Don't get me wrong, attorneys do have their place, just not in loan modification.Loan modifications are not new. Neither are short sales. I closed my first short sale for a friend in Southern California in 1993.

What they are is "highly publicized" due to their sheer numbers.See, attorneys by their very nature are confrontational and aggressive. They live to litigate and rack up billable hours.When a company or firm boasts they're "...attorney represented", it throws up a red flag.These companies are working hard to convince the poor homeowner that using an attorney is the SURE way to get everything you desire...interest rate reduction, loan term extension, and of course, the highly elusive "principal reduction".

Some attorneys even hypnotize their audience that "THAT'S what we do." They also want the homeowner to believe that a lender will respond more favorably to an attorney contact...especially if there was some sort of "predatory lending" or "concealment" or "Truth In Lending" (TIL) or "Real Estate Settlement Procedures Act" (RESPA) violations. Maybe there were, maybe there weren't, and truthfully, it doesn't matter.

Here's how it works:

Lenders have more lawyers than anyone else. And they have unlimited bailout funds to pay them with. Now you hire an attorney to represent you and as soon as your lender becomes uncooperative from being badgered by an attorney, a lawsuit is threatened and subsequently served. The lender closes the conversation at this time and directs the call to their legal department for which the nightmare of bickering begins. Nice. Lenders do NOT cower to these calls or threats. They have SO many other issues, attorneys are merely flies in the ointment to them.

The following day someone else hires the same attorney. They even have the same lender as you. The attorney gets on the phone with them. How receptive do you think the lender is going to be to this attorney and his new client? The same attorney who served them with a lawsuit yesterday? Forget about it.Successful loan modification is all about existing relationships. Not about an opportunistic attorney using new clients as guinea pigs to learn how to do it effectively and painlessly.

Here is the formula for massive success:

Utilizing an established network of former employees (loan processors, underwriters, doc drawers, shippers, compliance officers, production managers, regional managers, wholesale coordinators) from any of the numerous lenders and servicers in the country who are now entrenched in the loan modification industry.They still have friends and associates still employed by their former employer. They receive 50 new files a day or more. They remove those from their former employer. They make a phone call, chit chat, then begin negotiating for the homeowner. They can process and negotiate so many more files in this manner than any other currently in place. It's non-confrontational and efficient.

Here's what homeowners need to understand. Loan Modification MUST be equitable for the lender AND the homeowner. It is not about attacking the lender as attorneys would have you believe. It's about 'Verbal judo". The lender must benefit from the modification as well. Knowing how to prepare and submit what the lender wants is vital.

Let's now address the "Bigfoot" of loan modifications..."Principal Reduction".

Of course the homeowner wants it reduced to current market value right? But, the lender/servicer is not authorized to do so. They have been authorized only to manage interest rate and term agreements. As soon as the issue of principal reduction pops up, it must be presented to the investor or investors for reply. THAT is why a portion of modifications become delayed. Waiting for the owner of the investment to reply.It's a prickly pear.

Say you purchased your home for $500,000 and now it's worth $250,000. You want a reduction, I'm hip. So you request one. The investor is being asked this: "Mr. Investor, you loaned m3 $500,000 several years ago and now that investment is only worth $250,000. I want it reduced by that amount."Why on Earth would the investor agree to that? Ponder this...although the investor is smart and savvy, they are not using common sense. If the homeowner decides to bail on the property, the investor is going to get it back at the current market value anyway, so why not just take the hit and agree?

My solution? There are still $350B in TARP funds sitting in the federal reserve. Everyone will have to eat some losses in order for this country to prosper once again. Why not use the bailout funds to help those who actually NEED it?

Let's examine the $250,000 loss. Right off the bat, the fed agrees to write a check to the investor for half that amount. The other half will be given as a tax credit over ten years. Now adjust the existing homeowner mortgage to this new amount. The home is saved and the investor keeps some of their investment. It stings a little but everyone wins...if we're going to be paying for the bailout anyway, why not help our neighbor and not some idiot at AIG raking in millions?

That's a lot to digest, I know. There is SO much more to know it cannot possibly be placed into an article. I have more facts and solutions at our website for you to read. Please visit. FederalHomeLoanMods.com