Being a “mortgage guy” in today’s world is kind of surreal. I talk to many people each week who currently owe more than their house is worth and may (or may not) be behind on their mortgage payments.
Which means they pretty much are not going to be able to refinance their home with the current programs out there.
So if you find yourself in the situation where you are falling behind on your mortgage payments (or about to) because of some kind of economic hardship that you are going through, these are your basic options:
- Try to get your current lender to modify your loan
- Try to qualify for the FHA Hope for Homeowners Program
- Try to qualify for the FHA Secure Program
- Try to do an FHA Short Refinance
- Do nothing and most likely end up in Foreclosure at some point
As we have wrote before, the FHA Hope for Homeowners program and the FHA Secure program are semi-not-real — meaning these loans are just not getting done in most situations even though the media makes it sound like they get done all of the time.
So it seems that most people I talk to are a candidate for a Loan Modification or an FHA Short Refinance or Foreclosure.
Many times, I am asked “what is the best way to get a loan modification done” and my answer generally is “try to do it yourself and if you end up frustrated, then hire a loan modification firm to represent you to work with your lender to get your loan modified.”
Here are 4 tips when deciding which loan modification firm to hire that can hopefully ensure your chance of successfully getting your loan modified at a fair price:
Make sure that the loan modification is “attorney based”. This means that you will actually have a legal firm representing you, not just a sales organization. The loan modification company will be working with your lender’s loss mitigation department – and somehow these departments seem to respond better to attorneys than they do to people who are not attorneys.
Shop around. Loan modification companies have all different kinds of pricing models — some charge $3,000 up front and no guarantees. Some charge $500 up front, then 2% if your loan is successfully modified. Some charge a flat-fee. There is a wide variety of pricing models, so be sure to speak with AT LEAST 2 or 3 different companies before making your final decision.
Look for them, don’t let them look for you. If you are contacted by someone about “having your loan modified”, be very careful. Many times, these are the most aggressive sales organizations. Good loan modification companies don’t use these tactics, they know that there are plenty of homeowners who need their help and don’t need to aggressively go after them.
Ask around for a referral for a good loan modification company. You may be surprised to learn how many of your neighbors have had their loan modified already. Many of them used a loan modification company to assist them in getting it done — don’t be afraid to ask for a referral.
Do loan modifications work?
I have heard and seen probably hundreds of success stories of people getting their loan modified — and in a time where so few (if any) people got a FHA Hope for Homeowners loan, it makes sense to be smart about how to improve your chances of getting your loan modified.