Do you want to hear from an expert in the field that your lender loves you? You believe it so I am going to reinforce it by telling you that they certainly do.  They love you more than you can imagine and they want to keep loving you until you run out of money.  Let’s go for a ride on a Loan Modification so I can illustrate the love and kindness from your lender and others in the market that would love you help you on the train for some money.  No money and the train ride ends unpleasantly.

 

First I want to state a couple embarrassing public statistics regarding Loan Modifications and failed government programs.  The statistics that came out in recent weeks for the governments 75 Billion Save The World Program were laughable.  One Million people were supposed to be eligible for loan modifications.  We are talking about a government subsidized program.  It turns out that only 30,000 people received short term solutions.  Keep in mind that the statistics since 2007 show that a very high percentage of completed loan modifications fail and the people end back up in default.  The notion of “here is a couple hundo off your payment and you should like it and deal with it” is a tough sell when you have to still make the high payment and you’re a couple hundred thousand under on your property value relative you’re your mortgage debt. 

 

What is a Loan Modification to your lender?  I am going to give it to you straight right in your ear whether you want to listen or not.  This is your problem and if you don’t listen you will more than likely end up where a client of mine did in the example below.  A Loan Modification is an opportunity for your lender to capitalize on your moral character.  We all want to do the right thing…right?  Sure we do as long as we are being treated fairly.  Moral character will bury you.  Your lender is going to pledge to you that you are eligible for a Loan Modification and ask you to send in all your financial information.  Keep in mind they love you so they want to do only what is best for you at all times.  What happens once they get all your paystubs, bank statements, etc?  Now is when they peer into your personal finances an attempt to get your money.  Absurd right?  I am the traitor now right!  How could I suggest such a thing from your lender?  Oh My…save it the truth sucks. They pump you up with false hope and prophecy of your ultimate eligibility.  Eligibility for what?  Oh, you mean the payment that you can now afford and the potential for forgiven debt and keeping the house.  Wrong!  You will end up with a couple hundred bucks off the payment with all the expenses and curtailment added to the back of your mortgage note.  In the process over several months with much frustration many of you will go broke and capitulate your savings and safe money to you lender on the basis of wanting to do the right thing.  Then you will wake up and realize you have been had with an ultimatum of pay or foreclosure.  Eventually you will find a Short Sale is the only fair remedy to your problem.  Let’s not jump the gun.  Let’s see what a recent new client had to say about their personal loan modification experience.

 

A family was referred to my team from a recent happy customer where we completed a Real Estate Short Sale.  These new clients had just been through and experience that I would classify as “Feudal”. The spend ten months trying to get a loan modification with the help of an attorney.  An attorney…Wow!  How cool would it be to be an attorney? That must be a person with extreme intelligence and the utmost care and consideration for all people in distress.  Well I will let you decide.  This attorney took $3,800 from this family and failed miserably and was eventually never heard from.  The clients ended up after ten months getting their own loan modification that consisted of an unaffordable couple “hundo” off of a 4K monthly payment.  It gets better.  The attorney that took their money didn’t even give them an objective time line to switch gears if things weren’t progressing according to plan with their loan modification.  How about if in 90-120 days it is not working out then we need to investigate a Short Sale.  How about some advice on preservation of assets and exercising the caution not to dissipate all your assets and saving to your lender in the interim of the process.  The attorney provided no guidance but he did cash their check.  He was stellar when it came to the check cashing exercise. 

 

Where are these people now?  Great question.  They are clients of mine fully engaged in a Real Estate Short Sale.  The bad news is that they have had a recent reality check.  The attorney fleeced them and their lender pumped them up to a point that they capitulated all their saving and retirement to the cause.  Yes “the cause”. They got on the Choo Choo and now it came to a sudden stop and they have to get off.  I am actually not sure if the train even stopped but I do know when they showed up for help they definitely had to get off the train.

