Mortgage Modification: 7 Secrets Your Bank Will Never Tell You!

So much power and so little accountability! These lenders have dirty secrets that they wish you did not know. Knowing these will help you negotiate a better modification and KEEP YOUR HOME

1. THERE ARE NO RULES!

By that I mean that street-smart homeowners should get on the bleeding-edge of this loan mod frenzy. The pioneers are getting extraordinary values. Whenever a big trend overwhelms and industry there is tremendous advantage that goes to the innovative and courageous. For many months I have been advising clients to pursue an aggressive loan mod solution, even when prospects seemed dire. I have been amazed at the results.

So, be brave, be intelligent and be diligent. You will prevail…at least for now.

2. MOST FEES ARE BOGUS

When you look at the amount a lender claims you owe them, you might be surprised at how large that number is. If you miss 4 payments of $1000 each, why don’t you owe $4000? The answer is late fees and penalties. The problem is that all of these types of fees have to be justifiable, and completely spelled out.

When you ask for additional concessions (in a Qualified Written Request) (more on this in #6 below) also request an itemization of all charges for the mod. Dispute any except arrears and interest. You will prevail.

3. MOST LOANS HAVE RESPA AND TILA VIOLATIONS

Up to 70% of the loans currently in effect have RESPA and TILA violations. This means that the Real Estate Standards and Procedures Act and/or the Truth in Lending Act was violated when your loan was originated. This gives you recourse up to and including the hypothetical invalidation of the loan itself! Talk about leverage when attempting to negotiate!

It also makes the claims of the “forensic auditors” shallow…I bet even I could find the violations!

4. YOU HAVE A RIGHT TO A TIMELY AND THOROUGH RESPONSE

Under Section 6 of RESPA is a requirement that lenders must acknowledge your inquiry within 20 days and respond thoroughly to your inquiries within 60 days. This request for a modification, there is a way to hold their feet to the fire. By sending a qualified written request…such as your hardship letter, request for additional concessions and request for itemization of fees… you force the banks to respond in a timely manner. This gets you priority in an overworked/ understaffed loss mitigation department.

5. PRINCIPAL REDUCTIONS ARE POSSIBLE

Yes, it is true that principal reductions are the most difficult thing to achieve when negotiating a loan mod. Some banks however, would have you believe that they simply are not possible. That is a lie.

My clients have successfully negotiated principal reductions, even for investment property. The key is to have an intelligent proposal and be bold and persistent.

6. THE FIRST OFFER IS ALWAYS UNACCEPTABLE!

Most people attempting to do their own loan modification are uninformed. Most own only one home, and haven’t had a lot of opportunity to hone their skills at modification. The lenders know this. They rely on it.

When you receive your loan modification offer, you must remember that it is the minimum that the lender is able/willing to do. They are driven to minimize THEIR loss, not yours! Ask for additional concessions in a Qualified Written Request very shortly after getting your mod offer.

7. YOUR HARDSHIP LETTER DOES NOT MATTER!

Most applicants spend way too much time crafting an elegant statement about their hardship…telling a detailed story of how/why/whose fault, etc. Save it!

While it may be cathartic for you to do…save that copy for your personal journal and send a 100-word succinct statement that answers; 1) what is your hardship, 2) how did it make it difficult for you to make your payments, 3) when did this occur, 4) when will it be resolved and 5) how much help do you need?

You should handwritten the letter. It will be read by the initial file reviewer who will scan the letter for an identifiable (read common) hardship and check-off the appropriate box on the evaluation form. It may never be read again. Sorry to burst your bubble.