Real World Mortgage Modification
June 22, 2009

My name is Chris Dix. I live in Grand Junction, Colorado. I’ve been watching, researching and selling mortgage loan modifications for the last three months.
I’ve spent the last three days surfing every blog, forum and web post on mortgage modifications that I could find.

Of lesser note is the mistaken notion that second liens can’t be modified. I get to that, too.

Mostly, I’m going to address these two general themes here. I see that there needs to be a message of reason here. Maybe when the general situation is described, everyone will understand the big picture.

'Hope For Homeowners' was passed by the US Congress July 30, 2008.

On March 4, 2009 the US Treasury issued Uniform Guidance for President Obama’s “Making Home Affordable” plan which is the Administration’s stimulus strategy to get the housing market corrected.

There was a third piece of legislation that was passed since then, related to Obama’s overall stimulus package. An accurate description escapes me today.

What is a loan modification?

A loan modification is an existing mortgage 'modified' to match current economic reality.
The lender is persuaded to "re-write" the note. New terms of the mortgage are written. One or more terms of the note can be changed and the changes are permanent.
The concept is not new. A significant player in the Real Estate game could always get a modification if they wanted. Ted Turner could always get one. Donald Trump can always get one. There are movers and shakers in your town that have done it. They’re not about to advertise it. If they did they would be subject to the same ridicule that short-sighted people spout today. The point is that banks have always been receptive to be convinced that it was in their best interest to modify a previous loan.

The Federal Stimulus package is new. Never been anything quite like it in history. We all saw what happened to the Real Estate market and general US economy October of 2008. Timothy Gheitner and the geniuses in the Bush administration be praised. Whatever.

A Mortgage Modification absolutely is not a refinance; there is no credit score consideration, closing costs, or property appraisal. I read that there might be a BPO, although I have only seen them for short sales. Anytime you hear the confused souls in the media use the word re-finance, turn off whatever media you’re listening to. They are confused.

In fact there are two separate and distinct aspects to the Making Home Affordable plan.
One is modification; the other is refinance. Why don’t you hear about the refinance portion? Because by far the biggest majority of US homeowners are dealing with almost no equity in their property. A federally subsidized mortgage modification is the chance of a lifetime. Get ‘em while they’re hot

As is typical with any new Federal program, there is lots of confusion. Regrettably, the scammers surface to feed on the uninformed. After you read this, you won’t be in that group. Please notice that every prosecution is by various state’s attorneys general. The US Dept of Justice has yet to prosecute an attorney firm in their jurisdiction. This will flabbergast all those that harbor ill feelings about attorneys; but by far, most of them had better be as honest and well meaning as the day is long. (I know, I know. The difference between a dead attorney in the middle of the road and a dead skunk in the middle of the road is that there are skid marks in front of the skunk) This vilification of every modification professional that exists is just nonsense. The good ones are just as camera-shy as the high-rollers that have been modifying their financing for as long has
there have been underwriters with a lick of sense. They’re all busy working.

A homeowner in default has three "workout options:" to keep their home:

Reinstatement
Forbearance Agreement
Loan Modification

Neither a forebearance or reinstatement is a real stretch for a lender. Likewise, in this economy, the likelihood of these two options fitting a home-owner is slim and none.
However, part of the negative press about ‘modification’ was these two options being sold as modifications. Bad idea.

If a homeowner decides it is better to abandon their home and mortgage, there are several other options to salvage their borrowing potential down the road. That would be another article. The first decision a home-owner must confront is: Do I want to keep my house?

THERE IS ALMOST NO MOTIVATION FOR YOUR LENDER TO MODIFY YOUR MORTGAGE. . If your bank contacts you out of the blue sky, you can bet your bottom dollar, literally, that it is a refinance offer. That’s where their profit is. It is not a modification offer. Never happen.

There are four different ways for a homeowner to attempt a loan modification:

* Homeowner does their own loan modification ­ - Free
* Government agency ­ - Free
* Investor specializing in loan modifications ­ - Fee based
* Attorney Groups ­ - Fee based

Homeowner attempted modification:

Statistically the success rate is 20% when a homeowner attempts their own loan modification. They routinely take 8-9 months. 40% of home-owner negotiated loan modifications have resulted in higher monthly payments! 80% of homeowner loan modifications have gone back into default. Half of the loan modifications we accomplish are from homeowners who previously attempted their own modification. This explains the first half of all the posts anyone can read in the media.