 

We all want to do the right thing as long as it is fair.  It obviously is not fair and your lender has you in their sights.  You are being targeted for the funds that can be recovered.  Legally without a better solution you do owe the money so the lender can do anything to you including outright lie if that helps with recovery.  They are not being supervised and you owe them money.  What happens when you cannot comply with the paltry loan modification and you are living paycheck to paycheck?  That is when the lender lowers the boom on you as they did with these clients.  They tell you that you either make the modified payment now or they will foreclose on you within 10 days.  Shocker isn’t it?  If you don’t want to believe this or hear such a story from me then that is fine.  I suggest you go for the Loan Modification and then call me with your sad story to sign up for the Short Sale.  It’s a personal choice.  If you come to me early before you have gotten taken, i.e., before you are broke, then you will not be broke.  These clients have three children.  While I am clearly disgusted by what is going on the only thing I can do with my team is steer you to the fair solution with a Short Sale.   Wake up America.  Sometimes when kids are involved I come real close to yelling at my clients when I hear such stories.  Everyday is like a broken record with the Loan Modification stories.

 

I want to give you another example from a phone call from yesterday that I received from an existing client.  He had read that Bank of America was going to come out with a new Loan Modification initiative that he believed would make him eligible for 30% debt forgiveness of the existing principle on his two loans and the perfect payment.  I gave him a nice “HELLO” on the phone.  You mean Bank of America that was recently criticized by the government for being one of the worst lenders involved in their failed 75 Billion dollar subsidized program is going to be the front runner with Loan Modifications that entail 25-30% of principle debt forgiveness for YOU? 

 

That would mean that the US Treasury Department is going to have to require that all financial institutions to write down their loan portfolios another 30% and plan on conveniently doing it next year again just to satisfy the people.  The mortgage debt is bound by contract law with the investors that own the actual mortgage paper behind the large servicers. The visions of grandeur with holy debt forgiveness are never going to happen.  How about all the other great programs from the government and the threat to change the bankruptcy laws to coerce the lenders into helping with loan modifications from 08 & 09?  Failed!  They don’t work for the masses. Get smart or go broke, your choice.

 

Let me elaborate more on the motivations of the banks and large lenders as I see it.

When are people going to understand the Band-Aid concept?  The concept of a Band-Aid is to delay the process or otherwise drag it out. Literally put a Band-Aid on it.   If a lender like BAC can drag out the problem and recovers more money through the loan modification process I described above in conjunction with billions in new earnings to offset current additions to loan loss reserves then they win.  Look at it this way.  If all the defaults are realized today and they hypothetically equate to 12 billion but the bank only reserved 10 billion then Wall Street doesn’t bless this and the stock goes down.  Ouch!  We wouldn’t want that to happen.  Given the bank has already recapitalized and for the most part has already reserved against the majority of its real estate losses, wouldn’t it be more financially sound to take the mortgagors down for as much money as possible while delaying the process.  That means that in the public eye the can reserve 10 billion per quarter for loan loss reserves and come in with a controlled loan loss contribution at or below that figure while the work their lawful recovery efforts on you.  Now that is how to run a business and Wall Street likes that very much. 

 

That’s were we are folks.  Its capitalism and if you owe one of these goliaths money you better get a real plan before they take advantage of you.  The bulls eye is on your head and the Choo Choo Train doesn’t rest.  Maybe this blog will set you straight and you can solve your problem with a Short Sale and still be in good financial shape.  This is why I am writing to all those that will listen.  Go to my home page at www.thenegotiatedsolution.com and sign up for our FREE two hour video “The Negotiated Solution” and learn about the Short Sale.   

 

I hear sad stories every week from good people that got hurt really badly by either doing nothing or believing in the loan modification process.  It doesn’t have to be you!  I guarantee your time will not be wasted investigating a Short Sale. The Short Sale Solution done property where it entails Credit Strategy, Asset Preservation, Property Disposal, and Mitigation of the unpaid Residual Mortgage Debt is the only way to keep it fair and get the most out of the solution.   

 

Blogging from the front line of the Real Estate Crisis.

