Predatory Upfront Loan Modification Fees

I’m troubled by a trend that I’m seeing.  Recently I’ve noticed that mortgage brokers/loan originators have become interested in learning about loss mitigation techniques. When I ask why, they say that they’re hearing there’s good money to be made doing loan modifications.  What? Wait a second. I thought loan modifications were done by the lender for free.

More and more spam is popping up in my spam bin advertising loan modification services, offered by loan originators so I decided to call one of these LOs today after sending an email late last night asking for more information and receiving no reply. 

This particular person goes by the title of “mortgage planner.”  On her website, she advertises a wide variety of mortgage products including the pay option ARM and the hybrid ARM (are those even available anymore?) but there’s nothing on her website about loan modifications. None of the staff bios show any experience in doing loan modifications. Here’s what I found out.  The upfront fee charged to the homeowner is $3500.  But the LO assures me that all the work is handled by attorneys, she says.  The borrower’s up front fee is placed into escrow.  If a request for loan modification is accepted by the lender for loss mitigation (statistics were offered that 93% of loans are being modified) the full fee is due.  If the loan does not get modified, $2,000 is refunded and the remaining $1500 is not.  I asked the LO why a homeowner wouldn’t just work directly with an attorney.  She said that she works with a network of attorneys with a high loan mod approval rate and homeowners are always free to hire their own attorney and not work with her.

I asked her how much of the $3500 goes to the attorney and how much of it she gets to keep.  Her response was, “why are you asking me that?” To which I replied, “because if the attorney is doing all the work, then I’m wondering how much of that fee is going to you.”  She said “Well I work with the clients. I put a package together and follow up with the lender.” I said, “but a few minutes ago you mentioned that everything is handled by attorneys.”  Of course at this point the conversation has turned a tad bit adversarial and she starts to probe deeper into my true intentions. My intentions are only to get closer to what’s really going on here. I need to know if this sort of gig is something that is a viable alternative for Realtors to know about when counseling homeowners in financial distress.  My intentions are to be able to help other loan originators evaluate whether receiving a referral fee on a loan modification is going to get them into trouble.  If I were to guess, I’d say that the LO earned $2,000 for a successful loan mod and the remaining $1500 went to the attorney. There are forums out there confirming my guess.

In some states, including Washington State, Mortgage Brokers and their LOs now owe fiduciary duties to consumers.  Fiduciary comes from the Latin word fiducia, meaning “trust.

433 thoughts on “Predatory Upfront Loan Modification Fees

  1. Rhonda, Jillayne that 40% quote of loans that were modified have already defaulted was from 8 months ago. Maybe the stat is still the same, maybe not. However, 60% of modified loans were doing well — which seems to me to be a workable solution to a situation that otherwise had a 100% failure rate.

    I do agree tho that consumers needing to do a loan modification are far better off paying a recommended attorney, not some ‘service’ that has sprung up in the past year or two. Also, many people in short sales might be far better off doing a loan modification instead, and I wonder if lenders are better/more willing to do modifications instead of short sales anyway? Seems like they are.

  2. Hi Leanne,

    Here’s an article from July of 2008:

    “Analysts with Moody’s Investors Service said earlier this week that a whopping 42 percent of subprime adjustable-rate mortgages modified during the first half of 2007 had become 90 or more days delinquent by the end of March 2008. That number goes up over 50 percent when you look at previously-modified loans now 60 or more days delinquent.

    In the industry, this is called recidivism; and seeing such high recidivism rates among modified loans is the newest wrinkle for a housing collapse that, so far, has been full of them. After all, what does it mean if those borrowers with renegotiated loan terms end up defaulting on them anyway?

    “Defaults like this aren’t the result of borrowers needing a small fix to their loan,

  3. Hi Mortgage Samson,

    How’s it going down there in Florida? Are the banks starting to write down the sales prices of those REOs yet? What about loan mods…..are you seeing the same problems down there with LOs trying to break into this arena?

  4. I think the better argument is you can get the same results for free. Finding an attorney who knew how to do this would be problematic, at best.

    BTW, I suspect this service would probably come under the distressed property law quite a bit of the time, depending on the circumstances.

  5. Kary,

    Ironically, mortgage brokers are exempt from the DPL.

    “Finding an attorney who knew how to do this would be problematic, at best.”

    Can you say more about this, please?

    The LOs are being told that this company has a “pool of attorneys” that process the loan mods.

  6. Hi Jillayne, Any loan originator who only gathered the papers and tossed them at a processor is long gone. Of we LO’s who are still around (I do call myself a mortgage planner, as a member of NAMF, NAMB, WAMB, etc.) it’s because we have taken on the concept of fiduciary as a real responsibility to deliver what is best for the client to the best of our ability. While it’s hard to draw a line on resonsibility (after all I am in business) one could say the guy I did one loan for instead of two in half the time and half the fee is a decent example of walking that line. As the voice of NAMF, I would hope you communicate that responsible LO’s are not just collecting fat checks for carrying paperwork and looking for easy ways to make a buck. It’s pretty darn tough out here and Realtors are not accumstomed to having their clients turned down since only ‘last year’ their self employed guy got 100%loan. Which begs the question: what ARE realtors doing counseling holmeowners in financial distress…is that their responsibility? Whoa! ?

  7. Hi Susan,

    Realtors are sometimes the first person a homeowner calls when they finally come out of denial and decide to do something about their pending foreclosure.

    Sometimes homeowners are trying to figure out all their options and selling may be a viable option. At that point, Realtors often counsel the homeowners as to the “sale” option. If the homeowner does not want to sell there are other options.

    For example, the homeowner could try to refinance or call their lender and see if they qualify for a loan modification. The homeowner could decide to take on a roommate. I’ve seen this happen lately. The homeowner could decide to move out and live someplace more affordable and put a tenant in the home. There are plenty of options for a homeowner to consider beyond selling.

    Not all agents are well versed in all these options which is why it is so important to refer homeowners to a HUD-approved housing counseling agency where a homeowner can receive FREE counseling.

  8. Susan says, “As the voice of NAMF, I would hope you communicate that responsible LO’s are not just collecting fat checks for carrying paperwork and looking for easy ways to make a buck. It’s pretty darn tough out here.”

    Susan’s right. There are many, many LOs who I meet every week who are really struggling with trying to figure out how to help homeowners who may want/need to refi but might not qualify under the new tighter underwriting guidelines.

    There are also many LOs who would not ever consider take a $2,000 referral fee (or paperwork shuffling fee) from a homeowner in financial distress.

  9. 🙂 sorry Jillayne! The 40% quote tho was from your original post. I realize there will be lots of modifications that don’t work, but given the overwhelming burden on lenders to do “something”, even if many mods don’t work, I think there is a majority (over 50%) that appear to be working, and personally, I’d vote for the mods and keeping people in their homes over the high cost to lenders, society and families of foreclosure.

    Even if it’s 50/50 that mods will become foreclosures, it seems to me that they are cheaper than a full foreclosure for the lender, and the risk of the second 50% that may fail possibly will be offset by them failing in a bottomed out or near bottomed market. It’s a risk, but lessoning an onslaught of sheer numbers of foreclosures all at one time seems like a smart plan to me.

    We can’t have all the failures all at once. Chaos.

  10. Jillayne, you quoted “Analysts with Moody’s Investors Service said earlier this week that a whopping 42 percent of subprime adjustable-rate mortgages modified during the first half of 2007 had become 90 or more days delinquent by the end of March 2008”.

    I would think that subprime modifications are far more likely to return to foreclosure than other foreclosures simply because those borrower were marginal in the get-go. However, there are foreclosures happening due to value reductions, job lossess, illness, and such where the borrower always has been stable and qualified until the chaos of todays’ market. I wonder what the modification success stats for this group would be? Much higher would be my guess.

  11. Great post. This is a scam. Any good bankruptcy attorney is capable of doing a loan modification without filing bankruptcy. Some real estate attorneys may do it as well. They will also explore the client’s other legal options.

    The scammers sell their services by leveraging off the attorney’s bar license.

    What you are describing is fee spliting which is strictly prohibited by the attorney’s rules of professional conduct. An attorney cannot share fees with a non-attorney or vice-versa. It can also lead to charges of unlawful practice of law against the person doing the modifciations. The bar takes it very seriously. The rule prevents non-attorneys from influencing the attorney’s judgement.

    There is also an inherent conflict. Is the attorney loyal to the client or the scammer? What if a dispute arises between the scammer and client or any of the parties. The attorney’s loyalty to the client is compromised. What about confidentiality? Out the window.

    This has been seen in the estate planning realm. An organizer sets up a system to sell services. They sell by leveraging off the attorney’s bar license. They do the work and maybe have an attorney review the documents. As a result it is now a violation of he consumer protection act for non-attorneys to advertise estate planning services.

    Attorneys have been disciplined for their involvement in these arrangements. My experience is that only inexperienced or desperate attorneys fall for these types of fee generating arrangements.

    Do you want someone who is inexperienced or desperate or willing to violate the rules to work your case?

    There are very good attorneys out there who can handle modifications. My advice to clients who need a modification would be:

    1. Call the mortgage company and see what they will do for you. They don’t want your house. You may not need a professional.

    2. Hire a debtor’s attorney to handle the matter.

    3. Consider the benefits of filing bankruptcy with a good bankruptcy attorney.

    No reason to throw money away on a scam.

  12. Hey Jillayne – I think you’re throwing the baby out with the bathwater. I have been a mortgage professional for 23 years and
    I have seen first-hand the travesty of the sub-prime and 100% financing that created this mess. Our industry has had more than it’s share of bad actors, especially since the banks stopped paying
    attention to ‘prudent man’ rules with respect to underwriting. But our industry also has a lot of professionals who have counseled clients against over-financing just because the banks would let them.