It is critical to know that attempting a mortgage loan modification does not automatically stop a foreclosure. There have been several reported instances where a foreclosure happened in the middle of modification negotiations. Ask yourself if you want to tackle just that part.

Government Agency:

There are free government agencies that will help a homeowner do a loan modification.
Read about ‘em elsewhere.

As of April 16, 2009 both CNN.com and PBS TV report that the US Government has processed one (count 'em, one) single mortgage loan modification.

Ask anyone who has worked for the Federal Government. Remember the last time you tried getting in contact with any free US Government agency and let me know how it went.

Investor Specializing in Loan Modifications:

Published results indicate that investors with the right intentions, know what they're doing, and work hard at it are 50-60% successful at completing loan modifications. I don't know how long those good modifications took, nor vouch for optimum modification results. Chances are they don’t know the ‘Approved Advocate’ either.

Attorney Groups:

Attorney groups are generally 90% successful at completing loan modifications.
The trick is to find the right one.

Brief commercial: I represent two attorney groups with two different payment options and marketing approaches. As national attorney firms they are monitored and supervised by the US Dept of Justice. Both are proven about 97% successful, and take only 30-60 days after the client gets all the required docs submitted. The terms of our loan modifications are better than a homeowner can get on their own, with a resulting interest rate reduction, loan principal reduced, lower payments, foreclosures stopped, and with terms that the homeowner can continue to make their payments. We know the 'Approved Advocate' to negotiate with at every lender. Our weekly follow-up calls do not get put on hold. (Would you put your attorney on hold?) The fee justifies itself typically in four to six months. The No-Risk Guarantee makes the process painless.

Back to my article:

If you get nothing else out of this article, please understand: How much your payments may be reduced depends on the ability of the person negotiating your loan modification!

Side note: One of the research posts I read commented on the fact that the companies I represent have only been in business six months. I ask you; With the US modification legislation being passed so recently, just how old would you think an organized, legitimate modification company would be?

Consider that it's estimated that 4 million mortgages need to be modified. Ask yourself;
· Whose best interest will my lender have in mind? Theirs or mine?
· Who is going to negotiate the best terms?
· Am I getting the best possible rate with my mortgage loan modification?
· What am I being charged by my lender to do my loan modification?
· Who is going to get priority attention from my lender?
· Who is going to get my modification accomplished in a timely manner?
Professional, attorney-driven loan modifications can typically accomplish:

* Lower interest rates
* Lower payments
* Principal reduction
* Convert an ARM or I/O to a 30 yr. fixed rate mortgage
* Foreclosures stopped (up to 12 days before sale)

Mortgage loan modifications can be attempted at any point in the life of the mortgage.
For many lenders, it is not necessary to be behind in monthly mortgage payments, although some do insist you be in default. This is important to consider: Your lender gets the privilege of determining the delinquency qualifications on your loan. Doesn’t seem fair to me, but they make the rules. Seems like a whole different Golden Rule, but I’m not sure. And they want to know why the general US population is so grumpy. The sooner you get started on your application, the better.

Here is the one single qualification point you must meet: You must have a job. Almost any job will do. Your very best bet on getting a mortgage modification is having a job, at less than you were making last year. (Self-employed applicants will provide a Profit & Loss statement, not Federal Tax Returns. Get it? You should. If not, your accountant will gently explain it to you). We are being told to take applications from un-employed home-owners. I wouldn’t hold your breath. I repeat, get a job.

The application is free. I do not take your money and I don't take any ID sensitive information. The attorneys do that after you qualify. My task is to qualify you for a mortgage loan modification. After you qualify and have trust in our process, you may choose to pay the attorney and the No-Risk Guarantee will be spelled out precisely. (When did you ever see a reputable attorney operate any other way?) This foolishness about not paying up front is nonsense. Maybe the Federal government is willing to trust you for the fees, but no one else will. “I’d gladly pay you next Tuesday for a hamburger today.” (Anybody else remember the Popeye cartoons?) Try going to Wal-Mart and tell ‘em you’ll pay ‘em tomorrow. Again, a national attorney firm is supervised by the US Dept of Justice. You think any attorney wants a call from mess with the USDOJ?