 

GHunter

Everyone has heard about the newest Obama backed program to help homeowners.  I am not questioning this program or its message.  I think this program has practical application to serve many distressed homeowners in contrast to past programs from 2007 that were almost complete failures.  The judgment that dictates success vs. failure is gauged by the programs ability to help people stay in there homes with an intermediate to long term solution.  I want to focus on the new message with a serious warning to unsuspecting homeowners.

 

The object to keep everyone in their homes that wish to stay is a good one but we need to drill down on the methods of the lenders that are separate from the voice of our government.  This is the key.  Caveat Emptor or buyer beware also applies to the unsuspecting homeowner.  Read on and decide for yourself who is on your side. 

 

When you call your lender with a mortgage problem, a question when you are minorly delinquent, etc. you will many times hear this new message:

 

The government and the lender want you to know that many people are being prayed upon with loan modifications and the likes.  Anyone requesting money up front or giving you guidance not to make your mortgage payment is suspect and looked upon as a fraudster. 

 

In other words, steer clear of these groups and individuals, because we are your lender and your friend.  We obviously have your best interest at heart.  You are our customer.  Ok, sounds great doesn’t it.  In the real world there certainly are crooks that will take your money and do nothing for you.  Keep in mind not everyone is a crook and that you may need professional help with a Loan Modification of Short Sale to avoid much more serious consequences.  At this point I am going to completely refrain from voicing my opinion on the subject of this message as being “Truth or Deceit”.  I am going to give you a real life example so you can come to your own conclusion.

 

Last week a guy came buy my house to do some work on my pool.  I was ordering a safety cover out of concern for my family and neighborhood kids.  I expressed my strong desire to ensure that the pool was a safe place. I don’t want anyone to drown on my watch.  This guys name was Dave.  Dave said he completely understood.  Somehow the conversation went to his family.  He said he had seven kids.  We laughed.  I asked him if he was Catholic.  He said no but he had it all figured out.  Apparently every time he would bring up the subject with his wife about going back to work she would end up pregnant with another.  We laughed again.  He acknowledged he was truly blessed with a family.  Then out of nowhere he made a profound statement.  He said,  “I have a great family but no money” .  We started talking and it ended up he was completely broke and living hand to mouth with a monthly subsidy from his brother.  He went from laugher to a stressed out soul and he was dying to tell me his story.  I was drinking my coffee and I had time to kill early in the morning.  Here is his story:

 

He had a property he lost to foreclosure over a year ago.  It was an investment property.  He lost this property to save his new primary residence where he and his family lived.  Around the same time he lost this property he applied to his lender for a Loan Modification.  They told him he was eligible. Keep in mind this was about a year and a few months ago.  As part of the eligibility he obviously had to jump through some lender paperwork and compliance hoops.  We have all heard of those.  He ended up going through a forbearance period.  In the end he did obtain a Loan Modification.  An approximate $3.000 monthly mortgage payment was reduced by a net of $60 per month.  Congrats, right?  Wrong.  In the process the lender played this family’s good moral character to the poor house.  Over the term all of their savings and retirement accounts were slowly and voluntarily sucked into the lenders grasp.  The $60 solution was hardly a solution at all. This guy has been getting a $900 per month subsidy from his brother every month over the past year just to survive.  He is now totally broke with nothing but a paycheck.  He literally has nothing.  Is this in your judgment part of the plan by the lenders to get their money back or really part of the solution and our government’s intentions for the public? 

 

Frankly this is the scam that the lenders are pulling on people nationwide.  Don’t seek help from someone that will represent you and level the playing field to keep it fair.  This is our mission statement.  Your lender wants to keep it fair for you.  After they are done with you and you are flat broke what do you think happens?  The story continues:

 

I told him the only thing he could do at this point was to call and try to seek a remedy from the newest Obama plan.  He told me that he was ashamed to have to take money form his bother every month.  He put his head down almost to sob.  This is the part of this crisis that I hate.  The human toll is terrible.  I told him he should be grateful to have such a brother and that if his brother had money he surely couldn’t take it with him.  That made him feel better.  I gave him my personal contact information and told him to follow up with me after he contact his lender.  He called me two days later with the results. His lender said he made $48 too little to qualify for any of the plans and that his investor was a private lender.  They then went on to inform him that they only offer one Loan Modification per loan over the life of the loan.  It is blatantly obviously to everyone reading this blog that a reduction of $60 per month for a family of seven children after you have taken all their verifiable savings over the course is a disgrace.  Then they apparently exposed the evidence of deceit in a final blow.  They told Dave that at this juncture that if he did not make his payments they were going to foreclosure on him and he would have to vacate his home. That was it.  Unfortunately this is verifiably happening to many unsuspecting people.

