Making a Loan Modification Work

By: Sarah Carlye


You and your lender (or the lenders agent) entered into this transaction with your eyes wide open and both agreed to the terms of your mortgage. Right? With the possible exception of cases of fraud (which existed during the mortgage heydays and still goes on) you and your lender must also approach a mortgage modification with your eyes wide open and agree to a reduced payment or altered terms. It`s a voluntary process and believe it or not, the scales may be tipping to the borrowers side for now.

Mortgage servicers, lenders, banks, and holders of securitized mortgage notes have a problem. Too many homeowners can`t (we`ll get to the ones who don`t want to pay in a moment) pay their mortgages. The reasons vary but the acceptable (from the banks viewpoint) reasons fall into what the banks call hardship. If you lost your job temporarily, sustained an injury, adjustable rate reset, have reduced income, military duty, damage to property, death of a spouse and a few other main categories will help build your hardship case. The problem for the banks is there are millions of homeowners who qualify. Who gets modified and finishes the process with a sustainable loan?

I am forced to answer this question with a question. If a homeowner goes to their lender with hat in hand and says, "Please sir, can you help me." Who do you think will come away with the best deal? The bank or the homeowner?

On the other hand, an experienced company that has a network of attorneys, understands the marketplace (real estate values matter here) and the needs of the various servicers, lenders and note holders can make a difference to the homeowner. The company must be able to analyze your situation and present your situation in the light that make it acceptable to your bank. This involves proving that the best outcome is for you to stay in your home at an affordable payment that you will be able to pay for the forseeable future. The company that helps you modify your loan must also be able negotiate for that outcome on your behalf.

Just because banks are negotiating terms on a contract that you agreed to does not mean that they are giving a way free money. Every step must be done right so that you can achieve a sustainable loan with your current lender. A loan modification that works for both sides of the transaction, reduces your payment and helps to save your home from foreclosure is the goal.

Richard Barber began his career in banking after graduation from Washington and Lee University (many years ago). His varied background as banker, dancer, real estate investor, mortgage professional and investor find him appalled at the current state of the finance industry. The contributions to our catastrophic situation have come from government, commerce and individuals and will take all three to dig us out.

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