Stacey is a guest contributor who’s had her share of struggles with debt — in particular, her mortgage. I invited her to share her story about how she’s working to prevent her house from going into foreclosure. Her goal? To lower her existing mortgage rate with a loan modification.
Much like everyone else, I experience financial victories and losses based on the current economy. One of the financial challenges I’ve faced recently was to do with keeping up with my mortgage payments. Recently I fell a month and a half behind on my mortgage, so I began to think about what it is that I needed to do to ensure that I get back on track with my payments.
Exploring Options To Save My Home
We already know that when we don’t make our mortgage payments, the lender can foreclose on our home. The foreclosure process takes time and money: the average cost to the bank for foreclosing on a house runs about $50,000. The New York Times recently reported that 1 in 11 mortgage holders are now facing loan problems. With more people in recent years getting into trouble with their housing payments, banks are eager to resolve these financial issues on a positive note: it is in the bank’s and your best interest to settle the loan amicably rather than to deal with foreclosure. But do you really know all your options? Refinancing is one way to go about it, but I’d like to explore this other thing called a “loan modification”. I want to be proactive here and do what is needed to avoid foreclosure as much as possible.
What Is A Loan Modification?
Here’s what a loan modification entails: it lets a homeowner and lender change the terms of the loan so that the homeowner (in this case, the borrower) can stay in the home without having to face foreclosure. Loan modification is one avenue you can check out if you’d like to rework your mortgage situation: you won’t be refinancing or dealing with a new mortgage; instead, you’ll be renegotiating your current mortgage. In order to lower your monthly payments, the lender might:
- Decrease the interest rate charged on the mortgage loan;
- Change an adjustable rate to a fixed rate, especially if your adjustable rate is going sky high;
- Lengthen the time you have to pay back the loan;
- Decrease the principal due to the lender;
- Waive certain late fees;
- Possibly waive or wipe out a second mortgage.
I Hired A Loan Modification Service Provider
I’ve tried to extract myself from my financial bind by seeking assistance from the HUD’s HOPE For Homeowners program on getting a loan modification. It took endless hours to schedule conference calls with HUD’s HOPE for Homeowners. When I first started this process, we weren’t quite behind on our mortgage payments but warned them that it was possible that we’d fall behind under our current financial circumstances. But here’s the irony — I then found out that unless we were actually falling behind, we wouldn’t be eligible for the program’s help. So ultimately, HOPE For Homeowner’s didn’t work out for us. For those homeowners like me who are in limbo… are there any options?
I’ve decided that I’d look into hiring someone who could help me out with a loan modification. Why? Because I’ve got conflicting priorities in my life right now, so I simply don’t have enough time to deal directly with the bank. In my case, I’ve secured the help of a company that provided mortgage assistance as a professional liaison who’ll work in my behalf. I expect them to have the professional experience to streamline the process and cut through the jargon.
Loan modification services include such online services as Loan Modification Fast and Home Foreclosure Fighter. For other loan mortgage service providers, you can check out and the more familiar LowerMyBills.com.
I am hoping that a service like the ones mentioned above can help me wade through the latest programs that will help me keep my home. Of course if you have any thoughts and ideas on this decision, please feel free to share them here. Do you agree with my decision? Does anyone out there have specific experience with loan modification services?
I just started the process with the loan modification agent so I’ll keep you apprised of my progress. On Friday afternoon, I filled out a secure online form with my name, address, telephone number, email address, mortgage loan amount, loan interest rate and house value. The site I am using has a telephone verification system which works to connect me with loan professionals whom I’ll be speaking with about my situation. Let’s see how it works!
For more information, you can check out these additional strategies for lowering your home loan rates.
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{ 22 comments… read them below or add one }
Stacey – I’m sorry to hear about your difficulties. The economy seems to be back to full steam with a raging stock market, and faster corporate earnings growth, so it’s only a matter of time when the job market and income growth comes back. Try to hang on as long as possible.
