Beware of Mortgage Modification Specialists

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Many of the same predatory lenders who took advantage of unsuspecting borrowers with questionable loans are still out there taking advantage of the same customers with mortgage modification schemes. If you truly believe you are in need of a mortgage modification, here are some red flags for you.

Here are several things to watch out for from dubious mortgage modification specialists. First, avoid someone who tells you to purposely not pay your mortgage. Avoid someone who collects monthly payments while you attempt to modify. Some modifications can take as long as 8 months. The fee should be a flat fee that is placed into an escrow account until your modification is approved or denied.

Avoid a modification company who has a fee over $2000. I have heard of fees as high as $5000. If you are in foreclosure, you will need a foreclosure attorney which costs more but still fees that high are unnecessary. Avoid someone who tells you they can guarantee anything, especially lowering the principal balance.

Never sign the title of your home over to anyone. If you succeed in your modification, you will be asked to sign a mortgage modification agreement generated by your current bank at the end of the process.

Here are some traits of a mortgage holder who has a chance for a successful mortgage modification:

The total debt ratio of the household should be about 100%-120%. That is the sum total of every bill paid each month. The banks know from statistical averages that if a customer is deeper in debt than this, chances are they will not succeed even with a mortgage modification.

Banks want to understand the problem, and hopefully see the fix. E.g. Someone who was out of work who recently became employed again. Tell this to them is a hardship letter.

Your chances they will listen improve if you have a costly adjustable rate mortgage that just adjusted upwards. Your chances they will listen improve if you are upside down on the value of your home.

Your chances they will listen improve if you are beginning to get behind on your mortgage payments.

Do not talk to the collection department; ask to be transferred to the loan mitigation department.

On March 4, 2009, our government came out with a standardized set of rules for mortgage modifications in the form of the Home Affordable Modification Program. This legislation has two key components. One is to provide a standardized set of rules for bank’s to follow when determining if a customer should be entitled to a mortgage modification. The other half of this legislation is the home affordable loan program designed for customers with limited equity in their home and good credit.

Prior to this legislation, Bank #1 would act one way modifying loans, Bank #2 would act completely differently and Bank #3 wouldn’t do anything at all. Now the modification departments of these banks have a standardized set of guidelines to follow which include cash incentives for each modification granted.

The Home Affordable Mortgage Program allows a customer with a loan to value between 80% to 125% to refinance into one of today’s excellent low fixed rates.(Around 5%) Any mortgage holder who obtained their mortgage in the spring and summer of 2006 and 2007 should be looking at this option.

At that time, mortgage rates were in the mid to upper 6’s. The best part about this mortgage loan program is that there is no costly mortgage insurance which makes the payment higher. To qualify, the borrower must have an existing Fannie Mae loan, be current on their mortgage and fit the normal criteria for proving income. So often I am approached by clients who are pondering a mortgage modification when in fact they qualify for this mortgage loan program with a low fixed mortgage rate. This loan will benefit customers who bought their homes a few years ago and put the 20% down, and then declining values withered away their equity. This avenue is designed for the responsible borrower who pays their bills on time. To determine whether or not you have an existing Fannie Mae loan, I placed a Fannie Mae lookup link on my web site. This option is better than a mortgage modification because you will receive a 30 year fixed interest rate. Many mortgage modification programs are only fixed for five years then become adjustable again.

Written by Preston Ware
First South Mortgage
Tel: 704-542-8057
* http://www.prestonware.com
Email preston@prestonware.com.