone involved prefers a modification instead of a foreclosure. But if a foreclosure would generate lower costs for the owner, the decision will be to foreclose. The cost of foreclosure to the borrower does not enter the decision.
Yet the decision is far from cut and dried, and it can be materially affected by whether and how the borrower presents his case. I discussed this issue with Warren Brasch, a lawyer who represents borrowers seeking loan modifications. Our combined observations:
Equity: Perhaps the most important factor affecting the modification decision is the amount of equity the borrower has in the property. If the borrower has enough equity in the property to pay any deferred interest plus foreclosure expenses, foreclosure is almost bound to be the lower-cost solution.
Equity depends on property value, which the borrower is much better positioned to know than the servicer. The borrower knows or can easily find out how many houses in the neighborhood are for sale and what the trend has been in recent sale prices. In a weakening market, it is easy for the lender to overestimate value, and the borrower must prevent that.
Moral hazard: Servicers fear that if they are liberal in granting modifications, borrowers who don’t need a modification will seek one anyway. They protect themselves against this by entertaining modification proposals on a case-by-case basis, while placing the burden of proof on the borrower.
Borrowers must accept the burden of proof. In addition to the data on property value, they need to document that they cannot afford the payment increase that is pending, and they must document what they can afford.
To do so, borrowers should calculate their total debt ratio: the sum of mortgage payment, other debt payments, property taxes and homeowner’s insurance as a percent of their gross (before tax) income.
This number should be calculated as it stands now and as it would be after the rate adjustment. It should also be calculated to demonstrate what the borrower can afford. On the last, Brasch suggests that a servicer may be willing to accept 45 percent as a reasonable maximum.
Servicing cost:Servicers have an interest in minimizing modifications because they add to costs. They try to keep costs down by computerizing the servicing process to the greatest degree possible and standardizing customer support procedures so that low-paid and easily trained employees can perform them.
Modifications must be handled by a special group who are more highly trained and better-paid, and the increased cost of expanding their number cuts into the bottom line. Hence, there is a tendency to be non-responsive in the hope that the borrower will go away.
Borrowers have to be persistent. Brasch said: “If a servicer says they will call you back . . . forget about it. You need to call them and call them constantly. They will lose your paperwork, fail to return calls, put you on hold and then hang up. It’s what they do. Keep fighting, calling, faxing. This does work!”
In deciding whether a modification would be less costly than a foreclosure, servicers usually ignore an asset possessed by the borrower that could tilt the balance toward modification. This is the right to future appreciation in the value of the borrower’s house.
In exchange for a modification that might otherwise be more costly to the owner than a foreclosure, the borrower could pledge a percent of the future appreciation, which could shift the balance to modification.
Jack Guttentag is professor of finance emeritus at the Wharton School of the University of Pennsylvania.
If you are a homeowner facing foreclosure an searching for a solution to save your home, there are options available to you. A loan modification is a way to renegotiate your current loan terms, adjusting your interest rate, principal amount owed, or length of loan in order to lower your monthly payments. A lender is willing to do a LOAN MODIFICATION because it is a cheaper alternative than foreclosure.
As great of a solution a loan modification is, there are many “fly by night foreclosure rescue” companies out there looking to take advantage of your situation! BEWARE OF THE FOLLOWING LOAN MODIFICATION SCAM.
LARGE UPFRONT FEE SCAM:
These scams typically start by either a phone call, or an “official” looking document that uses scare tactics to get the homeowner all worked up about losing their home. Then, they offer a loan modification stating that it takes anywhere from 2-10 weeks to complete. They then charge a large upfront fee (typically $3000 - $7000) and promise to have a 98% success rate. They state that they have been helping homeowners for years and only they can help you. They offer a 100% money back guarantee if your not satisfied. This sounds good so you decide that you will do anything to save your home and pay. Once your money is collected upfront, in many instances you loan never gets modified. After some time the homeowner gets curious as to why they have not heard from the company or individual with an update. They start investigating and realize that the company does not have a physical address, nor will return their phone calls or money. The company or individual uses excuses such as “the homeowner never provided all the documentation needed” to get away with not doing any work. At the end of the day, the homeowner looses their home to foreclosure because it is typically too late by the time the realize they were scammed!
WHAT YOU NEED TO DO TO PROTECT YOURSELF:
MAKE SURE THE PERSON YOU ARE DEALING WITH HAS A PHYSICAL BUSINESS ADDRESS AND BUSINESS PHONE NUMBER.
MAKE SURE THE COMPANY YOU ARE DEALING WITH IS A MEMBER OF THE BBB
DO NOT PAY A LARGE UPFRONT FEE…A SMALL FEE IS OKAY BUT YOU SHOULD NOT HAVE TO PAY UNLESS THE LOAN MODIFICATION IS SUCCESSFULL.
MAKE SURE THE COMPANY YOU ARE USING HAS AN ONLINE TRACKING SYSTEM SO YOU CAN SEE THE PROGRESS OF YOUR LOAN MODIFICATION AT ALL TIMES
MAKE SURE YOU MEET THE COMPANY AT THEIR OFFICE AND SEE THAT THEY ARE CONDUCTING BUSINESS (GET TO KNOW THE COMPANY)
GET REFERRALS AND TESTIMONIALS TO VERIFY COMPANIES HISTORY
GET COPIES OF ALL PAPERWORK THAT OUTLINES THE BUSINESS RELATIONSHIP
Our “Worry Free Guarantee” provides you peace of mind when you need it most. WE ARE NOT A FORECLOSURE BAILOUT COMPANY! We are an PROFESSIONAL LOAN MODIFICATION COMPANY that specializes in loan modifications and short sales. Our expert loan modification negotiators will pre-qualify, package, propose, and negotiate a LOAN MODIFICATION on your behalf! We pride ourselves on being members of the BBB and in good standing. That we put all of our promises and guarantees in writing and have a 3 day rescission period in case you change your mind. That we have many referrals and testimonials. That we are located in downtown Phoenix, Arizona in a state of the art building that we own! THAT WE CHARGE NO UPFRONT FEE’S FOR OUR LOAN MODIFICATION SERVICE! Lastly, that we have an online tracking system that updates you on your loan modifications progress. We have spent hundreds of thousands of dollars building our company and advertising so we can help as many homeowners avoid foreclosure and stay in their homes. Our commitment to getting the job done and conducting business with honor and integrity is displayed to you from the second that you call! LOAN MODIFICATION INFORMATION
