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Loan Modifications - A Thing of the Past
Frustration and Deception
No matter how much you think you know about mortgages or real estate, unless you have successfully completed a few dozen loan modifications with different lenders, then you should NOT go directly to your lender and request a loan modification. Here are some strong reasons why you should hire a reputable company with expertise and a strong track record of completing successful mods, or, if you can't afford that, read a few books on the subject first before attempting.
Each lender has their own unique guidelines as to who qualifies for a Loan Mod. That would be alright if they published the guidelines, but they do not. It is like taking a test that you can't study for.
Here's the typical scenario: Joe Homeowner calls his bank and requests a Loan Mod. The bank says sure, of course, then sends Joe a huge folder or envelope full of documents and forms for Joe to sign and fill out. Joe is overwhelmed, but he tackles it nonetheless, spends the next two weeks gathering bank statements, tax returns, receipts, etc., and filling out the numerous forms and signing authorizations, etc.
Joe feels very confident and submits all the info. Three weeks later he still has not heard from the bank so he calls them, waits on hold for over two hours, and is finally told that his paperwork has mysteriously disappeared and that he will have to start all over.
A week later Joe receives the same package or in some cases, a completely different one which completely confuses Joe, but once again, Joe diligently tackles the project. Since he did not save copies from the first attempt, he has to start from scratch and a week later he submits the package once again.
This time he starts calling right away and right away (after increasingly longer on hold times) he keeps getting passed around to different departments and different "managers" and "processors" and "specialists". During one of the calls he is told that since he is not behind on his payments, that his case is not high priority, so Joe stops making his payments.
Eventually, two, three, four, or probably more like six or seven months after he began, Joe receives a form letter stating that he has been declined. This letter will not state a reason, it never does. It is followed by a Notice of Default and a request for back payments plus late fees and foreclosure fees and legal fees. You get the picture.
Joe calls the suicide prevention hotline.
Sorry Joe, That Mod is Long Gone!
Joe throws darts at his forms and miraculously manages to fill them out right and Presto! three months later he gets a "trial" mod. The magnanimous bank has generously lowered his interest rate from 7.875% to 6.75% thank you very much. Keep in mind that today's 30 year fixed interest rates are hovering around the 5% mark. This saves Joe a whopping $150 per month for the next six months.
If Joe makes the payments on time, the bank promises to CONSIDER a longer term Mod for Joe. Consider. Wow. Thanks a lot. Oh and by the way, all the back payments that he owes are now being added to his principal balance, which was already high because he was in a Negative Amortization Loan in the first place. That means that he is now paying on a HIGHER loan balance, which then raises his monthly payment. Now that is still technically a modification.
Joe begins making plans to move to Canada or Mexico.
Joe's best friend, who happens to be a Real Estate Agent tells him that whatever he does he should NEVER pay an upfront fee to a Modification Company, that they are all scams. Joe believes his friend and eventually loses his home to the bank.
Joe's expert friend tells Joe that he will help Joe to do a "Short Sale" then proceeds to sell the house for $100,000 less than what Joe owes to the bank. Joe is relieved and is living in a small apartment he has rented (since his wife took the kids and left him he can fit his three pieces of furniture comfortably there).
In January of the following year Joe receives a 1099 from the bank for the $100,000 which the IRS considers as income earned. Joe's expert friend could not be reached for comment as he was on vacation in the Bahamas spending the commission he made from the short sale.
Folks I am not exagerrating. Unfortunately everything I have written here is true and has actually happened. Think about it. When in your experience with banks have they ever done anything that did not make them money? When have they ever really helped you, except to inform you that you do not have enough money in your account, then hit you with a fee for that. Banks and Lending Institutions are not your friend. They are not your buddy.
We as taxpayers bailed them out to the tune of billions and billions and maybe even trillions of dollars but they are not keen on bailing out Joe Homeowner. The government handed out these bailouts with no written guarantees from the lenders that they are obligated to help homeowners.
When the Big Banks bought these toxic loans, they did so TO MAKE MONEY. And don't believe anyone that says that "Banks don't want your home, they are eager to work it out with you." Wrong again Mr. Expert. As many smug holders of this misguided opinion have found out, the banks are all too eager to hit you with as many late fees as possible, then pull your home out from under you, then to add insult to injury a year later you get the 1099 for the difference.
Once upon a time I would have recommended a Loan Modification expert but after talking to hundreds of people I have realized, sadly, that Loan Modifications are a thing of the past. Only a very small percentage of the tens, maybe hundreds of thousands of LM requests ever get even the courtesy of a trial mod. And they won't even consider you unless you have missed many, many monthly payments. Whatever you do, don't miss any payments, no matter who recommends that you do. It will only serve to ruin your credit.
No, these days banks are not giving out mods so the only solutions left for average underwater homeowners is to either walk away from their home and face the consequences I have already described, negotiate a short sale, or try and refinance their loan.
I wish I had better news but the facts are all too glaringly clear and painful. We taxpayers have written a blank check to bail out the lenders and banks and now they are repaying us by taking away our homes because of our inability to pay the bad loans that they put us in.
There is no justice here. I for one will write to my congressperson as many times as I can. I suggest you do the same thing. Vote these bums out of office and put in some new, less corrupt bums.
Also Read "The Swamp (Part 20)" by bludstream
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