    Loan modifications as an “industry” is brand new. Until the lenders started choking on their REOs, there were not very open to modifying loans. It IS a difficult process because each situation is unique, and because the servicer is usually the middleman between the homeowner and the owner of the mortgage. And due to securitization, it’s often difficult to know who the owner of an individual mortgage actually is due to those securities being sliced into ‘tranches’ which are sold to different investors.

    I am willing to bet a lot of money that most attorneys don’t know
    any more about how to determine the Net Present Value to the mortgage holder of Modification vs Short Sale vs Foreclosure than most of the other players jumping on the Loan Mod bandwagon.
    Those calculatons depend on a number of variables that change
    daily. I am certain that 99% of homeowners don’t know how to
    determine that.

    So I belive that there is a place and a need for loan modificaiton
    professionals who can not only underwrite the borrowers ability
    to pay (full documentation only please), but who can also demonstrate to the lender that the proposed modification will result in the least cost outcome to the ultimate investor. And I believe that
    knowledgable mortgage professionals are in a better position that most to be able to do that.

    The market will take care of finding the right value for that service,
    but I am happy to see that loan modifications are being widely promoted because they are BY FAR the best solution to this crisis.
    They keep families in homes, they reduce the financial stress on the family, they are the least-cost solution to the lenders, they keep the
    home from being added to the inventory of distressed properties for sale thereby reducing downward pressure on home values for everyone, and they don’t cost the taxpayers a dime.

  13. Jillayne, I forgot that loan officers were exempt. Apparently this was due to the new laws that went into effect covering them about the same time.

    As to what I meant by problematic to find an attorney, it’s not really a category of attorneys in the phone book, and even if it was, that wouldn’t help them find a good one. Finding good attorneys is difficult. That’s all I meant by problematic–I wasn’t referencing the pool of attorneys at all.

    As to this pool of attorneys, I wouldn’t necessarily assume they’re good at what they do. This type of thing might be something they even pay to join, so that they get the referrals (further eating into the $1,500). But chances are unless you’re their first, they’ve probably some experience doing this. But again, that doesn’t mean they’re good.

    I advised debtors for 20 years, and I never did this sort of thing, and I don’t know that I know anyone who did.

  14. Qwest Dex (, whatever. The point is finding a good attorney is tough. Probably particularly tough here because whatever work the attorney does is not public, so the quality isn’t known even by other attorneys.

    I really wonder how these workouts work. Do they require the person to file bankruptcy if they have significant other debt? Seemingly they would, or at least have the change be reassessed if they do file bankruptcy.

  15. Kary this is an excellent question:

    “Do they require the person to file bankruptcy if they have significant other debt?”

    I will ask this question next week when I attend one of their local “sales” presentations. It’s free by the way. If anyone wants to go, next Wednesday’s presentation is especially for Realtors. Then there’s another on on Sept 26 especially for Mortgage Brokers. Let me know and I’ll email the link.

    If the borrower has significant other debt and does not qualify for the loan mod because their overall debt to income ratio does not meet loan mod guidelines, I’d imagine that filing bankruptcy would only mean more write-offs for banks.

    I can’t imagine that the banks would encourage that.

  16. Hi Jillayne, I still say that realtors have no business counselling homeowners under duress unless they intend to become licensed mortgage ficudiaries. Of course, I refer homeowners to realtors to asses their current home’s salability if that is an option to get a fuller picture of the options. Realtors should never be discussing a client’s financial situation unless they want a big fat law suit later for their trouble!

    Which begs the question: Why are you running down LO’s in the realtor world anyway? Lost of decent LO’s are learning the ever- evolving new ropes daily in an effort to better serve our stressed clients and to help preven such tragedies in the future. I thought your organization was developed to promote best practices not bemoan stupid ones? Do you run down realtors for “tossing a bunch of papers …and collecting a fat check” in LO circles? I hope not!

  17. Hi Susan,

    Realtors absolutley must understand what’s going on with their clients finances. For example, if a homeowner is considering a short sale, it’s imperative that the homeowner understand that short sales are reserved for people in financial distress; for people with no money. Homeowners need to hear that up front so they can make an informed decision.

  18. Hi Susan,

    The “best practice” that I am promoting in regards to this article is for LOs and Realtors to refer homeowners in financial distress to:

    1) their own local, legal counsel; and,

    2) FREE HUD-approved housing counseling where loan modification assistance is done at no charge to the homeowner.

    and for LOs and Realtors to avoid becoming victims themselves of companies who are asking LOs and Realtors to pay a hefty fee in order to have the “opportunity” to get involved in secret fee-splitting arrangments that might not pass the smell test with state regulators.

  19. Since when are realtors experienced or trained in assessing a client’s financial situation? I should think at the very least the realtor would be advised to rely on the client’s accountant for that persepective, appropriately edited! Who the hell would consider a short sale unless they were in dire straights? It is NOT a realtor’s job to assess this!!!!!
    Realtors are are highly trained in the contractual and sales process and legalities of those transactions.

    It is my understanding an appropriate distance from a client’s financial state is a matter of law and would otherwise be toeing the Privacy Act line rather closely…i.e., putting a realtor at disadvantage in negotiating failry on their behalf for knowing ‘too much’. I had one client in distress who was very emotionally unwell…and if his realtor had known to what extent he was in the hole it was rather likely they would have swept in like wolves for the kill to underbid his home.

  20. “Who the hell would consider a short sale unless they were in dire straights?”

    You’d be surprised.

    Susan, Realtors must disclosed short sales in their multiple listing system so other members of the MLS know whether or not the home sale must be approved by the lender.

    If the seller cannot perform on the sale without the approval of a third party, most people would consider that a material fact that must be disclosed to all parties.

    Therefore the real estate agent must help the seller make an informed decision about short-selling BEFORE the home is liste. This includes having a heart-to-heart discussion/reality check about the lender’s requirements: The seller must prove they are in financial distress.

  21. Aren’t short sales homes that are legally in iminent state of seizure posted at the county courthouse as a matter or record? I attended a certified short sale class and heard a noted WA attorney expound on the new Distressed Homeowner Law recently– both of which should put anyone off the idea of ‘counseling’ for life.

  22. Susan wrote: “Since when are realtors experienced or trained in assessing a client’s financial situation?”

    When they were a bankruptcy attorney 20 years prior to becoming a real estate agent! 😀

    Seriously, prior to the distressed property law going into effect, if someone want to sell, but was also in financial distress, I’d list their property but also get them to see a bankruptcy attorney, preferably early on. There are things people should be doing months before filing bankruptcy, and with the new bankruptcy law attorneys are less willing (and in some cases unable) to file a bankruptcy if the client comes in at the last minute.

  23. Susan wrote: “Who the hell would consider a short sale unless they were in dire straights? It is NOT a realtor’s job to assess this!!!!!”

    Agents need to do that do know whether they can do a short sale. A lot of people want to do short sales that can’t because they don’t want to pay the difference between what they owe and what the property will net. The agent needs to be able to understand their financial situation enough to be able to determine that, and later to sell the bank on the short sale process. That’s why only agents that specialize in short sales should do them (and I say that not being such an agent).

  24. Susan wrote: “I had one client in distress who was very emotionally unwell…and if his realtor had known to what extent he was in the hole it was rather likely they would have swept in like wolves for the kill to underbid his home.”

    If by “in the hole” you mean how much was owed compared to value, chances are the agent(s) already knew that. It’s not a secret in most cases. I always look that up before writing an offer for a buyer.

    If you mean instead how dire their financial situation was, then perhaps the agent would avoid taking the listing due to the distressed property law.

  25. Agreed, Kary assessing the financial state of the property transaction is one thing…assessing the financial state of the seller is a very specialized skill and legal resonsibility. One wonders if havng the guts to list a property after counselling the client is such a hot idea and could be construed a conflict of interest.

  26. Jillayne, I’m so glad you wrote this. I did participate in a national conference call about loan modifications where I was hoping to learn how to properly “point” consumers in trouble in the right direction. I honestly do not have enough time to be a counselor nor do I wish to be compensated for this type of transaction–it’s not part of my mortgage practice. However, when consumers contact me, I’d like to have some good advice to send them in the right direction… just over halfway through the call, it turned into a sales pitch much as you’ve described here. I was angered and sick. I hung up…I wish I would have stayed on to learn the nitty gritty–but I really couldn’t stomach it.

    Thanks for this post.

  27. That’s not what I’m talking about. I’m well familiar with the laws of bankruptcy, having practiced for 20 years.

    What I’m talking about is will they allow you to continue to pay $500 a month towards other unsecured debt, and still modify the loan. Assuming they would modify the loan with that other debt in place, how would they deal with that if you then later filed bankruptcy and wiped out that $500 a month payment? Seemingly they’d require you to file bankruptcy so as to maximize the payments you could make on the mortgage, but I could see the politics of this calling for a different result. Maybe that’s not such a concern with the means testing of the new law (something I’m not familiar with). But seemingly it could allow the debtor quite a windfall if they could modify their secured debt and then wipe out their unsecured debt.

    Excellent point on the bankruptcy option to short sale, however. I used to think of the bankruptcy process as rather cumbersome, but compared to a short sale it’s much closer to a normal sale (subject to some other concerns).

  28. I believe Doug Jones has the best point:

    I am happy to see that loan modifications are being widely promoted because they are BY FAR the best solution to this crisis.
    They keep families in homes, they reduce the financial stress on the family, they are the least-cost solution to the lenders, they keep the
    home from being added to the inventory of distressed properties for sale thereby reducing downward pressure on home values for everyone, and they don’t cost the taxpayers a dime.

