If You Are Late On Your Mortgage Payments Or About To Face A Foreclosure Action-Judicial or Non Judicial Foreclosure: You Do Have Options!
Do Not Just Assume That Your Lender Holds The Upper Hand
Find out why It Is critical To use an experienced professional
Do Not Trip Over Dollars To Save Pennies by doing this on your own—when your house(s) and credit are at risk
Home Realty Solutions, Inc, is not a mortgage lender, broker or realtor. We are experienced professionals with an entire division of our Company devoted to loan modifications, short sale packages, negotiations and training programs for others to perform these challenging duties competently. Many of our deals come to us through referrals from residential mortgage brokers, Realtors and current and former clients. Because of this we have heard first hand the stories behind the ever-growing epidemic of foreclosures and soon to be foreclosures that are happening in our neighborhoods around this country, as well as the rumors and misinformation that are pervasive and downright frightening to most borrowers.
We have also seen and heard the stories of people that are facing the prospect of losing their homes, that are trying to work with their banks to save their homes or hiring someone that says that they can help them, when in reality they really can’t because they lack the knowledge and/or the skills or both to get the job done. Some time ago, after getting fed up with government inaction, multiple failures by do-it-yourselfers, as well as the scams out there, I decided to collect my thoughts based on realty. Due to all of this, as well as the fact that some of these same situations are now arising in the commercial real estate market, we have looked into some of the options borrowers (owner-occupied and investor-owned properties) have.
What we found to be most prevalent over the last several months is a process known as loan modification. This is not a new process. However, it is being used in new and creative ways to assist borrowers in keeping their homes with affordable payments, saving their credit and provide lenders with performing loans. These are explained below, as well as some of the reasons that using a true professional is critical. The key word here is true. If you were having brain surgery you would not want to use a doctor doing his first surgery, and the same holds true here. You certainly do not want to do it yourself, no matter how capable you are or think you are. You may well be emotionally attached to the property as your home and you most definitely will lack the requisite objectivity that is so vital to getting the loan modified fairly. This is so contrary to all those free 800 numbers out there with county and state endorsed “trained” counselors who will tell you how to do it right. Many of these trained counselors with whom I have been in contact are former loss mitigation negotiators or former bank loan officers or officials. That’s like hiring a retired career prosecutor to defend you in a criminal case. He/she may know the rules, but in a crunch, they are going to knee-jerk back to their prosecutorial mentality and so too will the advice from most of these free loan counselors.
At the end of this piece I have posted my contact information in the event you need any assistance.
What Happens To Your Home When You Can No Longer Afford Your Mortgage Payment? (You are eating into savings, triggering tax penalties by hitting your IRA or 401(k), or running up the balances on your credit cards where you will pay 28% interest on a significant balance over many years, if you don’t file bankruptcy beforehand)
With the turmoil in the financial markets, rise in unemployment, drop in the equity markets, and the incredible increase in the amount of mortgages being late, in default and foreclosures rising exponentially around the country, is there anything that a homeowner or an investor with his/her home and credit at risk, can do to save their home and credit from the lender(s) that is holding the borrowers’ note(s)?
What Is A Loan Modification?
When a homeowner can demonstrate a hardship (often the loan itself is the hardship such as an Option ARM loan where only partial interest payments are made) that is taking away their ability to make their loan payments at the current level, a loan modification can be negotiated that could:
· Lower the existing rate and turn an adjustable rate into a fixed rate loan.
· Put the amount that has been missed on the back-end of the loan in a recapitalization.
· Defer payments for a number of months through an abatement reamortize and recapitalize the loan balance
· In some cases reduce the principal amount of the loan
How Can A Modification Be Accomplished?
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There are two ways for a modification to be accomplished. The 1st is for a homeowner to go to their lender and attempt to negotiate the modification themselves. In many cases this can be penny wise and dollar foolish, because a homeowner is in a state of maximum stress and anxiety, doesn’t really know the process and is typically dealing with a person within the institution that may not have the authority or a real interest in working with or in helping them. In many cases, borrowers think they are dealing with a negotiator, but in fact are dealing with just a screening person known as a servicing agent or representative.
The other way is to work with a professional loan modifier who is specially trained in modifications, who knows the people in the banks to speak with, knows the borrowers rights and all of the laws in a specific jurisdiction due to a close association with other experts such as attorneys familiar with applicable state and federal law, regulations, and rules in whatever state the property is located. What are some of the reasons to use a professional loan modifier?
