Integrity

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Loan modification is a fast growing industry primarily because there is a great need for many home owners to modify the terms of their loan so they at least have a chance to stay in their residence.

Prior to the loan modification surge, borrowers who were unable to make their mortgage payments had only two choices: short sale or foreclosure. Obviously, either of these requires the person to vacate their home, which, in most cases, is the last choice the homeowner wants to take.

With a successful loan modification, interest rates, and in some cases principle owed, can be lowered and may be combined with a lengthened amortization, so monthly payments are in line with monthly income.

Most lenders now have active assistance for their borrowers so they can modify their loan without outside assistance. However, it is time consuming and often confusing, and many borrowers turn to firms such as ours for assistance in the process.

We are also hearing from a lot of mortgage brokers and realtors who want to try to help their clients stay in their homes. If we can’t modify the loan, we refer it back to the realtor for a short sale.

As with every industry, there are unfortunately those who want to make a quick buck at the expense of someone else.

Here in Colorado the director of the Division Of Real Estate found it necessary to issue a position statement regarding who can negotiate a loan modification. The statement requires anyone negotiating on behalf of the borrower be a licensed mortgage broker, unless they are an attorney licensed in Colorado and not engaged primarily in the loan modification business. The Director found this necessary because of complaints of borrowers being charged up front for a loan modification without refund if the loan modification was not accomplished.

I recently responded to a radio ad from a loan modification firm. I found that it was a law firm that charged a several thousand dollar retainer, for which there was no refund if the modification was not successful.

Homeowners have also been advised to quit making payments either to make their case for modification stronger or to have funds available to pay the loan modification firm.

I believe it takes a serious lack of integrity to take money from someone who is already struggling to make their house payments and then refuse to refund it when there are no results. Also, recommending that borrowers quit making their monthly payments, will no doubt result in a declining credit score. We have not found that being behind in payments is a prerequisite to a loan modification.

There are non-profits who offer loan modification services at no charge, and although many provide a good service, we have been informed of many cases where the modification doesn’t get done. This may be because the non-profit is under funded or under manned, but the process drags on and on.

Homeowners looking at the promise of an affordable monthly payment don’t need the additional frustration of waiting month after month for results and then face foreclosure after putting their faith in a loan modification company (non-profit or not). If the loan modification can’t be done, let the homeowner know quickly and refund any deposited fees so they can move on to short sale while there is still time.

With proper up front screening we can determine which cases will be successful with 90% plus accuracy, and within a few weeks the loan is either modified or rejected.

The Colorado Division Of Real Estate recently issued subpoenas to thirteen loan modification firms in Colorado and other states because of misleading solicitations and a no refund policy. Firms that operate with integrity appear to have no problem with their records being reviewed, and in some cases, have stated they look forward to the attempt by the Division to put some honesty in the business before it gets too far out of hand. Hopefully, agencies in other states will put some regulation in the industry

Unfortunately even with regulation some home owners will continue to lose money with no results and some honest firms will be harmed because home owners are afraid they will be cheated.