    I believe that homeowners can get their lenders to do loan modifcations if they are persistent, live in the property, and have convincing reasons as to why a modification is in the mutual best interest of the investor and homeowner. Homeowners – if you don’t feel confident you can do this yourself, find 2 or 3 real estate attorneys, talk to them, and pick one to work with. Keep up with what your attorney does, and learn as you go. You can definitely get extensions on foreclosure dates, and keep negotiations moving along.

  29. leanne, I hope home owners in need aggressively try to have their loans modified as well…and that they’re aware that predators are waiting for them…as they do prey on the weak and fragile.

    On the call I was on, a LO asked: what if the home owner doesn’t have $3500? The answer? Family is happy to help and/or they’ll eagerly use their credit cards.

    Off point here, but credit cards are the next big mess. Banks are/will be be jacking those rates like crazy and EVERYONE (home owners and renters alike) will feel the pain if they carry balances.

  30. Credit cards are what caused me to ask the bankruptcy question above. In my experience there are very few people who get into trouble on a home loan that don’t also have significant credit card debt. I don’t see how you deal with one and ignore the other.

    In the past one of my suggestions was amending Chapter 13 to allow a home loan to be modified (both amount and interest rate) under a 5 year plan. That would allow all the debt to be dealt with, and only give the debtor relief if they completed a long term plan. It would also eliminate the issue of obtaining bank approval, especially on assigned loans.

  31. “Since when are realtors experienced or trained in assessing a client’s financial situation? I should think at the very least the realtor would be advised to rely on the client’s accountant for that perspective, appropriately edited!”

    You are right Susan, Realtors are not trained in assessing their client’s financial well being. In fact it is rare that a loan officer will discuss the buyer’s true qualifications with the agent involved in the transaction leaving Realtors to rely on the lenders representations. However the current market is evidence of how well LO have done at honestly assessing the borrower’s ability. By the way, can you enlighten us to the education and licensing requirements for loan officers that qualified them to be financial consultants? Fogging a mirror doesn’t count.

    “and if his realtor had known to what extent he was in the hole it was rather likely they would have swept in like wolves for the kill to underbid his home.”

    WOW! Wolves? Realtors are required to look out for their clients best interest. Your client should be honest with his agent about his motivation in order to get the best representation possible. The listing agent would not disclose this information any other agent as it would violate their obligation to look out for the clients best interest. I know the “fiduciary” aspect of the lending industry is new, as is continuing education, but agents have always had a fiduciary obligation to their clients, and a code of ethics. Clarification…our obligation to the client was fiduciary until the late 90’s when the laws changed due to the desire to implement better representation for buyers, i.e. buyers’ agents, and the standard became an agency duty to the seller.

    As a short sale specialist I do talk to my prospective clients about their financial situation. If they feel they have the income to support their monthly payment over a long period I refer them to free credit counseling like Acorn. I also refer them to a bankruptcy attorney as a routine part of our first meeting. Many are buried in mortgage payments and have tapped savings, retirement, and credit cards to try to keep their home and are out of options. Short sales are just one of many potential solutions for homeowners. The available solutions depend primarily on those homeowners particular circumstances.

    Lenders are getting better at loan modifications. 6 months ago the standard reply to a borrower asking for loan modification was to require half of the arrears up front and then pay the remaining balance, in addition to their regular mortgage payment, over 12 to 24 months. This was typically an unworkable situation since the borrower could not make the original mortgage payment in the first place. Those that accepted this type of deal usually tapped their savings or retirement for the upfront payment and then ended up defaulting anyways. Now they are offering to lower interest rates, put the arrears and penalties on the back end of the loan or try to refinance through the new FHA guidelines for defaulting borrowers.

  32. Many people have said that the slow market will help get the bad apples out of the industry.

    While that may be true to some extent, those that remain still need help/guidance on what to do in these situations.

    It’s easy to point out what we can’t do (law.)

    It’s more difficult to help people understand what they should do.

    For example, this new “get rich quick” scam for LOs where the LO hardly does any work and collects $2K sounds too good to be true.

    Imagine if you’re a struggling LO whose income has dropped dramatically over the past year. You may think your only option here is to go for the $2K or refer them directly to their lender and get nothing.

    You have a family to feed, your own bills to pay.

    Sometimes it’s not that black and white of a decision for some LOs.

    It only becomes black and white when regulators say that this is not allowed.

    Until then, without a set ethical guidelines, each LO makes that decision on their own. (A mortgage broker could have policies and procedures set up at his or her own company.)

    Bankruptcy Attorney says that lawyers have a lengthy code of ethics that’s vigorously enforced. Even Realtors created a Code of Ethics over 100 years ago. (Enforcement of the Realtor Code varies from area to area, which is problematic but we’ll save that topic for another day.)

  33. Ken asks,

    “By the way, can you enlighten us to the education and licensing requirements for loan officers that qualified them to be financial consultants?”


    In WA State:

    LOs who work for a mortgage broker must simply pass a competency test. No pre-licensing education required. Fingerprints and a background check as well.

    LOs who work for a bank, credit union, or consumer loan lender have no such requirement. However, most banks do run a background check. Most all federally chartered banks offer ongoing training. With all other entities, education is voluntary. The duration and quality vary from company to company.

    Same could be said for mortgage brokers. It’s all subjective depending on the company.

    This will change, though I do not have an effective date for you.

    All LOs are going to have to pass a competency test and a background check as well as take a 20 hour pre-licensing class. All LOs, no matter where the work.

    HOWEVER, it’s important to point out that none of that education contains a requirement to assess a client’s financial situation. It’s all education in state and federal law.

  34. Jillayne, I think it worth pointing out that unless you have studied pretty thoroughtly or have reasonable experience an LO would not pass the comptency test. In addition we have continuining education credits required every year and oversight by Brokers for Loan Originators working under their licenses, which you yourself participate in. At the moment, we are witnessing a trend of Brokers becoming “CLA Bankers” (brokers moving to Consumer Loan Act status) who are advertising the move to LO’s as ‘no more licensing!’ and ‘no more ysp disclosure’. This has attracted a certain element of folks who have been investigated for violations. The reason they get the same bank status for LO’s is because they hold funds from transactions for an hour or so before reselling the notes. A new loophole soon to be closed? Any insight on this?

    I also disagree that LO’s don’t have to be familiar with assessing a client’s financial situation: the very fact all lending (Fannie, Freddie, specific Lenbders) guidelines dictate what are acceptable debt to income ratios and credit scores for a given loan product put us in the position of assessing their ability to repay a mortgage…requiring a very thouorugh analysis of their assets and liablities in context. Our loan analysis software is pretty thourough on these points as are the underwritng systems. Most lenders and brokers are requiring a Net Tangible Benefit discussion with a client about their full understanding of their ability to repay the mortgage for the forseeable future or at least three years.

    Any licensed LO in the state of WA is pretty well versed or they wouldn’t be able to get a loan underwritten…much less have their files clear their Broker compliance and get paid!

  35. Ken, Regarding my incendiary ‘wolves’ comment above: the client I was assisting was elderly, legally blind, emotionally unstable, dealing with the loss of a close family member and had already been taken advantage of by a realtor who helped get him into a very high interest rate baloon note held privately by a friend who wanted his home. I had another elderly client with a 300 ft beachfront property and modest home nearly taken down by a lawyer who held his note and wanted to develop his property. Another angel investor, also an attorney, told me he would ‘definately foreclose if given the opportunity’. So yes, unfortunately not all of your compatriots or mine have the right attitude toward treating our clients with repect and fairness.

  36. Susan, re: brokers moving to become CLA lenders…it’s not all about “no more licensing”. Our company has been licensed under the MBPA and was quite happy being so…the recent passage of laws that were passed at the end of this past session (which there were many doosies) forced lenders (such as correspondent lenders regardless of whether or not they were all ready complying with the state licensing) to become CLA lenders.

    The bonding required to be a CLA lender is enormous. We were told by the state they wanted us to have bonds under both MBPA and CLA if we wanted to retain “active” licenses.

    We are now CLA lenders–not by choice. We have chosen to retain or MBPA licenses as “inactive” and are told by DFI that when the national licensing goes into effect, this will allow us to easily convert to that.

    We are a direct endorsed HUD lender–we’re not hiring convicts to be LO’s. But because we’re large enough to have our own credit lines and our own in-house underwriting–we’ve fallen into this trap.

    I can’t wait for national licensing which will include every one who takes a residential loan application: broker, banker and correspondent lender. 🙂 It’s about time…but it’s my understanding this may take up to 2 years? (Jillayne have more scoop on this).

    National licensing will get rid of any remaining fringe and scum that has no business originating loans…if the current market doesn’t weed them out first.

  37. Ken, re: “the current market is evidence of how well LO have done at honestly assessing the borrower’s ability”

    the current market is also evidence of how many real estate agents pushed buyers who could barely fog a mirror to their LO’s…with comments such as “can’t they afford more?” or “well if you can’t approve them, so and so can”.

    I’m not saying that this made it okay for the loans to be made or pushed…I’m just saying for every LO that was unethical or not considering a buyers ability–there’s probably a real estate agent out there to match.

  38. Rhonda,
    You’re right… everyone had a hand in this. LO’s like yourself and the one I use are at the top of the list for ethics, integrity and ability. The 80/20 rule where 20% are doing the business right and the rest fall into another category applies to all of our related industries. I don’t know how many agents act in the way you refer to in your comments but I would likely see a different scenario. Agent fails to get a good pre-approval before showing the customer. They see a house $50,000 more than they can afford, oops, and all the rest in their price range just won’t do. Buyer wants to get that house and either the agent and loan officer do whatever they can to make it happen of the buyer disappears and ends up with someone who can.

