You will see their advertisements on TV or billboards from the freeway. Or maybe as you are listening to the radio or reading the paper. Perhaps your neighbor knows of one. I'm talking about companies that claim will help you modify your existing mortgage and lower your monthly payments.
Even though their services are in your best interests, many of them will charge you a very hefty fee for them. I've heard them charge as low as $600 for an initial consultation up to $4,000 for a the entire process! All this for something you can be doing all on your own!
They claim that they have a team of "expert negotiators" or attorneys that know the laws and loopholes so that they can lower your monthly payments and slash your mortgage balance in half. Although there is some truth to this, the majority of the time these are just sales and marketing tactics used to make you think that you have no chance you can do that on your own and that you "need" their expensive services.
In this industry, nothing saddens me more than to hear that families were taken advantage by a financial predator, and this is what prompted me to write this entry. What I hear the most is, "I paid XYZ Foreclosure Specialists $2,500 three months ago to modify my loan and I they won't call me back."
The process is rather simple and I'll explain why you as a homeowner is able to do this just as skillfully as they are. If you find that you need to modify your mortgage here's what you can expect and what you should do:
*Call your bank's Loss Mitigation Department and explain to them your hardship (loss of employment, hours at work cut, medical problems, maternity leave, etc.) and tell them you wish to apply for a loan modification. If you tell them you just want to get a lower payment or lower rate, they will simply tell you to refinance.
*The first thing your bank will want to know if your current financial situation is on a monthly basis (income coming in versus expenses going out). Have this information ready before you call.
*If possible, give the Loss Mitigation representative the financial information over the phone rather than requesting a financial package be sent out to you or faxing the information in. The reason for this is because faxing or mailing that information in will only result in unnecessary delays. This process will be different from bank to bank.
*If you qualify for assistance, your file will be given/assigned to a negotiator. This process will take anywhere from 30 days up to 2 months, depending on the bank.
*The negotiator will then get back to you with a proposal in the form of a loan modification, a forbearance, or a partial claim. If you agree, they will mail you the agreement which you need to sign to formally accept the terms.
That's it!
If you noticed, nowhere throughout this process was there ever any "negotiations" going on.
If anything, they would take place on the last step, when the negotiator will give you the terms. However, most of those terms are non-negotiable because they are coming directly from the investor, who about half of the time happens to be another company other than your bank! Surprised?
Here's where the GSEs (Government-Sponsored Entities) come in. They are Freddie Mac, Fannie Mae, and Ginnie Mae. These three companies own about half of the mortgage debt in the country. And the bank who you thought was your mortgage holder is only acting as their servicer for them - and because they own the debt to your mortgage, they are the ones that decide what the terms are going to be, and are usually non-negotiable.
If your mortgage does happen to be owned by your bank, the terms will be easier to negotiate since the actual money belongs to the bank. But the overall process will be the same.
Now, going to one of these companies and paying them your hard-earned money (which is hard to come by if you're in need of having your mortgage modified anyway), the first thing they are going to do is take your financial information (step 2 above). They will then mail or fax that information in to your mortgage company and the rest of the process will be the same.
The relationship with these companies often delay the process. The first reason is that they are considered a third party and for privacy laws they will bank will need to have an "authorization to release information" from you, which will take anywhere from 2-3 business days up to two weeks for the bank to receive. Another reason is that these companies will have many other files they are working with and will often times not have enough time to follow-up with your case.
Of course there are always exceptions to this. There are legitimate companies out there that are really out there to help. These are often approved by HUD or the government to help home owners deal with this situation. To find them, check out HUD and Homeownership Preservation Foundation.
Whether you use one of these companies or you decide to do it on your own, I wish you the best of luck. And the best advice I can give you is to have perseverance. If you're thinking about doing a loan modification or are in the middle of one and need some advice, don't hesitate to call me. I will help guide you through this process.
One last word on this, what I just described above is the "normal" process. As always, there are always exceptions to the rule. If you've had a different experience, by all means share it with the rest of us.
Manny Carrillo
REALTOR®
SJ Fowler / GMAC Real Estate
4015 S. McClintock Dr., Ste. 110
Tempe, AZ 85282
480.338.3062 - Direct
www.mannycarrillo.com
MLS Property Search!
