There has been quite a bit of banter recently about loan modifications.  Facts have been misquoted and misleading on how loan modifications are originated, approved, and who benefits most.

     Loan modifications have morphed from a seldom used tool that was used as a streamline type of refinance to a possible real estate market savior.  However, not all modifications are created equally.

     If a borrower initiates contact with their lender about a loan modification, or vice versa, they are taking a calculated rusk.  The lender will create modification terms that are best for the bank, not the consumer.  Untrained lender departments will handle the modification request which can be a test of one's patience.  The consumer must be very careful about what they say to the lender representative.  Saying the wrong thing can back you in a corner and actually hurt your chances of getting a modification.  Conversations with your lender can be recorded and/or be logged into your customer service history as well.  People have to realize that lenders aren't required to do a loan modification, it's voluntary.

     Using a third party negotiator who goes through the lender legal department, not customer service or loss mitigation departments, takes the burden off the homeowner.  The packages that are prepared and submitted to the lender legal deparement are meticulous, deailed and to the point which cuts down processing time and streamlines the process.

     The main advantage to using a third party attorney based service vs. doing it yourself, is that the attorney knows the rules of the game and can create leverage.  Before the modification negotiating starts, the attorney will ask for specific loan papers form your original and final loan package.  The lender has 20 days to comply with the request.  With all the buying and selling of loans from lender to lender, paperwork gets lost or the the rquested paperwork may not have been prepared or in compliance with the Department of Real Estate regulations.  If the lender can't supply the requested paperwork, they are on the hook for a lawsuit.  Rather than go to court, the lender will entertain the attorney proposed modification.  This leverage can translate to lower overall monthly modification payments for the homeowner, vs. doing it yourself with no legal leverage.

     Homeowners must be aware of scams as well.  The only individuals able to collect monies upfront for loan modifications are attorneys.  Real estate industry people can not accept any monies payable to them upfront from the homeowner.  It is a violation of RESPSA, a real estate regulatory act, to do so.

     There are a few qualifiers to obtaining a loan modification, for example, you must be employed and have cashflow.  Contrary to popular belief, you do not have to be delinquent on your mortgage to obtain a loan modification.  You just have to show a hardship as to why you are struggling to make ends meet.  Hardships comie in many ways, shapes and forms.  A bad real estate loan is a hardship as well.

     Loan modifications keep families in homes and can stablize our real estate markets, but if you want to deal with your lender on your own, excercise caution.  It's best to let an experienced third party handle the negotiations.  I will pay dividends in the long run.

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