The Truth About Mortgage Modifications: The Secrets They Don't Want You To Know

The Truth About Mortgage Modifications: The Secrets They Don't Want You To Know

By S. Norman Nash--

We all have been told that the Obama administration's modification programs have been designed to help the overall economy by resolving the mortgage crisis. The Big Myth is that these programs are readily and easily accessible to everyone, and that homeowners must be delinquent in their payments to qualify. In reality, you can qualify without being delinquent. But most Americans still find it tough to talk to lenders unless they are delinquent.

What's the solution?

Below I discuss common problems experienced by many individuals, including several members of Congress and State Representatives when applying and talking to lenders about these programs for themselves and their constituents. I also review why Attorneys can be a better choice in negotiating with lenders for obtaining superior terms and results.

Also I offer a time-saving solution when using such services as File Reviews www.filereviews.com, an innovative service that give attorneys and individuals fully documented files within a few short weeks.

We, the public, have been told that everyone with a mortgage is entitled to go to their lender and apply for a modification and that they will help us for free. They have gone public on TV stating that they are ready and willing to help the public in a timely fashion. Unfortunately, this is the myth.

For over a year now, lenders have been saying that they are willing and able to help the public with this with expediency. Yet they fail to live up to their promise, as documented by ABC Night Line News on Jan. 29, 2009.

The program shows three lenders giving California's Congress woman Maxine Waters "the cold shoulder" when she tried to help three of her constituents. The lenders sometimes left her on the phone for hours without getting any assistance. Congresswoman Waters commented in this interview: "The average American trying to get through to negotiate a loan modification will not get it done!"

One of the first question lenders asks their customers who apply for a modification: "Are you delinquent?" Most will not even consider a modification unless the customer is delinquent. They will basically try to put their clients in delinquent or foreclosure status first so that they have all the leverage when negotiating. If the mortgagor is current with payments, the "modification" is not a priority for the lender.

The attached Home Affordable Modification Program Supplemental Directive 09-01 4/4/09 states in HAMP Eligibility on page 2:

"The mortgage loan is delinquent or default is reasonably foreseeable; loans currently in foreclosure are eligible. This means if you have foreseeable' hardship, be it a decrease in income or added expense, such as a new baby, you may be eligible for the modification.

See the attached HAMP Hardship Affidavit, Fannie Mae Form 1021 August 2009 for a list of possible hardships

I have personally talked to several people who represented themselves in early 2010 that told me their personal horror stories, when applying for modifications. Spending hours on the phone, on hold most of the time. When they were lucky to talk to someone, it was a different person every time; not always having access to the existing files and the customer had to start over again, wasting precious time. Then they were unofficially told (although no lenders will never admit this) that they must be delinquent before the bank will talk to them.

Thinking they needed to be late these people stopped paying their mortgage for several months. Then they received a letter, starting the foreclosure process. It wasn't until this point that the lender would talk to them about their file. Now that the lender had them just where they wanted them a ruined credit rating and foreclosure status on their mortgage, they strong armed these unsuspecting individuals into accepting whatever terms they wanted to give them.

Did you know lenders are not required to tell their customers the maximum amount that they actually qualify for? They are only required to tell the customer how much they are being subsidized. For example if the bank suggests a $500 modification is available, it is likely that the client has been approved for much more, in some cases doubling this amount. It is the job of the mortgagor and/or their Attorney to negotiate with the lender in order to get the maximum modification they qualify for. Remember, all lenders are trying to make a profit and so the less they give the more money they keep.

Some elected government officials and State Representatives are now getting on the band wagon to help their constituents deal with these lenders.

---US Senator Kay Hagan helping save homes 2/14/10

http://stellahopkins.blogspot.com/2010/02/us-sen-kay-hagan-helping-save-homes.html

---Sen. Brown looks for additional federal foreclosure funds for Ohio 3/8/10

http://www.bignews.biz/?id=848959&keys=Senator-SherrodBrown-Foreclosure-Ohio

---Representative Danny K. Davis (D-IL 7th) 7th-term Democrat from Illinois.

Mortgage Modification with Citimortgage 1/22/10

http://www.congress.org/congressorg/bio/userletter/?letter_id=4568090381

Individuals do have the right to negotiate, although having an Attorney in your corner in my opinion is always better when negotiating. An Attorney may also be able to remove delinquent payments, interest and fees, thereby saving the individual huge amounts of time and money.

In order to process a Government Subsidized Modification, lenders are required to use a "Certified" Net Present Value Test (NPV Test) to calculate a modification. This test calculates how much the lenders will profit or lose if they a) modify a mortgage or b) foreclose on the property. It also figures out how much of a government subsidy the bank is entitled to, in addition to how much the lender's portion should be added to the monthly reduction (a closely guarded secret that's usually extracted from the bank only with a court's subpoena). After all, this is where the lender's profit margin lies when they negotiate for the final reduction figure and this information is carefully guarded. In turn a Failed NPV test calculates the bottom dollar figure the lender will consider for a Short Sale.

To Gain access to the "Certified" Net Present Value Test spreadsheets and federal data feed used to create this NPV Test, one needs to be a lender or certified to do so. To become certified, stringent background, educational, and financial requirements are imposed. This means that 99% of the mortgagors/Attorneys that are applying for these modifications will never have upper hand when negotiating with the lenders. But, there is good news for everyone! There is a place where Attorneys and individuals can turn to for help. File Reviews at: www.filereviews.com.

Lenders take three to nine months to get this information to mortgagors, and Attorneys, File Reviews takes 3-4 weeks, a definite improvement.

File Reviews has "Certified" people on staff, thus allowing Attorneys and individuals access to the same "Certified" NPV spreadsheets and federal data feeds, calculating the same NPV test that the lenders do, in advance. Showing a client their maximum reduction figure allowed, before they start negotiating.

In essence, File Reviews Eliminates the Negotiation Process.

All in all the process of applying for a mortgage modification is a complicated and time consuming process. However with an Attorney and File Reviews; I feel you will save more time, get superior results and all with less headaches.

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