  39. Jillayne, thanks for another terrific post. The ensuing discussion has been fascinating as well.

    I am not in the industry–just a person who’s bought two homes and refinanced a few times. We bought our first house in 1998, before financing went completely haywire. I’m something of a numbers geek and watching lending standards completely leave the realm of reality was baffling (as a number-cruncher) and frustrating (as a borrower).
    Watching the situation come back to earth is painful, too, even as we are thankfully pretty far from short sales and bankruptcy–knock wood.

    I’m prompted to jump into the conversation by Susan’s comment at #41:

    I also disagree that LO’s don’t have to be familiar with assessing a client’s financial situation: the very fact all lending (Fannie, Freddie, specific Lenbders) guidelines dictate what are acceptable debt to income ratios and credit scores for a given loan product put us in the position of assessing their ability to repay a mortgage…requiring a very thouorugh analysis of their assets and liablities in context.

    Lending guidelines that focus on debt-to-income ratios are missing a big part of any household’s financial picture. In my experience, LOs paid not one whit of attention to other financial commitments that don’t register as formal debt. I can’t help but wonder if this has been part of the “willful ignorance” in the past few years and a big contributor to financial failure among borrowers.

    As a large example, childcare. In our family, we have two working parents and children younger than school age. Of course we have a major monthly outlay for day care, which is not exactly negotiable; the income that we use to pay the mortgage wouldn’t be obtainable without child care and its expense. Over the course of several transactions (purchases and refinancing), this was *never* explicitly considered in the analysis of how much we could borrow. Not by our stodgy old credit union, not by the slick-and-sleazy LO from, well, elsewhere.

    Of course childcare and other kid-related expenses are common. I’m sure there are many other examples of non-negotiable expenses that simply don’t register in cut-and-dried, computerized credit assessment. But those bills do come due. If folks take on a mortgage with a payment that “the experts” say they can afford, based only on loan-to-debt ratios…leads to some tough choices.

    I mean, kids just don’t have a lot of trade-in value these days. Or maybe that’s just *my* kids… 😉

  40. The genesis of this market started in the mid 90’s when source lenders (not loan officers or mortgage brokers) came up with the theory that they could provide a loan to every American. Based upon underwriting guidelines and risk profiles a lending product could be produced that, in theory, would provide an acceptable return based upon the associated risk profile. The only question therefore was A. what is the risk associated with a particular underwriting profile and B. what was the required rate of return required in order to offset the risk.

    Every loan product has an expected default rate for which the associated cost is spread out over number of loans in total for that product. The cost is expressed as an increase in interest rate above the nominal return required for profit and overhead. The number crunchers who create the loan products and underwriting guidelines thought their computer models had figured the X factor for every type of borrower. That is why a borrower who walked out of the court house with a bankruptcy discharge in hand could get a stated income, zero down loan from the mortgage broker across the street. To them it was simply a matter of charging an appropriate rate of return to cover the expected default costs, overhead and required profit margin. In theory it should have worked. Of course history has proven otherwise. If all of the guidelines had been strictly adhered to, appraisals had been accurate, borrowers had truly stated their real income, and had all of the other moving pieces in the transaction adhered to the profile I’m sure it would have worked, but life just doesn’t work that way.

    I’m sure they are back at their computers, at least those still employed, factoring in the new variables to come up with more reliable products. The one thing you can absolutely count on is this; as long as there are consumers with money to spend there will be bankers who will lend them money. For now they have to work out the bugs in the system so the flow of money, for which their existence relies on, will continue.

  41. Angie, it’s not for LO’s to determine the entire financial picture with items such as childcare as you’ve referenced above. Underwriting guidelines dictate what debts are factored.

    Bottom line, it’s for the consumer to determine what their financial picture is. Even if a LO can approve a borrower for a payment of $x and a 40 debt-to-income ratio, doesn’t mean that the borrower should seek out that payment and suck up their mortgage payment. If a credit card sends you a card with a $20k limit–is it your job to max out the card?

    Consumers need to be more responsible and accountable for their personal finances. A question I ask my clients is “what payment would you be comfortable with for your total (PITI) mortgage payment?”

  42. Rhonda, absolutely. At the end of the day the borrower is the one who signs on the bottom line and takes responsibility for the incurring that debt and for paying it back.

    But if people in the lending field now have fiduciary responsibility to their clients; and if, as Susan says, part of that job is ensuring that the borrower is able to repay; then presumably that means taking into account the whole picture, not just what ends up in a credit reporting agency’s database.

    In our case we wouldn’t have ever dreamt of taking on anywhere near the maximum loans–or monthly payments–that were “on the table” when we were buying houses. Just didn’t make sense in our budget. Likewise, I would say, it doesn’t make sense that those astronomical numbers were even ever offered at all, since there was no way in the real world we could have actually afforded them…

    Well, I guess that’s been the story of the last few years!

    Along those lines–Rhonda, I do appreciate your updates about how lending guidelines are changing. We’re hoping to move on to house #3 (converting house #2 to a rental) in the next few years. Some of your recent posts have been very helpful as we’ve been mapping out our strategy.

  43. This dialogue about underwriting guidelines is good.
    Now let’s apply those same ideas to loan modifications.

    If we did a lousy job of underwriting the loan the first time (and not charging enough money for the risk) then at this juncture, if we hand out loan modifications to everyone…the default rate on loan mods will continue to be high.

    Leanne says it’s better than a huge wave of foreclosures.

    But this also means the entire mess will be drawn out years and years into the future. Most of the loan mods being offered are at the 3 and 5 year juncture, for example: Teaser rate fixed for an additional 3 years.

  44. Angie I can remember when my both my children were in daycare at the same time. Those days, my mortgage payment was less than the cost of daycare. That was over 10 years ago. I’m sure full time daycare costs are even higher now.

    Angie says, “But if people in the lending field now have fiduciary responsibility to their clients; and if, as Susan says, part of that job is ensuring that the borrower is able to repay; then presumably that means taking into account the whole picture, not just what ends up in a credit reporting agency’s database.”

    This is correct. This is what concerns me about mortgage brokers/LOs jumping into the loan mod business.

    Fiduciary duties means much, much more than just helping a client delay a rising mortgage payment for 3 years.

  45. JIllayne, I believe the lenders want this to be drawn out over years, and so does the Fed.

    We can’t have it all “work out” all at once, or we face collapse. For those who are in loans they can’t pay, either due to intensly bad terms in the first place, or for those who are down on their luck, health, or job income … let’s allow the lenders work out their modifications with buyers, and let this mess gradually unwind.

    I have never heard that the word “gradual” is a negative word. Hurry up, is usually bad. Let’s allow some grace here, and some cures, and see how that goes.

    Fiduciary or punishment? I personally think let’s figure out how many of these loans will find their way to success with some hand holding, rather than just put cement boots on them and sink ’em now.

    Some will still lose their homes, and others will find ways to stay in them. 50/50 odds perhaps, but for the good of the whole, let’s allow some grace.

    I am not the only one who believes this is the most prudent course of action on the part of lenders. There are many economists above my skill level that want this course to be able to play out.

    I’m not sure that “years and years” will be the course either. When things are falling apart for individuals, it doesn’t take years.

    In my view, a slow work out won’t forestall everything, not even close. But, it will help many who are wobbly, and allow many to regain their footing. 3 years to 5 years can make a world of difference.

    And, if in 3 to 5 years, we’re still hurting, well then, how really did it hurt? Do you want a fire sale today, or the long, slow train of a leaky air mattress? I like the leaky air mattress myself. I hate fire sales, and disasters.

    My bet is on the realities of life — we have needs to move during our lives, as well as desire. We’ve all been in this odd waiting game in the last year or two, and I don’t think the waiting is going to want to continue. Just my hunch.

    The majority of homeowners have no credit problems, nor did they do sub prime loans. We are a nation of “fence-sitters” right now — so many too worried to move. When we all get sick of waiting for “permission to move”, things will unplug, and we’ll see a decent market, not this current market of doom & gloom.

    A confused mind takes no action.

    At some point, that confused mind, says ” I have a need, and I’m solving it. “

  46. Jillayne:

    Fascinating post, thanks for taking up the subject! Sorry to show up at the party so late…

    1. Unless there is a NEED for bankruptcy, I cannot see where LO’s or attorneys are needed for loan modifications. I know of someone who successfully modified his 1st, 2nd and 3rd loans (3 different lenders), despite not being all that fluent in English or finance. That tells me there is not a lot of “value added

  47. Regarding #47, specifically the second paragraph, I attribute what happened to the lenders trying to apply the credit card model to home loans. With credit cards they eagerly make loans to unqualified borrowers because the overall default rate is low enough that they still make a profit. And they still make that profit largely because people in trouble will struggle to make the payments far longer than they should–well beyond the point in time that they should have realized they dug a hole too deep to get out of.

    The problem with house loans was that they discounted the risk due to the loans being “secured.” Thus, where X% would be an acceptable default rate with credit cards, they thought that (X + Y)% would be an acceptable default rate with home loans, because they could always fall back on the security (and because people would tend to pay home loans before credit cards, and because there were restrictions on what could be done with home loans in bankruptcy, etc.). But the whole analysis falls apart when you throw in the possibility of prices declining, sort of like how California energy deregulation fell apart when prices increased. Add on top of that some companies focusing on short term results, and you have a really nasty combination.

  48. As to the topic of stretching out the pain, or getting it over with fast (like pulling off a bandage), the only real choice it to stretch is out.

    News flash: Bill Gates never was the richest man in the world. If he’d ever needed to liquidate his holdings, the value of MSFT stock would have fallen significantly. That’s because you don’t really need that large of a percentage of a company’s stock to be sold over a short time to destroy the value. The same is true for houses.

    I have no idea how many houses there are in King County, but as of the end of last month there were 12,288 for sale in the NWMLS system. People consider that a high number, but it’s possibly less than 1% of the total inventory, and a large percentage of those merely want to sell, they didn’t have to sell. If you made the percentage that had to sell at any one point a significant number, prices would fall dramatically. And if that happened, I’m fairly certain even the value of performing loans on bank’s books would need to be written down, and the banks would need to record large losses, leading to much worse instability in the financial markets.

