With the new and not so new "help is on its way for borrowers", I have received a few calls and visits from people that I know, that want to modify their loan. Many of these people are under terrible financial distress, but they want to stay in their home. They do not want to do a short sale or be foreclosed upon.
Some of the people that I interviewed lost some of their income. The wife of one of them lost her job but the husband is still working. With one salary, they have enough to pay for their basic needs and have some money left over to pay a reduced mortgage payment. This is why loan modifications could work for millions. The problem is that most of these borrowers do not know where to begin to obtain a loan modification. Many did not even speak the language fluently.
With such a short sample of borrowers that came to me for help, it comes to my mind that the program is not going to succeed without the help of Realtors. I know that attorneys are doing loan modifications and many companies have sprawled all of a sudden on the Internet and TV promising loan modifications, but that is not going to be enough and maybe, some of these companies are shady enterprises not to be trusted.
I decided to help a few of these borrowers and I was successful in obtaining loan modification commitments from some lenders. It took a lot of time and effort. Now, collecting money from these people that came to me for help was out of the question. The economic stress they were feeling was right on the surface. How could I charge for my services?
In some of the loan modifications that were accepted, the missed payments were added to the principal. No lender agreed to reduce the principal to reflect the present value of the homes. In calculating the payments that the lenders were going to receive on the proposed loan modifications, I noticed that they were going to be receiving the full amount owed. Over longer time, with reduced payments, but the full amount.
Banks are going to be swamped with loan modifications and they are not going to be able to service them diligently, so many of them will end in foreclosures. So, why can't Lenders pay Realtors a fee to be the liaisons between borrowers and them, just like short sale deals. Loan Modifications are a much smarter alternative for lenders than short sales or foreclosures, where they lose their shirt doing them. Wouldn't it be better if lenders partner with Realtors to do the bulk of loan modifications with the agreement to pay one or two points over the loan amount if the loan gets modified? That certainly will take away the pain that borrowers feel when they have to pay attorneys or Loan modification companies in advance.
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