 

Now, as an expert in the field with twenty years of extensive lending experience, I am going to give it to you straight whether you want to hear it or not.  Here is how the game is played.  If the lender can string the process out and get all of your money in the process it actually doesn’t hurt them, rather it helps them.  These loans are already the majority reserved for losses on their books.  All the write offers were taken in the past year during the crisis.  The lenders were required to reserve and increase capital to satisfy the government and the markets.  Now they are in the recovery mode and you may owe them money.  They don’t have rights to your retirement accounts and every nickel you have unless you capitulate it to them. 

 

The moral here is don’t trust your lender nor your government.  The government has saved the free markets and the financial system.  As I have said before, you are on your own.  No one has to end up destitute and in despair as Dave has in this example.  This does not have to happen and it doesn’t happen to any of our clients. Nobody that I represent or give advice to will go down this path.  I am passionate about this statement as my next blog is going to illustrate with three very recent examples of what I call Grand Slam Home Runs with Short Sales.  I am going to give you play by play examples of three people in very difficult situations that walked away from $630K, 390K and $285K respectively while not going broke and at the same time providing a real solution to their lenders.  All of the advice and time I spent with Dave was free and much of what we offer is free.  All you have to do is get motivated to help yourself.  Start today.  Investigate a Real Estate Short Sale at www.thenegotiatedsolution.com .  Sign up for the 2 hour video.  The cost is nothing but your time.  We designed this program to separate our team from the crooks and fraudsters on the basis of quality and credibility.  No money, no credit cards input, only your time and desire to help yourself. We help the people level the playing field, keep it fair, and win! Caveat Emptor to the homeowner!

 

GHunter, Blogging from the front line of the housing crisis.

Do you think your lender loves you?  Well maybe this blog entry will help you understand the reality around Loan Modifications.  In November 2008 I wrote a blog on Sheila Bair, the Head of the FDIC, and that fact that she had stated on CNBC that they had taken over Indy Mac and were large and in charge in their governance over the failed institution.  As a matter of fact she said explicitly that Indy Mac had a program that was very fair for Loan Modifications.  They based the new payments for modification purposes on 38% debt to income.  Mrs. Bair was utterly disgusted at the state of Loan Modifications on the part of all lenders at the time and implied that with the FDIC in charge they had a great program.

 

Well, so much for cable television interviews.  Her interview was excellent and what she said got my attention.  We actually decided to help select individuals with Indy Mac with Loan Modifications.  I would like to tell you about a recent experience on the part of one of our clients.

 

The client had a job and had tried for three months with Indy Mac to obtain a loan modification to no avail.  We decided to give it a try because he was gainfully employed and the numbers just made sense for a Loan Modification to avoid foreclosure and keep this homeowner in the home.  After all his primary objective was to stay in the home and the loan program was the nastiest of all, a negative amortizing arm.  This type of loan make the lenders look like predators so we felt this would be the added incentive to make this work for our client.

 

We started out with our standard proposal and demand letters as negotiators and licensed attorneys.  The one thing we added to the equation was the optional backstop of a short sale if our client was not completely satisfied with the terms of the Loan Modification.  Our demand letters demonstrated our clients desire to stay in the home and also exposed the risk of a $200,000 loss that we were prepared to put right up the pipes of Indy Mac with a Short Sale if they did not treat our client fairly.

 

Four months went by and Indy Mac was in a complete state of chaos.  Hey Sheila, who the hell did you put in charge of that zoo anyway?  Did you bring back the CEO with messed up teeth that ran the company completely into the ground?  I wasn’t sure but my client had had enough after four months.  We decided it was time to switch gears and go with the Short Sale.