    If on the other hand you manage to stretch things out, the price declines will not be so great, and it’s even possible that the allowances for losses taken to date will turn out to be excessive. But of course, just stretching things out, by itself, won’t be the complete solution. You also need the economy to do sufficiently well to come close to at least maintaining prices. But absent stretching things out, the economy will not perform well. So that leaves little choice.

  49. Thanks, Angie! 🙂 I was also coming from a recent conversation w/a buyer in a long contract (new const) who had used the builders lender and no longer wants the property. Their income has changed significantly and there’s decent (non-refundable) earnest money on the line. This person qualified for the home stated income and feels wronged by the lender. (I’m not the lender). I asked this person, “what made you think you could afford this mortgage payment?” which was 2/3 of their gross monthly income (not only insane–it’s impossible)…their response was “I was young and wanted the house”.

    Who’s fault is this? The niave buyer? The builder’s LO who would do anything (including stated income) to shove more buyers to the builder? It’s sick no matter which way you look at it.

  50. Jillayne, would you mind “bolding” the paragraph that reads:

    “Consumers reading this blog: Loan modifications are performed by a lender with no fee to the homeowner. HUD-approved Housing Counseling Agencies perform loss mitigation/loan modification services for free. These agencies are supported by our tax dollars.”

    I just received a call from a consumer who needs help w/a modficiation.

  51. I agree with $ 3500.00 being too much of a fee, but the L.O. is gathering all the information, finding the client, speaking to the client about ALL of thier income and assets to determine if a Loan Modification is actually a choice. And if not if you are with a good company, they can help put together a short sale. However the client should never be charged any more than one months payment for this work. Yes it can be done for free. Will the client do it, most of the time they will not as they are easily intimidated. An outside party will look for the best deal they can get for the client and understand what the lender is looking for. The company doing seminars for L.O. is just cramming their bank account with sign up fees, and then those L.O.s who are all pumped up about making tons of money are going to be in for a big suprise when they find out it is just not there.

  52. Thomas, instead of collecting a fee, such as one month’s mortgage payment (which the home owner is in dire need of) why not encourage them to contact a HUD approved agency, as Jillayne has recommended? This would be FREE. You could even initiate the call w/a conference call if the borrower is that itimidated to reach out for help.

    Who knows, you may wind up with referrals down the road from a kind gesture directing a home owner in need to the right resource without taking money from them (that they obviously don’t have).

  53. Almost no one is aware of this law, some states, CA, CO, MD to name a few have had this law on the books prohibiting this business.

    Prohibiting “Foreclosure Consultants

  54. “The bill would prohibit non-HUD approved agencies from providing ANY foreclosure assistance.”

    So Jack, Thanks for the copy/paste on HR32321. I typically delete copy/paste comments but I have a question for.

    The link you provided in your name sends us to your website where you’re selling loan modifications.

    Question: Does this new law put you out of the loan mod business or do you have plans to become a HUD-approved counseling agency?

  55. FYI:

    I just received this in my inbox this morning:

    “Earn clients for life.

    Foreclosures are at an all time high.

    Lenders are motivated to negotiate.

    Turn your declines into cold hard cash

    Our Rate Modification Services can help you the real estate/mortgage professional triple your income this year and feel good about helping your clients.

    Our attorneys and paralegals do all the work.
    Our processing center does all the customer service.
    95% success rate, money back guarantees.

    You just sell the program and make big commissions.
    Average commission is $2,000 to $4,000 per deal. You control the money.

    Instant cash to keep your doors open!
    Referrals unbelievable…

    Don’t miss out on this it won’t last forever.

    Call us now at….”

  56. Jillayne:

    Welcome to MY world of spam!

    That, and the “stated income” commercial loan solicitations.

    Sheesh….where are the ads telling us LO’s to just hunker down, work hard, and do the right thing, by getting those that qualify into better loans, while they still can?

    Thanks for the expose` on this.

    PS The punctuation limits on comments are mildly frustrating….but I suppose I should be glad I am only mildly frustrated today! 🙂

  57. I think it is simple decision to go to an attorney rather than your lender for a loan modification!
    Sure the lender will do it for free but is that really going to give you the help that you need.
    If you hire your own attorney you get some one that is on your side. you get the ability to negotiate.
    Going with the free lender option “its their way or the highway”.
    And jumping into this with a mortgage professional may be a good way to get the right attorney. This is because a mortgage pro wants to build long term clients that he can do business with in the future. No one has the option to forgo the fiduciary responsibility to their clients anymore. If you do you die.
    So Realtor’s, Mortgage pros, Title Agents, Processors and any one else directly involved in the housing crisis need to make these networks to survive.
    Some of the benefits of these networks will include referral fees it is standard for an attorney to pay those type of fees.
    I run a network of many professionals and help them learn how to increase their business by meeting their clients needs first. I manage the network and the clients putting the clients in touch with “The Right People” based on their needs! We get paid similar to a lead broker! But we do far more than collect and distribute leads. We have direct involvement with our attorneys, mortgage brokers, Real Estate Agents, CPA’s, Insurance Agents, Credit restoration companies etc… We tell them the standards they must operate by and this ensures the clients get the fiduciary commitment from all the service providers! This must be incorporated into any ones business plan to survive this industry. We are extremely successful with this strategy and we average 1 new referral for every client we help!
    I do not want this to be perceived as an ad so I will not leave My URL I just want to make the point of why Mortgage pros, Realtors and any other professional involved in the financial industries should be pursuing these options! The best thing about networking is you can focus on your own profession and still have alternative answers for your clients!

  58. Jack:

    I’ve tried doing word searches of the bill HR3221 for the words “foreclosure consultant” several times, but I cannot find the passages you are quoting from.

    I then scanned through it again, old school style, and still did not see it.

    I think I have full versions of the bill. But, it could be me….

    Secondly, you refer in your web site to a “Federal High Risk Home Loan Act”

    At present, I cannot find a federal version of “High Risk Home Loan Act”.

    There is an Illinois State version.

    I try to keep up on all of the new federal laws, and at least the WA state laws, but if this is for real, I’d like to see a link to a source, other than your own writings, to validate this information.

  59. do not need to be a attorney or mortgage broker to OPEN a loan modification can however hire attorney a work for you…and the fees you do not need to be IN FORECLOSURE but can just be behind or even current on your mortgage..

  60. Jillayne, There are loads of spam artists promising action for cheap.

    If you want to get a $500 referral fee for making a phone call — (those guys may or may not pay you)? How loverly for one’s reputation to be passing our valued clients over to hacks!

  61. Nice article. I would think that “desperate times call for desperate actions” might be applicable here. Most consumers are not capable of working out their own loan modification and the lenders are not staffed to work it out on their own. I think for the next two or more years, this is a service that will assist the market. I know when I am trying to handle a short sale prospect, when they tell me they still want to keep the home, I have nothing that I can do for them. That is where they need this type of specialist, at least from where I see it.

  62. I’m a mortgage pro, w/ 10 years real estate experience, a RE Broker License and am a CMPS and have spent the last month trying to figure this out because people are coming to me who need help.

    I have talked to at least 10 firms who do the modifications and am doing the due diligence on them because most people having trouble making payments, well let’s face it,many of them have no business being a homeowner, and do not have the skills to find a company that will not prey upon them.

    So to try and help them keep the home they bought, including assessing their situation, giving them the option of FHA Hope or loan mod, deed in lieu or short sale is a valuable service and I see nothing wrong with a mortgage pro getting compensation for that.

    In my search for an experienced group who handles loan modification, short sales and recommends other options, I’ve talked to folks who are obviously out of the subprime phone rooms and passed on them.

    I do think $2,000 is too much for a L.O to receive and am trying to figure out how to serve people and still make something for my time, research, due diligence and knowledge putting the client first.

  63. Joe, so why not refer your clients directly to their lender, to a free, HUD-approved housing counseling agency, or if you’ve determined that they would be better served by an attorney, to an attorney?

  64. How are you… I am Ken Glatt, disabled veteran, working pt.
    I have house loan mortgage with Nationstar at 8.75 fixed…
    I had to retire early from government due to disability, income dropped from full-time pay to retirement pay…
    Unable to make the 3,500 a month payment plus 500 per month for taxes and 300 per month for insurance…
    Nationstar sent me modification docs in June, I signed and had notarized on 6-26-08, sent back…
    It was interest only payment for 2 years then payment with escrow for approx. 2,800… I agreed, had notarized, sent back…
    Then Eric I was working with, said his boss and him had changes after they came back from vacation in July, said its higher now…
    Then they wanted 3200 without escrow included, I said to high… Now they said we have lower to the 2756 amount per month, but without escrow again…
    The first one I signed on 6-26-08 was including escrow at the 2800 a month amount, it said start the payments on 8-10-08, which I did…
    Now they have one they want me to sign for 2756 plus escrow to have payment at 3703.61 per month starting 10-01-08…
    I have not signed the 2nd or this 3rd mod agreement, since its now at 8.73 percent…
    Do I need an attorney to hold them to the 1st mod agreement or do I have to take there 3rd mod agreement?
    Thanks, Ken Glatt

  65. Hi Ken,

    I’m glad you found us. I’m guessing that your lender/loan servicer did not have full authority to offer you the first modification without first checking with and receiving the approval of the investors who hold a security interest in your mortgage.

    This is one of the downsides of securitized lending: When loans are modified, there’s more than just the lender who has to agree to the new terms.

    Here’s the good news. I am hearing that your first phone call should be to the local Veterans Administration.

