The Truth About Loan Modifications

1.      If you are facing foreclosure a loan modification is not a good solution because, many third parties have or are asking for illegal or unethical upfront fees
(Never pay up front fees for a loan modification).

2.        Lenders have only been approving a small percentage of loan modification applications.

3.       Most third parties are not successful at getting their clients' loan modifications even if they are licensed realtors or working with an attorney.  

4.       Even if your loan modification does get approved it will not solve the problem.
A.)  They are typically good for the lender and bad for the homeowner.
B.)They will entice you by offering you a lower interest rate and to make you current. But at the same time they will add your unpaid interest and late fees to your principal balance.
C.) In the final analysis if you are still going to owe more than your property is worth, you will still be upside down and are going to be paying out your hard earned money to a lender that has no intention of letting you keep the property or see a dime of return on your investment.
Everything you pay toward the modified loan is money thrown away.

5.       Modification are often for only 5 years or less then your loan reverts back to it’s original terms.

6.       Modifications typically result in you paying a much higher payment, taxes and insurance and HOA fees if any than you would have to pay for renting a similar home.
A.)Since you will not be building any equity as a result of your higher than rent payments because your loan balance is higher than the value of you home, there is no point in paying that higher payment to own.
B.) It is better to just rent a home for a lower payment and save your extra money so you can buy your next home at a great discount like others are doing today.

7.       Modification is bad for one major reason. Lenders are NOT lowering your unpaid balance. If your home is worth less than the balance owed to the lender, it is a bad investment.  If you are not building equity and have negative equity, sugar coating it with a low interest rate will not turn a bad real estate investment into a good real estate investment.   

8.       Modifications often do not lower your payments. if you had an interest only loan, an option arm or if your loan rate reset, when the lender offers you the modification, it is normally principal and interest (fully amortized) and even at the attractive lower interest rate, it does not lower your payments and in fact sometimes increases your payments.

9.       Lenders after approving your loan modifications force you to take the deal by holding your property hostage. Assuming you are behind on your payments they will only give you a few days to accept the deal or it will be void. Upon looking at the deal you will see that they will entice you to accept it by offering to make you current and lower your interest rate. The problem is that the way they make you current is to take all of your unpaid payments (interest) and late fees and add that to the unpaid balance. They drop your interest rate (not your balance) to make it appear that they are doing you a favor.

What they are really doing is forcing you to either let them take your home or agree to their terms. You will be made current just by signing and returning the modification and you will get an amazing low interest rate. The only problem is that the principal is being increased and you are now paying interest and making payments on a larger liability that can not be supported by the asset. They are okay with you being upside down and having negative equity, because they are shifting the burdon of the problem to you.    

10.    It is no wonder that by some reports nearly 100% of all loan modifications made by lenders fail within the first 12 months and the properties end up back in foreclosure.

11. Another trick lenders are playing is that they have you make three months of trial payments telling you that you will be approved and the modificaiton will become permanent after you make three on time payments. Then at the end off the thre months they tell you that sorry but you don't qualify for a low modifaction and sometimes offering to have you try again. I have heard this same story over and over again. Then they go stright to sale with your property in less than 21 days giving you no time. They use the three month trial ploy to get you to keep making payments all of the while while the clock tics on your foreclosure so that they manage to keep the payments coming in from you during the foreclosure period.

12. Face it, if 86.5% of mortgage holders are still making their payments they want to keep that figure up for as long as they can.