In the jungle, the strongest predators prey on the weakest and most helpless. And after years of being an entrepreneur, let me tell you, the business world is no different. As we saw from 2003-2007, the predatory lending practices of the mortgage brokers and bankers has greatly affected the economy of today. By now, we know all about the "sub-prime and Alt-A" loans that have put many fragile homeowners in a tumultuous situation with an uncertain future.
Now, with economic fears nearing their highest point, here comes a Knight in shining armor, riding his/her white horse, just waiting to rescue these borrowers in distress. Is it some fairy god mother, or perhaps a genie in a bottle? No it's "Loan Modification Man"! Loan-Modification can be a very tricky transaction, so buyer beware! Does everybody remember those mortgage broker/ tricksters who put you in these alternative loans in the first place, well these are the same group of nomadic heartless predators. That's right! The same S.O.B. that got you into this mess in the first place, now has a magical solution that will keep you in house, safe and sound. Well, fool me once, shame on me. But, you won't get a chance to fool me twice!
The primary action of most of these loan-modifying predators is to change your loan from a 20 or 30 year term to a 40 or 50 year term. Now, let's be reasonable here. A 50 year mortgage loan! These people should be shot just for suggesting that. Yeah your payments are the same, and you should have that house paid off just before the year 2060. And I'm sure that the hungry loan-modifying predator made sure that he/she gorged themselves on a couple of percent of your new loan, amounting to a few more months of payments for you.
Don't get me wrong, I am all in favor of negotiating with a mortgagee to lower interest rates or make other adjustments to help homeowners keep their homes. But, I am advising all of my clients in this situation to proceed with extreme caution. Have a third party review the new loan documents to check them out. Take a close look at your financial situation, and have an idea of what you want to get out of the negotiations before they even start.
Because remember, it truly is a jungle out there.