Depending on how much equity you have, and whether you need to borrow in the future, the option many Americans have taken is to simply walk away. Yes, your credit will suffer for 7 years, but is it worth funding something which may take decades to come back? This is clearly a moral issue, but thousands have gone this path, and have therefore benefited from the system.
Alternatively, simply play a game of chicken. You are already late with your mortgage, so your credit is getting dinged already. Speak to the loan mod dept DIRECTLY and mention your proposal, and other bank’s offers. They WILL budge, especially since you are already late. It’s about estimating their downside loss, and yours, and coming to a happy medium.
Don’t go through these programs you talk about. Just don’t do it. You DO have time to make a phone call and negotiate. Seize control of your own finances!
Keigu,
Financial Samurai
Financial Samurai,
Thanks for your thoughts! It’s often the case that many people have tried many avenues before they reach the point of checking out third party agents to help them with debt reduction or management programs. For some, the money they end up paying has been worth it to be able to offload some of that worry and stress on “someone” or something else.
When handling your debt, it’s always best to do things yourself as it is undoubtedly the most affordable way to do it and there are services that may not really help you much, if at all, whilst taking your money. I certainly advocate DIY financial management. But regarding handling your mortgage, these are the options you have when you’re having trouble:
1. Manage your debt and mortgage issues yourself. Negotiate with your lender, find programs that can help.
2. Find others to help you hang on to your home. Refinance, modify your loan, etc.
3. Sell your house (even take on a short sale).
4. Foreclose or walk away.
What would you do? I’d go down the list if I find myself in a bind. Every case and situation is different, so you’d have to weigh your own situation carefully to figure out what to do.
There are a lot of shady advertisements featuring mortgage modifications. Use caution getting involved.
If you’ve got specific horror stories, let us know! I’d like to hear about actual concerns you’ve had on dealing with your mortgage. The general vibe I get from people on the subject of foreclosures is that while it seems practical for homeowners to just walk away when things get tough, there are many who find this to be extremely unethical and that they’d do what it takes to hang on, even if they have to struggle financially in the process.
Hi Stacey,
I came across this by accident, but I am glad I did. Just to give you some background, I am a Realtor in SW riverside county – yeah – THAT SW riverside…
My first thing is this: If you do go the route of a mod company, DO NOT PAY upfront fees, legislation is being passed to outlaw the practice, it is highly un-ethical to charge for something you can’t deliver – and most of them frankly don’t.
I had a client pay a lawyer $3,000, and she had to make her own phone calls to find out what was going on – as you might imagine, she was declined.
The Gov resource for this is: makinghomeaffordable.gov
I do understand the stress involved, trust me, I work with homeowners all day who are in this situaton. Honestly, we can help some, and some we can’t
So, let me give you an outline of what is needed.
You have to have a hardship showing that you can’t afford your mortgage anymore – loss of job, sickness, etc.
Along with that, a financial statement showing what goes in and comes out – effectively demonstrating that you can’t afford it.
Essentially, you have to show your lender that you are going to loose the house. If they don’t think you are going to loose the house, they are not likely to modify you.
Ok, that said, calling directly yourself is always best, you can take advise from someone who knows what is going on, but try to make your own calls.
Now, if this does not work out? Switch to short sale – forget a regular sale (you will need to have 10-15% in the property to do a regular sale – this accounts for the cost for a Realtor to sell the house, closing etc.), if you are upside down, just realize a short sale is a very good way to save your credit and stay out of trouble. Here is what should be accomplished in a short sale:
Borrower is released from all liens on property in the sale, some payoff may have to be made to first of second lien holder. This means you walk, and they take the loss, not a pretty sight, but far better than a foreclosure.
Some things I try very hard to get my clients in a short sale:
Lenders agree to not pursue deficiency.
Lenders agree to waive 1099.
Lenders agree to report loans as paid in full and on time. Or as agreed.
We don’t always get everything on the wishlist, but we get some, and if we do get it all, it’s a very good day.