    I’ve been told that the VA is going all out and doing EVERYTHING POSSIBLE to help all our Veterans, even if your loan is not a VA loan. Here’s the phone number to the local VA:

    (206) 220-6300

    ask to be connected with a housing counselor for help with a loan modification.

    Good luck and check back in with us and let us know how it went.

  66. Jillayne,

    A little housecleaning…somehow I have multiple identical posts (73, 76, 77, 78 and 79).

    I just concluded listening to the CMPS conference call regarding accepting fees for Loan Modifications. The advice was solid, if unspectacular.

    1. It is a RESPA violation to accept a fee for referring a client to a loan modification specialist, UNLESS the charge is commeasurate with the service performed. So taking $2,000 would be hard to justify, and taking $200 would hardly be worth it.

    2. If you decide to take a fee, make sure the method of payment is compliant with state laws, and the rules your company operates under. Chances are, if you do FHA, you cannot accept the fee directly, and your company will probably discourage it.

    3. Be careful not to offer legal advice. Do NOT advise a client to miss a payment, to improve eligibility for loan modification, nor tell them whether their particular case is a a recourse, vs non-recourse situation. You could be in violation of providing legal advice without a license.

    The CMPS advice is on a national basis, so state specific info was missing.

    It was not a waste of time, and though a competitor of yours, they generally do a pretty good job of getting useful and ethical information out there.

    I’m pretty sure I would have learned more at your class, in the same amount of time, but I couldn’t have answered emails, and commented at the same time!

  67. Jillayne, looks like Joe and Sierra don’t have a response on how to justify their charges? (72 & 73/74 & 75).

    And…I’d leave Roger’s extra comments up…he did a lot of research afterall. 😉

    Roger, Interesting stuff on CMPS. I was afraid it would be too much like the last conference call (Mortgage Coach/Ron Quintero) so I stayed away. Also interesting that you consider CMPS and Jillayne’s firm as competitors…I guess I see them as two separate (similar) entities.

  68. Hi Rhonda,

    If an LO is simply referring a client out to free counseling at a HUD-approved agency, I’m not so sure any fee at all could be justified.

    What work was done prior to determining that the client could be best served by a taxpayer funded free state agency?

    Maybe….15 min, 30 min interview? You tell me. An hour?

    I could probably figure it out in under 10 minutes but I’m atypical.

  69. Jillayne, it would be interesting. If I recall, the recent State legislation that was passed does permit LOs to charge a consulting fee (PLEASE correct me if I’m wrong).

    I did a post a while back at RCG suggesting that LO’s should be paid by the hour instead of based on a percentage of the loan amount.

    I think w/regards to #84, LOs are not referring clients to a HUD approved agency, those who are collecting fees are referring them to an attorney or “modification group”… BTW I’m getting more and more junk from such groups promising me commissions if I refer clients in need to them. NO THANKS.

    I guess I’ve accepted there are parts of my job that I do “for free”. I’m not paid hourly. I do provide advise for those getting ready to buy a home or who need a little help getting on track w/their credit–this is free. If I can encourage someone to contact a HUD Counselor or Hope Now–I would NEVER charge a fee. These people need help and money the most. They don’t need our LO hands out just because business is down.

    I also believe (call me Pollyanna) that if you do good for others, it will return to you…may not be that day…but good karma has never hurt me. The marble kitchen counter hurt me…but not karma! 😉 LOL

  70. Re CMPS, there were a few plugs to attend another expensive educational seminar, but not bad.

    I see their services as similar, but they both would probably vociferously argue to the contrary, much like sisters that insist they bear no resemblance to one another! 🙂

    I called the HUD number, went through the phone tree, got several local numbers and connected on the 2nd one, spoke with a very helpful live person.

    There is a surprising amount of resources available, including grants, counseling, loan modifications and legal advice. A borrower in trouble should definitely investigate that route first.

    No, I do not believe you could charge a fee to refer someone to a HUD approved agency. It seems inadvisable to charge a fee to refer someone to a loan modification specialist. Cannot see that I would.

    We have to remember that our situation locally may be strikingly different from the norm nationally. HUD approved counselors may be overwhelmed in areas of California, Nevada and Florida.

    One other tidbit from the conference call:

    One of the effects of the passage of HR3221 is to ALLOW the lender/loan servicer to do a loan modification PRIOR to the borrower becoming delinquent, WITHOUT the fear of being sued by the investor, as it grants the servicer some indemnity.

    An important distinction, and one that had previously escaped my attention.

  71. I received confirmation from Mortgage Law Central this morning that unearned referral fees (for doing no work; just refering the client) on a loan mod are a violation of RESPA Section 8:

    “Section 5(b)(6) of Regulation X exempts from RESPA “any conversion of a federally related mortgage loan to different terms that are consistent with provisions of the original mortgage instrument, as long as a new note is not required, even if the lender charges an additional fee for the conversion.

  72. Many LOs will be tempted to jump on the modification bandwagon if they’re having a tough time surviving in this market…

    Another thought… it’s been brought up that if a LO did a certain amount of work (to where they were actually providing a service instead of just a referral) they could possibly earn a fee…BUT I would surprised if the lender would work with an LO when they are not a party to the transaction. Would they represent themselves as the borrowers Consultant? Would they have to present a signed agreement from the borrower to the lender? How could this even work?

  73. Why couldn’t any homeowner hire someone for a fee to act as their representative? And, perhaps even the lenders involved might be better to actually agree to pay certain fees so that borrowers could get some legitimate help; perhaps the lenders need to think about drawing up some kind of legal document for the borrower, the person helping the borrower communicate/negotiate and the lender involved as to what the duties are,the fees being paid etc.

    It seems like lenders need to hire more people to help talk to homeowners, but at the same time, it seems to me that the homeowners need someone to represent their best interests, and the lenders can’t really do that either – they have opposing needs in many regards.

    And just referring someone to HUD or another counseling service and expecting to be paid a fee is ridiculous.

    Confusing times to be sure.

  74. Leanne:

    I’m sure the homeowner is free to hire anyone to help with a loan modification, including family members, their LO, the babysitter! 🙂

    The question is whether the law allows just anyone to charge a fee for a service.

    That is not the case currently, in many professions, and while not perfect (because the professional associations have carved out a lucrative labor/service market for themselves), largely the intent is to protect the consumer.

    The trouble is the labor market, in concert with existing laws, cannot be nimble enough to address rapidly changing situations, but entreprenuers, seeking an opportunity, can.

    Some entreprenuers will provide valuable services, some will only serve themselves.

    We love the creative entreprenuer spirit, and we love the protection of law.

    We don’t usually get to have it both ways. In the meantime, we’ll have to muddle through.

  75. Pingback: Loan Modifications - Beware : Arizona Mortgage Team :: Arizona. Mortgage. Experts.

  76. Hello. I am real estate attorney Chris Benson.

    I have read many of the messages posted conerning loan modifications. Some are somewhat on point; however, many are not.

    Here are some things that are accurate from the posts:

    1. It is true that you do not have to file bankruptcy to obtain a loan modification. In fact, sometimes the purpose of doing a loan modification is to avoid filing bankruptcy.

    2. It is true that lenders do not charge a fee for agreeing to a loan modification. The attorney fees a person pays is for the attorney to counsel with the client, prepare a proper and complete loan modification and assisting the client with the details of negotiation such as various interest rates, forebearance agreements, prepayment issues and length of amoritzation to name a few.

    3. It is true that a property owner can contact the lender directly and attempt to negotiate their own modification. There are many things you can do in this World on your own that may not be a great idea such as: a) set your own broken leg; or b) get a can of spray paint and paint your own car; or c) borrow a friend’s airplane and try to fly to Vegas. I have flown many times as a passenger on an airplane and frankly flying one doesn’t look that hard. Sit in the left hand seat, press the throttle levers forward as far as it can go and pull back on the big steering wheel and off we go. Piece of cake. Landing looks like it might be a little tricky, but we’ll figure that out later when we get there. What’s the worse that could happen?

    The point is that sometimes you really need to pay a professional that knows what they are doing in order to have the best chance to achieve a desirable result — otherwise, your chance of success may not be too good.

    4. Here’s a bit of a kicker…especially in Washington — Only a lawyer can provide legal advice on how a person can (or should) modify their existing legal contract. Advising someone how to modify a contract (the promissory note and thus the legal rights at issue) is the practice of law. See my website for the case law concerning this matter. Now, it is true that some non-profit agencies such as Solid Ground are FHA and VA approved organizations that do assist low income families in modifying their loans and that practice has been approved. However, if you are not a lawyer or not a preapproved FHA/VA non profit organization….well…you know the answer….you shouldn’t be setting the patient’s broken leg or flying the plane.

    Loan modifications are a great way for a person to have a chance at saving their house. Get them to an attorney that can help them…they will appreciate you for that referral.

  77. Hi Chris,

    Thanks for stopping by RCG. Excellent advice. Question:

    “Only a lawyer can provide legal advice on how a person can (or should) modify their existing legal contract. Advising someone how to modify a contract (the promissory note and thus the legal rights at issue) is the practice of law. ”

    What about loan originators, who (theoretically anyways) know about mortgage documents.

    When they perform loan modification services for a homeowner, which may include talking with the underlying lender, are they practicing law unauthorized?

    Next question, when Realtors assist a homeowner with negotiating a short sale, are they also engaging in the unauthorized practice of law?

    Thank you.

  78. Chris:

    I don’t really want to practice law. I just want to help people, and originate loans.

    Are you suggesting that I am illegally practicing law if I advise someone struggling with a loan payment (assuming that I cannot help with a new and better loan) that they should talk to their existing lender to see what they can work out?

    Somehow, that doesn’t seem right.

    On a wider scope, can a person give anyone any kind of “legal advice” without illegally practicing law?