Less experienced loan modifiers and home-owners do not know who to talk to at the various lenders. Because of that, some lenders may disguise a refinance offer as a modification. The offer you may get from your current lender is assuredly a refinance offer. Refinance is not as beneficial as modification. The homeowner then suffers a less-than-optimum mortgage loan 'modification' settlement. Again, a modification is not a refinance. My attorneys have 'Approved Advocates' assigned to our attorneys at all of the lenders so this does not happen to you. You are assured of the best modification available to you because of our huge volume and legal professionalism.

The more I surf the web, read blog posts and talk to my prospective clients, the more I'm amazed at the emotional belief and feeling that "My lender cares about me." No, they don't. They're paid to care about the financial health of their bank. Your personal banker is not going to modify your loan. An underwriter, bean counter in a dark, dank back room with a smoke-belching and wheezing calculator is going to consider modifying your loan. The 'numbers' must make sense to the bean counter, not your hardship. Your 'hardship letter' will polish off your application. (We show you how to write that too. There are samples out there, but I haven’t seen a template that I’d trust.) No one can do a better job of talking an underwriter's language than a qualified attorney. (I knew I could never do that. That's why I'm publishing this.)

The homeowner must understand; there is no motivation for your lender to modify your mortgage. They do get paid approximately $1300 to modify. But if you had an overwhelming stack of modification application files on your desk, which ones would you tackle? The ones from attorneys? That are organized just the way your company wants them? That have your personal number and extension? Every week? Or the half-baked files from well-meaning, but ill-informed and ill-prepared poor homeowners?

Again, the terms we get for your loan modification easily pays for our fee, usually in four to six months.

Our job is to convince your lender that it is in their best interest to modify your mortgage. We do this in the package and format prescribed by your individual lender. They’re all different.

We all know that we can represent ourselves in court, but we would never trust ourselves to do that, because we know that a reputable attorney will do a much better job. The same holds true for loan modifications and for something as important as keeping and rescuing your home today.

What about second or third liens?

I read several blogs that reported second or third liens couldn’t be modified. That is absolutely false. It may be that the Home Affordable plan makes no arrangements for those modifications, but our firms do indeed negotiate those liens also.

What Are the Typical Results of Our Loan Moods?

NOTHING IS GUARANTEED! This is critical to understand. We know what the federal guidelines are, but we can’t predict the mood of the individual underwriter that got your file application, or the specific quality of your hardship letter. No reputable attorney will promise any specific result before the modification is submitted. (Ever heard an attorney promise acquittal before the trial?) The ultimate objective is to help you affordably keep your home. We begin by looking at the homeowner's debt-to-income ratio and work from there to get new terms for your mortgage that you can handle.

That being said, my attorneys typically are negotiating the following:

* Interest rates: 4%-6%
* ARMs changed to 30 year fixed rate mortgages
* Foreclosures stopped
* Principal reduced
* Payments reduced

Again, these terms CANNOT and WILL NOT be guaranteed to a homeowner before modification! Every lender is different. I simply tell you this so you know what we've done to date. Obviously, payments would be reduced due to interest rate reductions.

Here’s the deal: If you are a ‘Distressed Homeowner’ you initially have a choice to make.
Do I want to keep my home? Or do I want to escape this property and financing with the least amount of damage? If you want to keep your home, apply for a mortgage modification. All this hand-wringing in the social media and press will get you nowhere. We all can argue forever how fair it is that you have to pay for a US Gov’t stimulus program that was supposed to help you/us. That and 50 cents will get you and your family a cup of coffee.

This is the reality, folks. The lenders are buried in your/our problems. If you have nine months or so to get your mortgage modified, do it yourself or with US Gov’t assistance. If you want the assurance that your mortgage will get professionally modified in a timely manner (as in NOW) with the best terms possible, contact a national attorney.

Picture yourself in one of those soup lines we all remember pictured from our ‘last’ depression. (Yes, it is a line. A very long one.) Now ask yourself; “Do I want to be in the front of the line? Or the back?”

Of course I’d love to hear from you.

Chris Dix
www.Mortgage-Mod-Monster.com