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The Pros and Cons of hiring a Loan modification company, Working with a Federally Funded Advocacy Program, or the “Do It Yourself” Loan modification approach.

Part three in a three part series:  The Loan Modification Model

By now you know what a loan modification is and how it works.  The third and final section describes the pros and cons of the different approaches available to you the homeowner.

“We Save Homes Inc. leads with education.  We hold free seminars to inform homeowners on all of the options available to them so that they are empowered to make an educated decision.  This is an important time in their family’s life, and if they are struggling to make the payment for their home that is not something we take lightly.” Comments Mike McCarthy, Chief Development Officer of We Save Homes, Inc. (GWRC) “ We have thousands of homeowners whom we have helped significantly, but like doing your own taxes, you can do it yourself, you don’t have to hire a service firm to help you.”

Below is a pros and cons analysis of three ways to accomplish a loan modification:  Do it yourself, using a federally funded advocacy program, or hiring a loan modification firm.

Loan Modification: Do It Yourself

Your success with a loan modification depends greatly on which lender you are working with.  There are pros and cons to this approach:

Pros:

1. Save money: You may save money by doing your own loan modification.  If you contact the lender yourself, especially if your lender is set up to handle these requests, you may save yourself anywhere from 1,500 – 3,500 in fees charged by loan modification advocacy service firms.
2. Learn a lot/educate yourself on the process:  You will find that you will learn a lot about how loans work by working through the process on your own.

Cons:

1. You may not get the best deal: In this way, you may actually lose money.  Many banks will alter your interest rate, doing enough to assist you, but not reducing the true struggle.  By working with an expert, you gain all of their experience and expertise.  Most importantly, the professional you are working with will be able to leverage the relationship they have fostered at the bank.
2. The overwhelming time it takes to accomplish this on your own:  Working with a professional that works with the right contact at the bank weekly if not daily insures that they are leveraging this relationship on your behalf.  It may be better for your situation if a mortgage modification professional is going through several loan modifications at the same time.  That nlender will have a more difficult time telling that professional that they won’t do something for you than telling you as you are unaware of what the bank is doing for everyone else.
3. Trust factor with the bank: The bank wants to the best job it can do for you, however they have the conflicting goal of also remaining true to their investors.  Can you trust the deal the bank is offering  you?  If you are going it alone, will you have anyone to consult or advice you whether you can get a better deal?  Whenever you are in a negotiation you are at a severe disadvantage when the other party “holds all the cards” while working with a third party representative may cost money, it puts an objective party in between you and the bank and helps keep the bank honest and true in what they can do for you.

Consider the case of Rosa Ibarra and Luz Aguirre, borrowers at Countrywide.  IN an effort to save money they did their own loan modification and received a modified interest rate only.  They did not receive any principal reduction, nor were they able to affect their second mortgage with the same lender.  Their mortgage interest rate went from 6% to 5.14% and their monthly payments went from $2400 a month to $2100 a month.  As part of the terms they agreed to with this loan modification, they cannot do another loan modification for 1 year.

Arguably, if they worked with an expert, they may have received a better interest rate, a reduction in principal and a reduction if not forgiveness of their second mortgage.

Fast forward six months, Luz lost her job and now they cannot afford their mortgage payment.  The loan modification they negotiated for themselves did not go far enough and kept them on the brink should they encounter any hardship.  They are left with NO choice now except for a short sale.

Working with a Government Agency:

There are a few not-for-profit agencies that are set up specifically to assist you with loan modification.  The most prominent government agency is the Hope Now Alliance www.hopenow.com.

Pros:

1. The service is Free
2. There are a range of services available to you including counseling, negotiating and information.
3. Their website and their counselors offer a great deal of information:  It is very worthwhile to visit their website and find out how their services can help you.

Cons:

1. Nothing is really free:   This service was set up with taxpayer’s money and the support of servicing banks to the tune of 300 million.  The banks like to refer you to this solution because like doing your own loan mod, you can only get so far and you end up with a solution that is “easy” for the banks to accept.  This can sometimes mean – not the best solution you can get for your situation.
2. This service seems to help the homeowner who fits a narrow profile.  Again, this may not be the solution that best negotiates on your behalf but rather a wholesale approach whereby the President’s plan and standards outlined by the bank are applied.

1. Slow turn-around times: Demand for this service creates a bottleneck and slows down your results.  As a borrower you will have to stand in line for this service and from early reports your loan modification could take as much as 6 months to complete.

Hiring a Loan Modification Firm:

There are a plethora of Loan Modification firms to choose from.  Many of these firms were formed within the last 6-9 months by the very same loan brokers who got homeowners into these loans in the first place.  There are some great companies that are really helping borrowers, and there are many that will take the homeowners last $3000 and never actually work on their file.

Pros:

1. The benefit of their knowledge and expertise:  Hiring the right firm is similar to hiring the right firm to do your taxes.  They will plan and negotiate on your behalf with their experience of doing hundreds of modifications and knowing where they can push for more for better results for you.
2. Leveraging the relationships they have with your lenders:  The right loan mod expert will know be on a first name basis with the right contact at your lender. Besides being able to get to the right person on the first phone call, the agent for the bank on the other side of the line knows this person is aware of what is possible and what is achievable.  There is less grey area – all of that is leveraged on behalf of the borrower to achieve a better result.
3. Quicker timeframes: When you are paying a lawyer or a loan modification professional the process should go much faster than doing it yourself or working with a government agency.  Sometimes, this is can mean the difference between staying in your home and losing it.
4. Better results:  At We Save Homes, Inc.  For example, the homeowners are overwhelmed at the results they are able to get on their behalf.  Principal reductions, lower interest rates and more favorable terms are not out of the ordinary.

Cons:

1. It costs approximately $3000.  When it is difficult to make a mortgage payment, it can be difficult to find the money to pay for a loan modification.  Make sure the loan modification company you choose has a track record of success.
2. Who can you trust?:  This is a tough one as there are many scams out there.  Firms that are taking homeowner’s money, promising positive results and not doing anything with the files.  In some cases the files are sitting there for months while the homeowner thinks there is work being done?  There have been cases of foreclosures when the homeowner was completely unaware that no communication was actually taking place with the bank.

“At We Save Homes, Inc. we make sure that we discuss each individual case with the bank prior to any fees or obligations.  We can have a solid picture for the homeowner up front.  Our portal system allows for complete transparency,” says Ryan Boyajian president for WE save Homes inc. “that way the bank, the legal assistant, the homeowner, everyone is in touch daily on the status of the files.”

Contact us for a Loan Modification Consultation today.