    Does it matter any that the advice is free?

    I mean my wife is always giving me legal advice: obey the speed limit, leash the dog, don’t put the pizza boxes in the paper recycling etc..

    I agree with you that a person should seek competent help. Thanks for writing.

  79. Jillayne, I don’t think it’s possible to get very solid answers to those questions. The Law Practices Board (part of the WSBA) has an opinion out that indicates real estate agents can’t explain contracts to their clients. That’s an extreme position, but I can’t say it’s wrong based on the case law. (Although I think it probably does allow the agent to ask how many days to provide for an inspection, and then explain that they filled in that many days.)

    Also, in Ardell’s lease purchase thread, at about post 120 or so, I discuss the limitations of contracts that agents can “fill in.” (Search for “simple” if you want to find it). So to the extent a short sale includes either a note for the difference, or a promise of the lender to waive the deficiency, arguably the agent could be in trouble. I quite frankly hadn’t thought about this before, so that’s just my initial impression.

    BTW, I believe as a result of the distressed property law (or maybe prior to that), there are third party entities that assist agents with short sales. They are probably particularly at risk of unauthorized practice, because I don’t believe they are licensed in any way, nor do they come under any case law exception that I’m aware of.

  80. Roger, I think you could safely advise them to consult an attorney, and then as part of that indicate that they to have the right to represent themselves, just as someone can represent them-self in court. My guess is it’s more advising them as to the nuts and bolts that will potentially get someone in trouble.

    And again, this is a very uncertain area of the law.

  81. I’m going to put up 2 posts to partially answer the latest questions.
    The first post will be the law concerning the unauthorized practice of law. The second will be the law concerning real estate licensee and the Cultum v. Heritage House decision.

    Realize, it is beyond the scope of this informational blog to give all the case law and all the explanations.

    I can try to lead the horses to the water….but, I can’t make you drink. I’m not the “real estate police.” I’m just trying to open your eyes and help some people out.

    Here is Supreme Court case, a reference to the Rules of Professional Conduct put out by the bar association and the Washington RCW on the issue of unauthorized practice of law concerning promissory notes and deeds of trust:

    As set forth in the Supreme Court decision Perkins v. CTX Mortgage Co. 137 Wn.2d 93 (1999)

    The practice of law includes the selection and completion of legal instruments by which legal rights and obligations are established. It is established that the selection and preparation of promissory notes and deeds of trust is the practice of law. Perkins at Page 97

    The Perkins Supreme Court also provided on page 98 of their ruling as follows:
    We have firmly rejected the notion that a lay person’s authority to prepare legal instruments turns on whether a fee is charged.
    In Great Western, the unanimous court held that a bank, by selecting and completing legal documents, including promissory notes and deeds of trust, engaged in the unlawful practice of law where a lay employee filled out the documents and the bank charged a fee for the service. After resolving that the bank had engaged in the practice of law, the court considered whether such actions were unauthorized.

    A lawyer shall not: “[a]ssist a person who is not a member of the Bar in the performance of activity that constitutes the unauthorized practice of law.” Rule of Professional Conduct (RPC) 5.5(b). “It is the duty of the court ‘to protect the public from the activity of those who, because of lack of professional skills, may cause injury whether they are members of the bar or persons never qualified for or admitted to the bar.'” Bennion, Van Camp, Hagan & Ruhl v. Kassler Escrow, Inc., 96 Wn.2d 443, 447, 635 P.2d 730 (1981) (quoting Wash. State Bar Ass’n v. Great W. Union Fed. Sav. & Loan Ass’n, 91 Wn.2d 48, 60, 586 P.2d 870 (1978)). R

    CW 2.48.180 provides criminal penalties for the practice of law without bar membership: “Unlawful practice of law is a crime. A single violation of this section is a gross misdemeanor.” RCW 2.48.180(3).

    You can either choose to drink the water or not. If you don’t…good luck out there…it’s going to take just one upset person and one hungry lawyer to create some drama in your life.

  82. Chris, I don’t remember for certain, but didn’t Perkins v. CTX allow the banks to charge a fee for document preparation (e.g. filling out a deed of trust), even though it was the technically practice of law?

    If so, I don’t really see the point of citing that particular decision.

  83. Chris:

    I visited your website and watched your video.

    Both are informative, but I think there is an inaccuracy.

    You state in the video several times that ONLY an attorney can modify a loan contract.

    But as you mention here, a person may negotiate their own loan modification directly with a lender (just as they may represent themselves in court, possibly inadvisedly), AND they may contact a HUD authorized non-profit agency (similar I suppose, to pro-bono legal assistance), and those entities are authorized to negotiate and modify the contract on the borrowers behalf.

    Nowhere in your site do you mention that free help is available. As a for-profit business, I think it is understandable to not promote a competitor, but not to the extent of stating that no other entity can help.

    I hope you are successful in helping people.

  84. Chris, and Kary:

    Thanks for the additional clarifications.

    Re 98, to summarize, you cannot help another person modify a contract with a 3rd party unless you are a lawyer.

    Did I get that right?

    Re #98 and 99.

    The law says it is OK for the two parties in the contract to modify the contract (right?).

    So why couldn’t the bank modify the contract, without an attorney? Were they not one of the parties?

    Thanks for contributing.

  85. Second post concerning real estate licensees and the practice of law. To kind of boil it down, real estate licensee have a limited scope authority to prepare certain pre printed, preapproved forms that are preapproved by a lawyer in the representation of a person in an ordinary real estate transaction in the ordinary course of business as long as there is no fee for form completion.

    Can a real estate licensee advise a person on a loan modification: Nope.

    Can a real estate licensee advise a person on a short sale and negotiate a short sale? Well…. here’s the case law on the limited scope that a real estate agent CAN perform. Beyond that, I don’t know and i wouldn’t want to be the first to find out, especially in light of the new distressed property owner law.

    18.86.040 Seller’s agent–Duties.
    (1) Unless additional duties are agreed to in writing signed by a seller’s agent, the duties of a seller’s agent are limited to those set forth in RCW 18.86.030 and the following, which may not be waived except as expressly set forth in (e) of this subsection:

    (a) To be loyal to the seller by taking no action that is adverse or detrimental to the seller’s interest in a transaction;

    (b) To timely disclose to the seller any conflicts of interest;

    (c) To advise the seller to seek expert advice on matters relating to the transaction that are beyond the agent’s expertise;

    [Remainder of Statute omitted]

    Here is an excerpt from the Supreme Court Case:

    103 Wn.2d 623, 694 P.2d 630, CULTUM v. HERITAGE HOUSE REALTORS]

    File Date: January 11, 1985

    CASE TITLE: Diane Cultum, Respondent, v. Heritage House Realtors, Inc., Appellant.

    [1] Attorney and Client – Brokers – Agent for Sale of Realty – Unauthorized Practice of Law – Earnest Money Agreement – Limited Practice. A licensed real estate broker or salesperson does not engage in unauthorized practice of law by filling in a printed earnest money form in a simple transaction handled by the broker or salesperson in the usual course of business. The printed form must have been approved by an attorney and there must be no additional charge for completing the form. The broker or salesperson is held to the standard of care of an attorney in such activity.

    [2] Attorney and Client – Practice of Law – Regulation by Supreme Court – Statutory Provisions – Effect. The state bar act, RCW 2.48, does not restrict the Supreme Court’s inherent power to regulate the practice of law.

    [3] Attorney and Client – Instructions of Client – Compliance – Necessity. Reasonable care requires that an attorney faithfully follow his client’s explicit instructions.

    [4] Damages – Review – In General. A damage award will be upheld on review if it is within the range of the relevant evidence.

    The actual opinion of the case is very long: However, here is a relevant excerpt:

    In a series of recent cases this court has broadly defined the practice of law to include

    “the selection and completion of form legal documents, or the drafting of such documents, including deeds, mortgages, deeds of trust, promissory notes and agreements modifying these documents . . .

    BOWERS v. TRANSAMERICA TITLE INS. CO., 100 Wn.2d 581, 586, 675 P.2d 193 (1983) (quoting WASHINGTON STATE BAR ASS’N v. GREAT W. UNION FED. SAV. & LOAN ASS’N, 91 Wn.2d 48, 55, 586 P.2d 870 (1978)); HAGAN & VAN CAMP., P.S. v. KASSLER ESCROW, INC., 96 Wn.2d 443, 635 P.2d 730 (1981).

    The trial court’s extension of these holdings to completion of form earnest money agreements by real estate salespersons is logical since such agreements fix the legal rights and duties of both buyers and sellers of residential real estate. It therefore fits within the broad definition of the practice of law as we have previously defined it.

    Nevertheless, without retreating from our rulings in those three recent cases, we think there are sound and practical reasons why some activities which fall within the broad definition of “the practice of law” should not be unauthorized simply because they are done by lay persons.

    [1] As we have so often stated, it is the duty of this court to protect the public from the activity of those who, because of the lack of professional skills, may cause injury whether they are members of the bar or persons never qualified for or admitted to the bar. GREAT WESTERN, at 60. We have also made it clear that the practice of law is within the sole province of the judiciary and encroachment by the
    Legislature may violate the separation of powers doctrine. HAGAN, at 453. This does not mean, however, that the attorney hegemony over the practice of law must be absolute. Hence, although the completion of form earnest money agreements might be commonly understood as the practice of law, we believe it is in the public interest to permit licensed real estate brokers or licensed salespersons to complete such lawyer prepared standard form agreements provided that, in doing so, they comply with the standard of care demanded of an attorney.

    For a long time suppression of the practice of law by nonlawyers has been proclaimed to be in the public interest, a necessary protection against incompetence, divided loyalties, and other evils. It is now clear, however, as several other courts have concluded, that there are other important interests involved. SEE CONWAY-BOGUE REALTY INV. CO. v. DENVER BAR ASS’N, 135 Colo. 398, 312 P.2d 998 (1957). These interests include: 1. The ready availability of legal services.

