If it sometimes seems like an uphill battle to keep your home, it is.Mortgage servicers vary greatly in how they approach loan modification. According to the July US Treasury Department Report, the Bank of America has modified 50% more loan mods under the Obama Plan than Wells Fargo (9% of those eligible compared to 6%.) Most striking is Home Loan Services with 30,000 eligible loans. Through July, that servicer has modified none of them. When it comes to short sales, the numbers are only barely better. Since the mortgage crisis began, only 23% of the offers have been accepted by lenders. The United States is on track to top 2 million foreclosures this year.
What should a borrower do to keep his or her home?
First, admit that there is a problem. If you are maxed out on your credit cards and struggling to pay the bills each month, don’t wait until the bill you miss is your mortgage.
Put your family on a budget. Our parents and grandparents got through the Great Depression because they faced reality and learned how to handle it. Just because your five year old SUV qualifies for the cash for clunkers program does not mean that you need a new car payment at this time. Kids do not always require new clothes to head back to school. Eating out is an extravagance. A hundred dollars a month a month between cable TV and Netlix can be eliminated with a set top digital box and DVD runs to your local library. Involve your family in creative ways to save. It’s better than losing your home.
There are signs that the recession has reached bottom, but employment is a lagging indicator. Productivity in the US has risen significantly this past month, meaning that employers are making do with fewer workers. Several of my former colleagues in television news have lost their jobs because ad revenues are down and stations have learned that viewers keep watching even though less time is spent on researching and editing the stories. There, as in other businesses, employers aren’t about to hire again until they are overwhelmed by handling the demands of new work.
If you can’t keep up, get help. Should you get a call or a letter that offers help with your mortgage, look into how legitimate the company is. Is it a member of the Better Business Bureau? Is it registered with your local regulatory agency like your state’s department of real estate? As a final check, call your mortgage servicer and see if it even knows about the entity.
Watch out for red flags such as any company that charges large fees up front for assistance. Once you’ve paid, what incentive does a foreclosure rescue firm have to do any work for you? The salespeople for these businesses are on commission only. Don’t respond to pressure closing tactics. Trash any fliers placed at your door. These are usually left by fly by night firms that don’t want to leave themselves open to charges of mail fraud, a federal crime.
Throughout this site we refer to US Department of Housing and Urban Development (HUD) approved counseling agencies. Go to this map, and choose one here. For another option in low cost legal assistance to low income homeowners contact Legal Aid. Look for an office in your community.
Be patient, persuasive and persistent. You are not alone. Even the rich and famous have gotten into foreclosure trouble including Ed McMahon, Aretha Franklin, Jose Conseco, and Evander Holyfield to name a few.
Keep these useful posts in mind:
- Do it yourself loan modification
- The paperwork you need for a loan modification
- What constitutes hardship for a loan mod?
If you are reading this as a mortgage servicer, it’s time to gear up for incoming queries. Unfortunately between May and June of 2009 despite the press of the mortgage crisis, employment has been cut in the US mortgage industry by 500 jobs. If you don’t have the infrastructure in place, hire a reputable firm to do loan modifications and refinancing for you.
There are three kinds of borrowers applying for loan modifications:
- Borrowers who with belt tightening could continue to make current payments
- Homeowners who don’t have enough income to make lowered payments, who will probably lose their homes anyway even after a loan mod
- Those who can’t maintain their mortgages without lowered payments
For a servicer, loan mods make economic sense only for the last group. A professional mortgage modification firm will be able to distinguish between the three and clear your backlog of applications.
If lenders don’t get proactive, then expect to see Congress enact cram down legislation that will enable bankruptcy judges to slice loan principal with the stroke of a pen. Even worse, there is now a movement to enact “right to rent” legislation which will give even the most irresponsible borrowers the legal right to stay in their homes for an indefinite period of time. This approach will make it nearly impossible to sell a foreclosed home at auction, further depressing home sale prices.