Loan types – IF you are still on your purchase money, you will have a good chance of getting a deal. If you have refinanced, you may have to pay something into the deal. Purchase money is in CA known as non-recourse, meaning that if you can’t pay them, the lender gets the house. If you refinance (A recourse loan), the lender now has access to you – through deficiency or similar.
One more thing, whatever you are offered for a deal – remember – this is real estate… EVERYTHING is negotiable, if they offer you a note for $25k, ask for 5 – you may just end up with 10…
Phew, that turned into a much longer comment, sorry. I hope there is something useful for you.
If you have questions, shoot me a note terkels[at]gmail.
I’d also be very wary of services claiming to help on foreclosure. Foreclosure help scams are a big enough problem that the FTC warns people about it:
http://www.ftc.gov/bcp/edu/pubs/consumer/credit/cre42.shtm
How does paying a 3rd party even work? If you can’t pay your mortgage then how can you even afford to pay someone to help?
This could help but IMO, you should rely on debt reduction companies to get out of debt.
Hi SVB,
Thanks for your thoughts. What is REALLY bumming me out about Stacey’s post is this portion:
“I’ve decided that I’d look into hiring someone who could help me out with a loan modification. Why? Because I’ve got conflicting priorities in my life right now, so I simply don’t have enough time to deal directly with the bank”
If Stacey doesn’t have time to try and deal with the bank herself, then perhaps she doesn’t really care about her home in the first place. This is a rationale assumption, for there is no other explanation why she wouldn’t want to speak to someone directly in the mortgage and loan mod departments.
The other thing that bums me out is that she is asking us for help, and we are providing some thoughts, but she doesn’t bother to comment and respond. If that’s the case, is she asking for fun and doesn’t really need an answer?
Stacey needs to take control and get aggressive with her finances.
Just my honest opinion.
@Financial Samurai,
I have contacted Stacey about commenting here, but she preferred to write me a follow up post on this. I received an update of her experience as a separate post that I will soon publish.
I believe Stacey has spoken to the bank herself and has gotten frustrated with the process. I also know enough of her back story to know that she does face some financial issues and is very appreciative of the input she’s received here. I will ask her again to give her thoughts. I do know too, that different people have different approaches to their finances. In her case, she’s comfortable with approaching debt management companies for help and support and is willing to pay for it at this time.
Pls. stay tuned for her update soon.
Sounds good SVB, and thanks for the update! Sorry if I sound grouchy.
In a way, it may really be good that Stacey doesn’t have time to deal with her bank. Because, if she doesn’t have time for her bank, then the process and the repercussions perhaps don’t stress her out as much as others. In which case, she will be a free bird soon enough!
Without knowing her whole story, I’m just trying to look at the bright side of things. Looking forward to the update.
Best
I am sorry to hear about your situation, I think that a lot of people are having to make arrangements but I think banks initially aren’t always willing to step in and offer solutions and people end up in more trouble than they need to be. The banks keep telling us they don’t want to repossess peoples homes but they need to have more schemes that can help people.
I appreciate all the comments and suggestions. I started my loan modification process back in November, 2008 before my first late payment. I was told I could not get help if I was not late then when I was late in December, they accused me of a late payment and being unable to assist. I reviewed my previous conversations and they requested income info and other docs, which I sent. My mortgage company was bought out in January and claimed they had none of the former documentation (conversations, docs sent, etc.) from the previous bank. I resent it and was told again they did not get it. Frustrated, I visited the local bank branch in May. The bank manager was very helpful as she was two months behind on her own mortgage and had difficulty herself.
She called and talked to the Home Retention department with us for an hour. We sent another package of docs, including a hardship affidavit. We followed up in June and were told a third time they had no record of any of it.
We went back to the bank manager who got on the phone and let them know SHE was the one they spoke to and was SURE we made contact. We faxed the papers directly from the bank a fourth time. Finally we got a response by September. They declined my loan mod request and sent a threat of foreclosure. This is when we decided to seek assistance.