 

At this interval we collectively had given up hope of any prospects of a successful loan modification even though our client was a dead ringer for the program as described on national cable television (11-18-08) by Sheila Bair, Head of the FDIC.  We put the property on the market and obtain a contact within ten days.  We then immediately submitted our short sale proposal.  Now what do you think happened?

 

Within thirty days as we are steamrolling along at putting the $200,000 loss to the Einstein at Indy my client gets a letter in the mail.  Low and behold it’s an approval for his Loan Modification.  The terms were spot on.  The client was elated.  This was the first trust letter.  The second trust letter we later discovered got lost at Indy but was on its way.  My client decided that he wanted to cancel the short sale.  He was very happy with the terms and he really wanted to keep the house.  For me and my team that was a win.  What else can you ask for in this real estate crisis other than a very happy customer?

 

We cancelled the short sale and the client mailed his May payment in to the Great Halls of Indy Mac.   Remember the terms were very fair and the client had this agreement in writing from Indy Mac.  Indy Mac cashed his check just like they should.  Are you ready for what happened next?  Indy Mac sent him another letter.  I am going to cut and paste the email from my client so you can see it in his words:

 

Email subject line:  Loan modification denied!!!!

 

George,I’m officially freaking out now!

I thought the modification on the first loan was going to take place but I received a letter tonight saying that “Based on the information submitted in my financial package, the present status of my loan and/or other specific criteria regarding your loan, we cannot accommodate your request for a loan modification.” Of course they cashed the $1,200.00 check that I sent them, but denied my loan.

What do I do now? All of my roommates have moved out and I was planning on staying here for the long term.

Please advise…

 

 

I received this email about 9 pm last Thursday.  The client was flipping out.  I started to laugh because it was kind of funny.  I emailed him that we would work it out in the morning with the hopes that after thirty days with an approval I am sure it must just be a mistake.  It turns out there was no mistake.  My client and I laughed together.  After he was done ranting that cursing like a sailor it was just funny how nuts things are with these lenders. 

 

The story has a great ending.  We started the short sale back up and the homeowner’s is very content.  He is done with Indy Mac and he now has the mindset that the only fair approach for him is the short sale.

 

You make the call on the Short Sale.  I have always taken the position that Loan Modifications were for beggars and solutions that revolved around Short Sales were for winners.  Investigate our 2 hour video free trial at www.thenegotiatedsolution.com and investigate the short sale solution for yourself.  Heaven or Hell on earth is a personal choice. 

 

Blogging from the front line of the housing crisis.

 

GHunter

I have had so many people call me with terrible Loan Modification stories.  Many of them have exhausted their efforts and become short sale clients.  Today I would like to ask the people to call or email some of the good stories on Loan Modifications.  I can tell you lots of good stories about happy families with Short Sales.  Let’s get the email and phones going with maybe just a few good stories of loan modifications where the family was given an affordable solution and enabled to stay in their home.  I am not being feseshish.  I really would like to hear at least a couple good stories.  I am sick and tired of the negative ones.

 

I want to share with you a story just last Thursday from a distressed homeowner.  A family owns a home as their primary residence in NC.  The area is a beach town and the predominant ownership of real estate in this area is as a second home.  This guy got behind 60 days on his mortgage because his business had cratered due to the economy.  He contact his lender asking for assistance with the intent to stay in his home.  He submitted a raft of paperwork and had to wait for 60 days.  At the end of the 60 days the lender said, “Harrah, you are eligible for a loan modification”.  He was relieved but then there was more.  The lender said, “before we can offer you a loan modification we have to have you complete a four month period of forbearance.”  I call this the stress test.  The homeowner was paying over $4,000 per month on his current mortgage and having trouble.  The lender, and I might ad a TARP recipient, required that he make a payment closer to $5,000 per month for a complete four months before a loan modification could be finalize.  This wasn’t the best news but the homeowner saw it as a credible option to stay in his home and keep his family situated.  He made the four consecutive forbearance payments. He took money form every nook and cranny to make it work.  Finally the forbearance period was up.  He called his lender repeatedly and received no response.  This went on of a couple weeks.  Finally with the tenacity built up he got through to his lender.  What do you think they said?  You are not going to believe this.  They told him that he may have been eligible for a loan modification at the time before forbearance but that he wasn’t eligible now.  He was told that he could not be helped and that he was pretty much on his own.  If he falls too far behind the lender stated they were going to foreclose on the property.

