RSS
Home
The truth about loan modifications
Print
Email
RSS
Subscribe
In the past 6 months, there have been a number of articles in this column touching on the subject of the foreclosure process: everything from the default notice (NOD), to loan modifications, short sales and the plethora of scams involving all three. This month’s article will inform the reader as to what is actually occurring in the real estate and loan markets from the perspective of an agent who is working with distressed homeowners on a daily basis.
Many borrowers who default on their mortgages are receiving letters from their lenders purporting to offer to modify their loans. At first, the borrower experiences a ray of hope: maybe the lender will really lower the interest rate on their loan. Reading the fine print, though, often crushes that hope: the letter is merely a conditional offer by the lender to consider a loan modification subject to a review of the borrower’s tax returns and current income statements. Rarely does the review conclude with the borrower receiving the much-needed rate reduction, since the borrower’s financial circumstances have not improved.
Why do lenders make offers they don’t intend to fulfill? Simply this: the Obama administration is requiring the banks to show good faith to homeowners in default by contacting them regarding their loan. In order to receive stimulus money, the banks must collect statistics on how many letters they send to distressed homeowners, but they are not obligated to re-write even one loan.
For this reason, I have yet to meet one so-called loan modification consultant or specialist who has had consistent success modifying borrowers’ loans. These consultants – and that includes the attorneys who have jumped into this business – will only be speaking with the same bank personnel as the homeowner would. You should always ask these consultants four questions:
1. How many loans have they successfully modified?
2. What is their success rate/percent?
3. Will they provide the borrower with three references of local homeowners they
have helped in the past three months?
4. Did they write sub-prime loans prior to entering this new line of work? If they did,
they are part of the problem and none of the solution.
The loan modification field is rife with scams and misrepresentations to such a great extent that California Attorney General Edmund G. Brown has made it a priority for his office to prosecute consultants – and even some attorneys – who do not strictly abide by California’s regulations to operate such a business.
Los Angeles Neighborhod Housing Services (LA NHS) provides free foreclosure mitigation counseling to homeowners. They can be reached by calling (213) 381-2862 or at their website www.lanhs.org.
This article originally appeared in the September 2009 issue of the North Valley Community News.
For more info: California Real Estate Fraud Report
Related Articles:
Comments
