Where to start....................
Is using a professional service to secure a mortgage modification worth it? Sometimes yes, sometimes no.
Heres a yes: You are uncomfortable with the process, worry about representing yourself to the lender or have a hard time dealing with it. For many of us we will always want to lean towards someone more experienced then ourselves and this is where a professional would come in. Mortgage modification companies are familiar with the lender and the routes that need to be negotiated. The process with most mortgage modification companies is the same:
- They will typically send you a letter or a brochure outlining their "expertise" in these matters.
- You will fill out an application over the phone or in person, very similar to a mortgage application. It will ask the same questions regarding address, income, assets, employment etc.
- You will sign releases allowing the modification company to access your mortgage information.
- You will draft a hardship letter for your lender. This letter will include information from you regarding your struggle to pay the mortgage, things that have changed that have made it more difficult, and how a modified mortgage with a lower payment will make a difference on your financial well being.
The modification company will put together a financial picture based upon your information, contact your lender on your behalf and attempt to negotiate a lower payment for you. If they are successful, they will then earn a fee. LET ME STRESS THIS: It is against the law to collect a fee for this service prior to service being rendered. If anyone asks for money up front, it is fraud and against the law. They often have payment plans and you usually can use a credit card to pay your fees. If they are not successful than no fee is earned. Keep in mind the average fee is about $3000.00, which is no small potatoes.
Heres a no:You have a good relationship with your lender and are willing to deal with them directly. If this is the case you may be able to save yourself some money and get the desired result. Will the result be the same as if you used a modification company? This is the great unknown. Some say yes, some say no, modification companies insist that they can do a better job, but at this time I do not have any documented truth. Many banks now have a dedicated department solely for mortgage modification.
Success rates of modified mortgages for the banks: Numbers vary, but it is actually quite common for a borrower to still end up in foreclosure, even after a modified mortgage. This is one of the reasons that you need to have a very compelling example of how you will make it financially if your loan terms are modified. The FDIC has calculated a default rate of 33% on modified mortgages, which is staggering, but figures from market watch say it runs up to 50%! Banks are between a rock and a hard place. They absolutely do not want to end up owning your house. They have too many properties already. But with 50% default rates, they may be becoming more reluctant to deal with customers modification proposals.
Tomorrow, who's fault is this mess. I pull no punches folks.................
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