Home Loan Modification: Separating the Myths from the Facts

Home loan modification--it's a hot topic, and these days, everyone seems to be an expert on it.  Sadly, most of bloggers and journalists who are now "experts" in the home loan modification field since Obama passed the American Recovery and Reinvestment Act of 2009 are just bottom feeders in the latest financial buzzword.

Home loan modification is nothing new.  I've specialized in Loss Mitigation and Mortgage Banking for over 25 years.  Home loan modification happened long before the downturn in the economy.  However, the need for it is more prevalent than ever.

People simply don't have the money or time to invest in the costly fees of an attorney or specialist that charges $3,000-$4,000 dollars a pop to negotiate the deal.  If you had that money in the first place, would you even be in this spot?  So, borrowers hop on the Internet and see what they can find out.

Unfortunately, most of the information comes from these so-called "experts".  With the right teacher or program, you could do better than these experts that have never even seen a home loan modification packet in their lives.  As a result, there's a lot of misinformation about the difficulties of getting a home loan modification.   Don't listen to the hype.

Home loan modification is happening in record-breaking numbers.  Since lenders are losing an average of $50,000 to $60,000 on foreclosures, they will do whatever they can to avoid this.  People with ballooned interest rates from subprime mortgages are transferred over to 30-year loans, sometimes fixed with rates as low as 5%.

Myth #1
You have to be late on payments to get your home loan modification to process.

Not true, but being late will grab their attention.  Not many people are looking to modify their loans that are on time, but it's still worth the try.  You'll have to be persistent in getting your answers.  If you are willing to be the greasy wheel and take action, you will eventually get your questions answered by loan mitigation specialists.

Myth #2
Lenders will reduce the actual amount of the loan if the value of the home is considerably lower than the loan amount.

There are some very rare cases where a second mortgage is negotiated down for a settlement and then goes on your credit report as a settlement.  However, most lenders won't reduce the amount of your actual loan to the current property value.  They will, however, take the amount you still owe and put it on the backend of the loan waiting to be paid off upon sale.

Myth #3
Lenders, servicers, and specialists are doing whatever they can to help struggling homeowners.

If that were the case would Ohio home loan modification programs have cases going to the Supreme Court concerning fraud?  Would you have to pay huge amounts of money to a middleman to negotiate for you?  No.

They aren't out trying to help the tens of thousands of people experiencing the pain of a layoff.  They don't even have the staff to process the home loan modification packets.  You need to educate yourself.

There are plenty of DIY home loan modification programs out there.  Don't get sucked in by another media "expert" trying to prey on someone during a vulnerable time.  Do your research and look for a guarantee.