I have been hearing all sorts of different things floating around about loan modifications.  Lets see if we can figure out what is fact or fiction.

1.  The lender will pay the loan mod consultant money to do the loan mod.  I have heard this one around and even saw a commercial on TV that mentioned that all fees from the loan mod is paid by the lender.

2  There is software that the loan mod consultant can run the deal through and gives an output to send to the lender for the mod.  I assume it gives a recommendation on how to get the ratios to 38%.  I know First American sells software to the servicers for loss mit but I am not sure if this is what people are talking about.

3.  Some people tell me they get mods done in a week or two others tell me it takes 60-90 days.

4.  Principle reductions.  I haven't heard many people say that they were able to get principle reductions on mods.

1. Lenders do not pay modification companies for their services, the client/homeowner is the one who pays the cost

2. Every company is different, but there is no streamline software which is used across the board. Many companies approach the lender different ways too. The proposal given to the lender should be based on what you can afford, without being unrealistic based on your loan amount and other lviing expenses. If you work with the right company, they will tell you that not everyone will qualify for a modification, regardless of what formulas or systems one may have available.

3. Mods HAVE and CAN be done in a couple weeks, but that is strictly on a case by case basis and is mainly reserved for homeowners with a foreclosure/trustee sale date in the near future. Due to most lenders being overwhelemed at the moment, 60-90 days is a good time frame to prepare for.

4. Principle reductions are not so common on first trust deeds/mortgages. Most lenders would rather cut the interest rate drastically to bring the monthly payments down instead of writing down balances. Mass principle reductions would equate to a severe, immediate downgrade on the value of their assets, and as we all know, banks/lenders are not in the position to take anymore hits. Reducing the rate itself sets up the borrower to have an affordable payment, and assures the lender/servicer that they will again have a performing assets.

Principle reductions on second mortgages however are much more common than a first. In the event a borrower is behind and close to foreclosure, the second note holder will likely walk away with nothing, so it is in their best interest to aggressively modify the loan, which more often than first liens, equates to a balance reduction.

In regards to software, I have been using www.modprovider.com

It is a web based loan mod origination that allows you to calculate the DTI and generate the initial documents.

contact jay@modprovider.com

Justin,

Great info!

In most cases the borrower can and will get the same MOD offered as what a third party can provide.

Regarding point #1. Actually, a select group of "main stream" lenders DO pay for the costs of Loan Mods, among other loss mit solutions. There are a couple of brothers in Orange County that run a business on the web and that is all that they do. They are NOT an outside contract processing firm. Their fee is $1,250 to the lender. The lenders make the connection of the homeowner to this business. This was their business model right from the start, about 3 years ago.

"Most cases" is a pretty all encompassing phrase, and in this context I would asy that it is not true. And the reason, is quite simple.

Most lenders will not even talk about a modification until the homeowner is 60 day down. The new govie guidelines becoming more often used also require a homeowner to be delinquent. The reasons are many: Lenders are understaffed, they make more money servicing delinquent homeowners, and it is in the best interest of the trust to retain the highest NPV of the trust.

A modification submitted by a sharp mod company or an attorney's office can break past that 60 day barrier for homeowners that are current or maybe only 30 days down. I have seen this many times and with at least 7 different attorneys which I've had occasion to work.

And, as an FYI, it is not because we are going in claiming RESPA or TILA violations.

Do you know which "main stream" lenders pay the cost of the loan Mod?

Can you post the website address for the loan mod company?

What do you mean when you say, "The lenders make the connection of the homeowner to this business."

Thanks

This is so misguided. How many mods have you done? Seriously. Have you actually "fought the good fight?" Do you leave the borrower in a better position than they were in? Show me a borrower who received a 3% for 5yrs from a 9% from dialing the 800# and I will gladly  rescind my comments. But, unless you are a Type A personality with a TON of free time, you won't sniff what we could do.

Here is the thing, which most companies won't say....Loan Mods, in their true form, are a luxury and not a necessity. I wish it was the other way, but it isnt. Lenders can't afford to build up a mod department so they see us as a necessary evil. Lenders are willng to give a little more in the negotitation because they consider it a cost of doing business to package and process the file. We do all the work at no cost to the lender.

If that doesn't make sense, then you are in the wrong business.

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