 

This story is real and there is no glamour in telling it.  We decided not to even take on this homeowner as a short sale client because the second homes are not moving in the area and we felt that we would only add to his misery.  This guy is stuck and his lender screwed him.  Now you see why I am asking for someone to share a good experience about a person or family with a loan modification.  I am not making this stuff up.  I think the government programs are nonsense to date.  The large banks that received TARP are supposed to be helping people.  The only thing they are helping is themselves. The TARP money is cheap for the short term and they are leveraging it to their favor.  Alls Wells that ends Wells.  Nice earnings report fellas.

 

My point is once again that the government is going to save the free markets and you are clearly on your own.  This is an example.  Where is the accountability to the lenders for such shenanigans?  This is none.  The lenders talk the talk and their CEO’s act out on television.  It’s a money game.

 

This type of story is important not because you shouldn’t attempt a loan modification to stay in your home, but because you need to have realistic expectations and be prepared if it doesn’t work out in your favor.  What should you expect with a loan modification?

 

You should expect a reasonable reduction in payment or a calculation tied to approximately 38% of your gross monthly income being attributed to your total monthly housing expense.  Total monthly housing expense includes principle, interest, property taxes, homeowners insurance, property condo fee or HOA, and PMI if applicable.  You must also be gainfully employed.

 

I would like to share with you one more story from a recent customer that just completed a successful short sale with our company.  We just closed a short sale and got approximately $240K forgiven for a family that desperately wanted to stay in their home.  They worked diligently and frankly relentlessly with their lenders to simply keep their family in their home.  They were on a crazy negative amortizing arm loan program.  They persevered through a complete six months of negotiations for a loan modification only to have their lender offer them a payment reduction of $200 buck per month in a take it or leave it fashion.  I am not going to go into the details regarding the hardship, but I will tell you it was clearly a qualified hardship that I professionally do not believe would be questionable by anyone.  Having said that, the family contacted us and we completed a successful short sale over a total period of approximately four months.  Where is the catch to this story and why is it so significant?  The homeowners wanted to stay in their home so badly that they told me that they would move back in and continue paying two weeks before closing the approved short sale if the primary lender would let them. 

 

This makes no sense to me.  I personally connected with both the husband and wife and I really feel like we did the best for them possible given the circumstances.  I am not sure when these stories will turn the corner with loan modifications.  Most if not all loan mods require you to be delinquent.  Now they are saying with the new government programs that is not necessarily the case.  If you want to stay in your home definitely fight the fight.  If you are not happy do not lose hope.  Do not say things that recent new clients have said like “I feel desperate”.  You are not desperate.  You are disappointed and humbled but you are not desperate and you have options.  You have lost the battle but the war has just begun.  We do not endorse loan modifications as a general rule because we don’t think the review process is fair.  Frankly I think lenders use it to size the clients up and prepare the collections department for offense.  I sanction the Real Estate Short Sale.  I use this with my team as a weapon.  It’s fair and there is pain and benefit to go around but you as the distressed homeowner have a fighting chance.  These are my words and I am passionate about the take down.  When you think or feel desperation come visit me a www.thenegotiatedsolution.com an take the Free Trial Video. 

 

Blogging from the front line of the housing crisis.

 

GHunter

A Loan Modification by design is supposed to provide homeowners an affordable solution so they can stay in their home. This will then theoretically allow both the homeowner and the lender to avoid mortgage delinquency and foreclosure all together. Given the many people owe significantly more on their properties than they are worth you would think that lenders would be willing to do everything they can to keep people in their homes. The incentive for a lender to keep a homeowner in the home to avoid foreclosure is very significant when compared to the potential financial downside of foreclosure for the lenders.