I knew I would need help back in November. My husband is a fully disabled veteran with two cancer diagnoses since late August who underwent surgery and requires care. My brother-in-law is also suffering Stage 4 cancer and I am helping with his care. My mom had several surgeries (female related) since last year and I am an only child and am there for her care. Personally, I have two small children, run my own business and have Epstein Barr/CFS/sleep apnea. I found myself completely exhausted after trying to communicate for endless days and hours with an unresponsive mortgage lender using feeble excuses to ignore my pleas. Time was running out with futile conversations since November and foreclosure threats and I realized I needed additional assistance.
I am currently working with the Housing Authority, a free resource, and seeking additional financial help. We lived in this house for eight years and were NEVER later with a mortgage payment until December and I called a month ahead to let them know our circumstances. One of the Housing Authority reps actually cried and got angry when I told her our story, saying we were exactly the people they were supposed to be helping. I will be posting updates and hope it helps others in a similar position.
Dear Stacy,
Your story is very familiar to mine.
I empathize with the intensity of your concerns and your frustration in trying to manage this situation.
Because I have a considerable background in residential mortgage loan default resolution, and that comes from working with thousands of borrowers through the years, I wanted to share my insights with you. But the story is so long that instead, I chose to post it on my blog site (something I’ve recently started…).
Here is the link to my article on the subject of loan modifications, and what underlies the decision to grant you one, or not. As long as this article is, believe it or not, it is a distillation of the larger detail.
As your time and priorities permit, please take a moment to read it, and of course, feel free to contact me with any further questions you have. I do provide assistance to many borrowers in similar circumstances to you, and I do not charge, because in my belief system, information should be free. Occasionally, if I incur costs, I do ask the borrowers to assist with this very minor expenses (postage, and so forth), and I am not always able to work as quickly as some would like because I, like they, must maintain an ethical code of doing my best to meet my own financial obligations. But I do what I can for as many as I can.
Here is the link, and I hope it enhances your understanding.
My best to you and your family.
Lee Miller
We spent 8 months, yes, 8 months working with our lender to get a modification. One afternoon a councelor called to say we weren’t eligible. Sadly our “dream home” is for sale and we are looking to rent. Operation HOPE said we qualified for a modification but our lender disagreed. It’s a sad time.
Clay
you’d be so much better off dealing directly with your lender. if you don’t believe me, check out jerry brown’s (calif atty gen) website. it’ll go faster, and the third party MAKES ABSOLUTELY NO DIFFERENCE. same docs required, same review.
Its always best to initiate a dialogue with your lender first, and take advantage of free services such as HUD Counseling and HOPE-NOW. Often times, however, homeowners are given the run around, I mean, let’s face the facts people, ~200,000 homeowners are going to have foreclosure proceedings initiated on this month along. Lenders simply do not care, and you can’t convince me for a moment that the lender’s “negotiator”, a temp being paid $15 / hr. really gives one flying fu-fu about the homeowners situation or best interests.
@Justin – You hit that right on the head; Lenders just don’t seem to care about what homeowners are going through. Sad times.
No no no! DO NOT GIVE UP!!!! I am in the same boat with the rest of you, however I have been able to make some progress and I want to share with everyone how I was able to do so!
1) No the lenders do not care- harsh but sadly true, you HAVE to make them care!
2) their number 1 goal in this is again sadly all about the $$$$$
I wrote the president of Wells Fargo, whom is our service lender. I read the riot act of how they can donate 1 million to the people in Haiti yet they can not help our own citizens from ending up homeless. It truly disgusts me how many people end up losing their homes, yet also how so many are allowed to stay for years adding more into what is owed to the bank. YOU HAVE TO PERSONALLY HIT ROCK BOTTOM TO STAND UP FOR WHAT IS RIGHT AND SPEAK YOUR VOICE, BUT IN A MANNER THAT IS NON THREATENING SUCH AS HARM. HOWEVER USING SIMPLE TERMS SUCH AS YOUR ATTORNEY GENERAL, US DISTRICTS COURTS, THE MEDIA TO GET YOUR LOAN SERVICERS ATTENTION WORKS! My husband is also a disabled veteran and the VA told us to fix it on our, I have a feeling I will be hearing from my local representatives about this as I complained about that! considering they have cures and will not use them is also sickening!
