Many homeowners do not really understand what they are paying for then they send out a few thousand dollars to a company or law firm offering loan modifications. Too often, they believe they are paying $3,000 for a guaranteed reduction in their monthly payment, interest rate, and principal due on their loan. But the reality is that homeowners are mainly paying for convenience — not a guarantee of any sort.
In fact, loan modifications are not even that difficult to negotiate. The whole process may take a total of five hours of actual negotiation between the homeowners (or their representatives from a law firm or loss mitigation company) and the lender (or its representatives from a servicing company or foreclosure law firm). In most cases, this can all be done easily enough just between the borrowers and the mortgage company.
However, the few hours of actually speaking with the loss mitigation department of the servicer and getting all of the proper instructions in place to move forward with the loan modification is surrounded by potentially dozens of hours of bureaucratic nonsense and inefficiency. As soon as borrowers begin negotiating with their bank for any kind of workout solution, they can expect to run up against the following roadblocks:
- Multiple-hour long hold times per phone call
- Numerous disconnected phone calls after long hold times
- Phone calls are sent to voice mail boxes which are full
- Voice mails left with non-full boxes are never returned
- Faxes sent to servicing company are lost
- Faxes resent to servicing company are lost again
- Law firm is unable to create consistent payoff statement for loan
- Law firm needs information from lender; lender needs information from law firm, creating multi-day delays for any information
This is what turns a 90-minute loan modification negotiation into a three-month nightmare of being on hold, not getting phone calls returned, faxing information to the lender, and waiting as more interest, late fees, and legal fees are added to the account everyday. Wading through the lender’s inefficient business practices is the main value a foreclosure assistance company can provide to homeowners attempting to stop the process.
This value offered by loan modification companies is even more important when it is found that they did not provide any services to borrowers. When a mitigation company is exposed as a scam, it is often due to the fact that it never contacted the lender or opened negotiations for a workout solution. As soon as the borrowers find out that they have been conned, they file complaints about not having been able to save their homes.
But the saving of the house is almost secondary to the real service these foreclosure help companies provide. If the homeowners do not really have the financial means to qualify for a solution to foreclosure, the lender will simply turn them down. As well, if the Pooling and Servicing Agreement (PSA) states that only a certain number of loans may be modified, the borrowers may just be out of luck according to the terms of the PSA contract.
Thus, homeowners need to understand that, when they give a loan modification company thousands of dollars, they are not paying to “save their home.” They are paying mostly for the convenience of not having to wade through dozens of automated phone systems just to sit on hold for hours a day and ultimately leave voice mails that will never be returned. Loss mitigators can also offer proposals that are reasonable for banks and borrowers and present them nicely, but the main value they provide is saving homeowners time and frustration during a very frustrating experience.
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