If this is truly the case then why do only 10% of Loan Modifications provide an affordable long term solution for homeowners? Why do 90% of Loan Modifications outright fail? It’s simple. The lenders are unwilling to forgive a portion of the debt burden to provide a fair and affordable solution for the distressed homeowner. They belligerently focus on the debt in aggregate that is owed with the expectation that it is all to be repaid. Given the size of the debt burden that most people have and the law of numbers this is not a realistic position the lenders hold.

I don’t care how much talk there is in the news about modifications that will provide long term solutions. The market is only seeing short term fixes and homeowners’ that are force to leave their homes via foreclosure even after they have spent months attempting to work out a modification with their lenders. Lenders are not on board with a fair solution. They have the explicit expectation that people will mortgage their lives away and eat bread crumbs for the next 50 years to repay what is owed. I am personally tired of hearing lenders tell me. “we did lend them the money”. I always smile and reply, “yes you did and I feel for you but you are not getting it all back”. Maybe I should say that the 100-500K in debt my clients owe above their home values will be repaid in after tax dollars. Yeah right! Maybe the dumbass lenders should had respectfully stuck to the preexisting guidelines for their lending activities. Such guidelines are design to protect both lenders and borrowers from foreclosure.

Ironically, it is also common to hear lenders gripe about the costs of properties that they have taken back in foreclosure. When the lender loses everyone’s cooperation and there is no hope of a Loan Modification, a Short Sale, or any other mutually beneficial solution because they have railroaded a family into foreclosure, they normally gripe about the costs. I hear this from the realtors that specialize in REO property sales for the lenders. They market is hitting the lenders hard and when a property is in REO there is no solution other than the lender bearing the full burden until they can sell the property.

The reason this happens is that lenders are large organizations and there is little continuity in dealing with the recovery process regarding the current housing crisis. You commonly will see a homeowner that has been working with their lender for a couple months trying to obtain a modification only to have the collection department and a legal team posturing preparations for the foreclosure sale. Now if the client is working on a short sale solution at the same time, just in case the Loan Modification does not yield an affordable solution, you will also have the Loss Mitigation Department as a third initiative. All of these departments will be working independently in parallel to one another under the same roof called your lender. When I say independently I mean it literally. It’s a conveyor belt or what I call a machine and the left hand does not have a clue as to what the right hand is doing.

The lender could really care less about the homeowner. They just want their money back. When the lenders start caring about the homeowners you will see the reciprocal of 90% Loan Modifications working and only 10% failing. At this time it is the reverse so don’t be fooled.

If you owe a significant amount of debt over what your home is worth you would be better to spend some time researching our Short Sale Solution or our Hybrid Refinance options. Whatever you decide please do not sign up for anything that is not a long term solution for your problem. You owe this to yourself.

GHunter

Another client complained just this morning that they had spent six months trying to get a Loan Modification approved with their lender, only to discover that they simply could not afford the remedy.

This is a real problem in the current environment. The fundamental issue with a Loan Modification is that the lender is only focused on the money they are owed and they are discounting the cooperation of the homeowner. Put a different way, the lender is assuming they hold all the cards and that the homeowner must cooperate as they dictate terms.

If the homeowner cannot afford the modified terms they then have little choice but not to make the payments. The general attitude of the lenders is that they don’t care. Dropping an unaffordable payment by a couple hundred bucks is not going to keep a family in a home. There is nothing that will force the lenders to reconsider unless you focus on a more level solution.

This brings us back to the Short Sale Solution. This actually uncovers the incentive to cooperate with the homeowner by revealing the downside of ambivalence, and the risks associated with the lack of the cooperation and foreclosure.

Again, with all the strings attached to loan modifications, it time to lose the strong moral character and get realistic about a solution. The lender is a machine and they don’t care about you. Once you accept this concept you will be much better off. Stop calling them pleading your case and hoping they will come to your rescue. Focus on a real solution.

The only good thing that I have seen recently with failed Loan Modifications is that homeowners clearly see that the lender does not have their best interest at heart. Seeing this by first hand experience is very startling. This usually puts the homeowner on a clear path of indifference with a solution and their family’s best interest at the forefront.