Main point is the bank has to work with a negotiater in order to get it approved for a loan modification. It is so mislead on how to do loan modifications that it seems the whole point is to confuse people to make them lose their homes, trust me I have been working this issue for months now! We currently are at a stand point of almost being approved on the loan modification and have to come up with $2400.00 to make this happen. Mind you this is through our bank and not someone we hired to get this done! I took the job on myself to make this happen, it has not been an easy task as I myself have health issues and also have a 2 1/2 yr old son. I have stayed up countless hours and nights going on 4 hours of sleep for weeks on end just to get every little detail worked out!
CATCH 22’S – They do want to see you are behind to do a loan modification however they have stipulations on the whole process! If you make too much income it’s not good, if you make not enough income it’s not good.
If your debt – to ratio income is more then your income you will get denied.
The financial worksheets have to be perfect as if one number is off it can get you denied, and both work sheets financial and loan modification have to be exact for totals or you will be denied!
They want to see you drop all of your access debts such as if you are behind on credit cards they want you not to make payments and to more so have your home as your number one goal. Pinch every thing you can. For example I had changed out plan through direct tv to a lower payment amount with less channels etc… as we do not watch much tv. We had movie channels that we never watched so I dropped them from the plan and saved more that way.
They want you to prove you can make cuts to your budget in order to be able to pay. And if you do make sure you have proof of it as they will hound you for that, if not you get denied a loan mod.
They require more then you would think!
Currently I am working with a rep in the vice presidents office of Wells fargo. all that has this on hold is $2400.00 stay tuned because I will find a way to fix this! I suggest looking into non-profit organizations as they are out there and can help. And Stacey go to http://www.saluteamericasheros.org they can help you up to 2500.00 as your husband is a veteran also try usatogether.org, that also applies to any veterans out there! get as much help as you can you deserve it! I hope this helps pay it forward for help I have received! good luck to all but most all of use your skills to get the job taken care of keep your faith what little is left and do everything you can! Expect the worse hope for the best! ~A~
Stacey,
I do think you should try to work with your bank/ lender first hand. We looked at the possibility of going through a company like you did and even though it sounded great 1- we didn’t have the money and go figure it would have cost 2500.00 to have the company work things out for us, now had we done that and had to pay the 2400.00 where we stand now it would have been a waste of money. On top of that the guy is a lender himself and told my husband I would not be able to get a loan modification with doing it myself, it is a load of crap just to get you to give them money! I understand that it is very time consuming and a pain in the rear, but look at it this way at least you know the work is being done if you do it and on top of that you have to gather all the info for the financial worksheet and the making home affordable loan modification worksheet. I have a 2 1/2 year old myself and had to stay up late nights and some times hours on end just to make sure everything was 100% correct. Plus you already have your own home business so you should not find the forms that hard to do. Also there are ways to deal with your debt such as credit cards on your own too. I don’t buy too much into these companies these days there are too many scams and by the time you find out it is a scam it’s too late to save your home.
Many of us have experienced problems with mortgage the last couple of years. Like you, there are honest people who want to correct their financial situation but have little options unless they are already halfway to the bottom of the ocean. I work with people that turn to FHA loans to help relieve some of this stress. The best advice I can tell people looking to refinance, modify, or just let the foreclosure run its course is to do your homework. There are tons of information out there that you have readily available to you. Go online and read as much as you can before you talk to anyone. This will make this whole situation as smooth as possible.
I didn’t realize how large your site was. With this economy, helping people save their homes with a loan modification is really awesome.
Frankly speaking, your story is pathetic. The Banks keep announcing that they don’t want to obtain the homes of peoples but they don’t really do that. People often lose their homes in such cases. So It is the responsibility of those banks to introduce better schemes for the welfare of the people.