In the last six months of this year it seems that more than half of all the Homeowners who had modified their home loans are already in default again. We all know that the U.S. economic picture has darkened over the past month with one in 10 Americans who have a mortgage have either fallen behind or are in foreclosure. More than 500,000 jobs were lost in November, and unemployment is about 6.7%.
So, why are people who have already gone for help still losing their homes? What is going on? I feel there are several reasons. In this article I hope to clear up some of these issues, including the bad press that Loan Modifications and Loss Mitigation are getting.
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Foremost, in my opinion, the main reason Homeowners are defaulting even though they have modified their loans, is because they insist on trying to do it themselves, just to save the fee. Don't get me wrong, you can contact your bank and with enough time and effort on your part, you may come up with a modification from the bank. Most of the time these are only a short term Band Aid instead of a long term fix. Some of them that I have heard of are things like this: "The bank gave us six months of half payments; at the end of the six months we are to go back to the original payment and then also payback the half we didn't pay." Or: "The bank gave us an interest only payment for 1 year." The list goes on and on. How are these designed to help out long term? How in the world is someone supposed to come up with the repayment on that reduced mortgage while they can't make the original payment in the first place? An interest only payment on a home that is reducing in value is ludicrous, where is the benefit in paying 8 or 9 percent interest only on a home that's value is falling like a rock?
Another reason, in my opinion, is the "crooks" in the business. Yes, where ever there is pain and suffering there will be those who will exploit it and take advantage of it. These "companies" will take up front fees and promise the world to you and come up with nothing better than what you could have done for your self. Remember, up front fees can only be collected if the company is A) using a Lawyer to do the mitigation, or B) is approved by the Department of Real Estate. These "crooks" do not underwrite your loan before they charge you and at this point you have to take what you get. A reputable company will review (underwrite) your request first, give you what options that they feel they can do and then collect their fee.
Understanding why it's difficult to do all this on your own to save the fee is important. You must understand that all loans written have been bundled into pools and sold to various investors. When you make your payments, the investors get paid. If a bank reduces the loan amount of one of the loans in the pool, the pool is no longer worth the original amount and ALL the investors have to agree to the reduction before it can happen. This can be very difficult in its own right being as how the investors can be spread out all over the globe. The bank is very hesitant to try and do this on a one by one basis, if they will try at all. This is why it is important, if you are thinking about modifying your existing loan, to do your due diligence and research the company you will be doing business with.
Here's what should be happening for you. First thing would be a thorough review of your financial situation and hardship. This includes all your bills, credit and other wise. All income, even if it's just a few bucks a month from side jobs. You are going to have to become very transparent financially, but if you want the negotiator to come up with a deal that keeps you in your home for a lifetime then this is how you do it. Secondly, what ever company you are using should have enough volume to be able to approach the bank with a bundle of loans to fight for. There is strength in numbers. If you approach the bank on your own with a $350,000 loan and we approach with $350,000,000, who do YOU think has the most leverage? The whole process is about leverage. The idea is to prove to the bank that by working with these loans it is to their benefit and to the benefit of their investors. This is how we, at times, get not only interest rate reduced, but loan balances reduced as well. Even the length of the loan may be lengthened to 40 or 50 years. All of this combined can help keep thousands and thousands of Homeowners in their homes.
As New Jersey Governor Jon Corzine said, "We need a bottom-up approach, by modifying people's mortgages and helping them stay in their homes." He also has called for a 3 to 6 month halt to all foreclosures while the government works out a more aggressive plan.
For more information and any questions, please do not hesitate to contact me at www.homeloandebtsolutions.com [http://www.homeloandebtsolutions.com] we are in business to fight for you and to keep you in your home, for life.
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