If you are looking for help and you want to avoid foreclosure, let me save you months of anguish and false hope. Investigate both a Loan Modification and a Short Sale Solution as a means of avoiding foreclosure. Then you will be in a much better position to make the right decision for your situation.

GHunter

A Loan Modification is an option to consider with your lender only if you really want to stay in your current home. This process requires that you complete an application and submit it back to your lender with personal financial documentation. This process can normally take up to sixty days for approval. The benefit here is that if you can afford the final outcome, you get to stay in your home.

The downside is that if there are too many strings attached you can potentially get taken advantage of for no good reason. Weight the strings attached the and over-all costs very carefully against alternatives of a Short Sale. Both will give you the option to avoid foreclosure.

Many people use the loan modification process as a stalling mechanism to ward off an approaching foreclosure date. This is an excellent tactic for that purpose but you still need an ultimate plan regarding whether to stay in your current home or sell it.

There are many risks associated with a loan modification. The primary risk is that there is no level playing field to negotiate as compared to a short sale. Yes, it is true that you can stay in your home and avoid foreclosure, but at what cost, and can you bear the cost over the long term or is this just a temporary fix.

Here in lies the problem. Unlike a Short Sale, where there are clearly defined benefits for the lender, a loan modification theoretically is like calling up your lender and telling them your problem with the hopes that they will be fair and come to your aid. Many lenders will come to your aid and they will also be fair. However, you won’t get everything you want and you will have to measure carefully the benefits.

The good news is that if you are unhappy with the terms of the final Loan Modification you can always still choose the Short Sale option immediately afterward and still avoid foreclosure with a little training and knowledge. You always have the right to break the terms of the Loan Modification and move towards a Short Sale Solution so don’t feel you are pinned down permanently with any such decision.

Here is an example of the risk that caused me to use the term “beware” in the heading.

A gentleman recently was referred to me by a local realtor. This individual was an ex military person with strong moral character and he wanted to do the right thing. He and his wife were struggling with a housing payment that had recently adjusted to approximately $4500 per month. They were imminently facing foreclosure with no plan so they called their lender and it was suggested that they apply for a Loan Modification. They completed the credit application and submitted the financial information along with a check for $10,000. Now for a little context, this family had already spent $150,000 improving the house and trailing the bid of the market down over the past 18 months in an attempt to sell it in the open market. They were told by their lender that everything looked good, and that with their check for $10,000 on deposit, a foreclosure date would not be set and they would hear right about the 60 day mark. Well, the verdict came back form the lender and if you will humor me for a minute I would like to adlib the way I interpreted the conversation.

“Thanks for the $10,000, we already cashed your check. Your new payment is now $5,500 per month”. “What, you have to be kidding?” “We were having problems paying the $4500.” “Yes, I understand sir but these are the terms of the committee and if you don’t make it we will foreclose on you and kick you to the curb. Have a nice day!”

It gets better. This gentleman was so angry it took me personally over several weeks and collectively several hours to calm him down and convince him to stop with the anger and start focusing on the solution. I told him what an old Uncle once said to me growing up. He said, “you can punch a man in the eye and it will hurt him for a week or you hit him in his wallet and it will hurt for a very long time”. Together we decided that it was only fair to punch the lender in the wallet.

This was morally wrong for the lender to take advantage of this family in this way. However, the lender’s point of view was, “they owed us the money”. The homeowner was not able to find anyone at the lender who cared enough to listen to him.

He is now proposing a Short Sale to his lender. Not all lenders are so unscrupulous. The lesson here is to proceed with caution and not with a false sense of security when requesting a Loan Modification from your lender. In the end, our man will prevail and the anger will be gone.

When you are considering a loan modification, please beware and very skeptical if you are required to put up large sums of money. There are downside risks. You know this is very true when the FDIC is advertising that they will consider Loan Modifications with no up front money.

You may simply be better off choosing the proactive path of a short sale and find another home. Lenders are machines in recapture mode and they can make it very rough on you.

GHunter