· The complexity of the process.
· They know the point people in the banks to speak with and work with.
· They know the exact information that a bank wants to see and how to package and present it.
· They know what can be negotiated and what should be obtainable.
· Their ability to halt or delay the foreclosure process through prompt access to applicable mechanisms to halt or delay such action.
Some Of The Typical Objections To Hiring A Professional
Why can’t I do this on my own and save some money?
- This process is not as simple as making a phone call and getting the deal done. It is a complex process that requires a professional that has seen it and done it successfully. Learning the loan modification process on your own while trying to save your house and credit is not the time to learn something new! Many lenders dealing one on one with borrowers are getting the borrower to agree to a type of offshoot to a forbearance agreement that the borrower honestly believes is a modification of the loan. It is, in fact, a guise by the lender to get the borrower caught up on payments. Once the borrower is caught up, it’s right back to the original terms of the old loan and the trustee sale has not been cancelled, its simply been continued during the catch up period of 12 to 18 months.
- It is critical to get to the RIGHT people at the lender, and a professional will know them and have a relationship with them. A borrower will typically be speaking with the collections department.
- A professional knows the right information to present—cost analysis, valuation of house, facts to support the hardship as well as trigger points to persuade and motivate the lender to reach a modification agreement.
> The loan modification professional will present a clear and specific proposal in writing instead of asking the bank what they will do. Modification experts will know what the different lenders have been willing to do in the past
- The bottom line is that you could save money and attempt to do a modification yourself—but it could cost you your house and credit if it is not done correctly
- The professional knows how to stave off foreclosure (halting the process)
- If your loan modifications expert can negotiate just one extra item (such as a rate adjustment), a borrower could save tens of thousands of dollars.
Why the cost?
- The team that you will be hiring will be taking all of your financial and personal information, and be preparing a formal proposal that will be speaking to your specific lender and to the proper decision makers within that lender.
- Each modification requires up to 30 to 40 hours in conversations with the lender.
- Once the framework has been worked out, your team will move you from the agreement to settlement.
- If you hired an attorney to negotiate on your behalf at $300 per hour (conservative)—35 hours of work would be a cost of $10,500 and they would not typically be as experienced as the professionals who specialize in loan modifications.
What if you don’t have the money to pay for this?
- In reality, paying a professional $2,000-$4,000 to save $100,000, save your long-term credit and save your house? There is really no question!
- There are different ways to get the fee, none of which are ones that you would typically want to think about, but again the goal is to keep your house: credit card, savings, personal loan, loan/gift from relative. You can typically use any combination.
- If a homeowner has already stopped making their mortgage payments—where is that money going?
- A typically overlooked cost is what it would cost the homeowner to move out of their home and into a rental, including security, cleaning and pet deposit, moving costs, first months rent, utilities, insurance and more.
What if you need a guarantee of success?
- You are paying a loan modifications expert (and its’ access to a legal team, in the rare cases that is necessary) to negotiate on your behalf just as you would an attorney in any action. If you hired an attorney or a tax accountant in a tax audit and you lost the case, would the attorney or accountant refund your fees?
- Your modification firm could spend up to 50 hours or more preparing documents and negotiating during the approximate currently estimated 45 to 60 day life span of a modification in relation to a Making Home Affordable Program if you qualify, to 10 months or more for investors with multiple properties..
- Reputable and time tested loan modification firms do not accept files that are not reasonable or clients who are not qualified. Accepted files have a 90%+ chance of success.
- You, the homeowner, have the final say-so in accepting the offer from the lender.
The bottom line, it is essential to work with a loan modifier that comes highly recommended, that is professional, ethical and that provides you with as smooth an experience as possible during an extremely disruptive and stressful time. Whether you are a homeowner with your home as the affected property or if you are an investor with two, twenty or more properties wherever they may be located (in or out of state(s)), you most likely will not be untouched by the scourge of these toxic products to which you became a party in the pre-meltdown years. Notwithstanding all of that, never forget and always remember that you do have options—-loan modification is one of those core options, now and in the foreseeable future.
Should you have any questions, feel free to email me and I will be more than happy to respond. Our goal is to make sure you know all of your options---during our free consultation with you.
Barry Hart, President
Home Realty Solutions, Inc