    2. Using the full range of services that other professions and businesses can provide. 3. Limiting costs. 4. Public convenience.

    5. Allowing licensed brokers and salespersons to participate in an activity in which they have special training and expertise.

    6. The interest of brokers and salespersons in drafting form earnest money agreements which are incidental and necessary to the main business of brokers and salespersons.

    We no longer believe that the supposed benefits to the public from the lawyers’ monopoly on performing legal services justifies limiting the public’s freedom of choice. The public has the right to use the full range of services that brokers and salespersons can provide. Christensen, THE UNAUTHORIZED PRACTICE OF LAW: DO GOOD FENCES REALLY MAKE GOOD NEIGHBORS – OR EVEN GOOD SENSE?, 1980 Am. B. Found. Research J. 159. The fact that brokers and salespersons will complete these forms at no extra charge,
    whereas attorneys would charge an additional fee, weighs heavily toward allowing this choice.

    Another important consideration is the fact that the drafting of form earnest money agreements is incidental to the main business of real estate brokers and salespersons. WAC 308-124D-020. These individuals are specially trained to provide buyers and sellers with competent and efficient assistance in purchasing or selling a home. SEE WAC 308-124H. Because the selection and filling in of standard simple forms by brokers and salespersons is an incidental service, it normally must be rendered before such individuals can receive their commissions. Clearly the advantages, if any, to be derived by enjoining brokers and salespersons from completing earnest money agreements are outweighed by the fact that such conveyances are part of the everyday business of the realtor and necessary to the effective completion of such business. SEE COWERN v. NELSON, 207 Minn. 642, 290 N.W. 795 (1940). SEE ALSO 53 A.L.R.2d 788, 3 (Supp. 1978).

    The interest in protecting the public must also be balanced against the inconveniences caused by enjoining licensed brokers and salespersons from completing form earnest money agreements. STATE EX REL. REYNOLDS v. DINGER, 14 Wis.2d 193, 109 N.W.2d 685 (1961). Although lawyers are also competent to handle these transactions, lawyers may not always be available at the odd hours that these transactions tend to take place. As noted by the Minnesota Supreme Court:

    “It is the duty of this court so to regulate the practice of law and to restrain such practice by laymen in a common sense way in order to protect primarily the interest of the public and not to hamper and burden such interest with impractical technical restraints no matter how well supported such restraint may be from the standpoint of pure logic. . . . We do not think the possible harm which might come to the public from the rare instances of defective conveyances in such transactions is sufficient to outweigh the great public inconvenience which would follow if it were necessary to call in a lawyer to draft these simple instruments.

    COWERN, at 647.

    *** There is more to the case opinion, but you get the idea.

  86. LO’s need to stick with earning their keep from originating mortgages IMO. There is nothing wrong with referring a client/consumer to a HUD counselor or attorney–in fact, that’s what I would recommend…but there should not be compensation. (Especially if it’s a RESPA violation).

    It’s really dancing a fine line and our industry has done enough of that.

  87. Okay. Few things and I’m done for the day. I got work to do 🙂

    1. My website is not perfect. On the first page I do have the following text:
    Why using a law firm is important
    Only a lawyer can advise you on the modification to a contract you have. Or you can do it “Pro Se

  88. Chris:

    Thank you for your contributions and clarifications. There’s a lot to absorb in what you say.

    Please do not construe my suggestions to improve your website as an attack. I think we are largely in agreement. A person with a lot of money at stake probably should consult a lawyer.

    I would…if I had a lot of money! 🙂

    I am also a big fan of reasoned and civil disagreement (which I find to be generally the case here at RCG). It helps to clarify options, opinions, and what contstitutes ethical behavior in business and in life.

    Y’all come back now, y’hear?

  89. What gives the attorneys and LOs the privelege of touting “Loan Modification” as a new venue exclusive to those professions as far as charging a fee.

    Any financial planner or former real estate professional should be able advertise and contact lender(s) on behalf of clients and get the paper work to fill out and help the client negotiate one of the lenders’ boiler plate options! The lenders will only give so much and they will send a form. They do everything in writing and the options are limited. Some folks need help in going in that direction and it shouldn’t cost $3500.00. No NEW LOAN is being negotiated here. All that is being done is gathering information on a loan that exists and inquiring as to what options are available to a borrower. No one is breaking any law if they charge a fee to do it for someone else, as long as there is full disclosure to the client as to the persons qualifications requesting the information and no one is being taken advantage. A business license and references in the legal, real estate industry or field of finance should suffice. If the client thinks a short sale is in the best solution then an attorney or real estate broker/agent will have to do the sale. Of course, there is always the “For Sale By Owner” option and in some cases it could be the best way to do it and avoid any futher financial obligations in the form of attorney fees and/or a real estate commission.

  90. With all due respect Mr. Sloan, you are incorrect.

    It is the practice of law to advise someone concering their contractual rights. It’s that simple. A “business license and a reference” ain’t good enough.

    Also, if you think that there are only boiler plate options available concerning loan modifications, you are also mistaken on that point as well.

  91. The lender gives you the options and it is up to the individual to choose. Who said anything about giving “contractual advice?”

    I have a subprime loan that is not behind in payments and I will continue to keep it when it rolls over. The lender has boiler plate options for anyone who has a loan. In some cases a “collection agency” is collecting the payments and the original “lender” is long gone and no one knows where.

    When was the last time you talked to any of these people?

    I have a friend or two who are going belly up and I guarantee you the “collector” whom ever it may be will have some “boiler plate” options and all you do is pick and choose!

    The lenders collector is “legal” in every respect and you only have choices. If you think that it is your expertise that negotiates the interest down, delays payments, or any other option you are kidding yourself. These folks don’t “give” anything away. It’s all in the “options” somewhere. I didn’t just get off the turnip wagon, and worked for six years in an attorney’s office.

    How long have you been out of law school?

    It is not against the law to give advice based on your own personal experience and you can charge for it – oops, sorry. Lawyers hate this stuff.

  92. This is really a gray area, but I think Chris is far more correct than Todd.

    As I’ve noted in the past, the Law Practices Board takes the position that real estate agents cannot even explain the contracts to clients–that such actions would be practicing law. Now that may not be a correct interpretation of the law (only the WA Supreme Court can tell us that), but assuming it is, then clearly doing a loan modification would be rather restricted, unless people are willing to pay a lot of money to be handed boilerplate forms.

  93. Great conversation. Perhaps this is why the loan mod companies are telling the LOs to sell it this way: “Our third party loan modification company works with a pool of attorneys..”

    My argument is still as follows: If a homeowner has money available to pay an up-front fee to a “third party” for this service, why aren’t the LOs simply referring homeowners to a LOCAL real estate attorney for the same price or maybe less?

    A homeowner in financial distress should always be referred to an attorney; we can likely agree on that.

    Attorneys can do way more than a loan originator. They can advise their client of their rights, they can explain the proposed loan modification, and they can even look at the original loan documents and scan them for compliance with state and federal law, looking for possible fraud, advise the homeowner of any rights under their state’s consumer protection laws, and so forth.

    Sure, a loan originator with experience working on the loss mitigation side of the business can attempt to do the loan modification portion of this, but I’m questioning whether this large fee paid by the consumer is in the best interest of the homeowner commesurate with the work performed. Further, the LO would be extremely wise to make sure that homeowner was referred out for legal counsel.

    SB 6381 says mortgage brokers/LOs owe fiduciary duties to their clients now.

    At best if the homeowner is not well served and files a complaint, the LO might be looking at refunding those fees. At worst, well, the worst case is a court date.

    I’m not worried about competent LOs with many years experience and experience working in loss mit. I’m worried about the majority of LOs looking to make their own mortgage payment this month with ZERO knowledge in this area trying to earn back those six figures he/she was making in 2006.

  94. Can anyone point me to any discussions regarding “Deed in Lieu of Foreclosure” and why this is a last resort rather than a first resort? Sounds like the easiest way to bail to me. Almost like laying your keys on the counter at the bank. I’m sure that’s not the case, but it sure sounds easy to just sign over the Deed.

  95. Hi Ardell, we should probably do a separate post on that because with loan mods, we’re assuming the homeowner wants to stay in the home and can reasonably assure the lender that they are willing and able to continue to make the monthly payments.

    Lenders are under no obligation to accept a deed-in-lieu. Doing so reduces their ability to pursue the homeowner for a deficiency judgement later, if, for example, fraud was found to have occurred on the part of the homeowner. Most banks/servicers look over the file very carefully when a deed and a set of keys arrives in the mail from the homeowner.

  96. I am planning to do a separate post on all the homeowner’s options, but thought I could get a few pieces of info before doing so on the least talked about option.

    Loan mods only work in certain situations, and I plan to write a post on my thoughts on which situations warrant which of the various options.

    Loan Modification

    Short Sale


    Deed in Lieu (of Foreclosure)

    Those are the options I can think of off the top of my head that should be included in the post. If there are others, besides jumping off a bridge or pulling the blankets up over your head, that I may have overlooked…throw them out by name and I will include them.

  97. I can write it! Meanwhile, if readers need help now, they can google the Seattle Coalition for Responsible Lending. They use to have a PDF handout that explains the differences between all these options. Let me go find it….

    It’s not there anymore. If anyone needs a copy, email your fax number to me and I’ll fax one to you.

    It’s about six pages.

  98. Kary,

    I’m sorry that you don’t know what you are talking about.

    It is not against the law to give advice to anyone based on your own personal experience. You can charge for it as well. Who mentioned anything about being a real estate agent/broker or an attorney! Yuk!! Check it out. I had an opportunity to be an attorney years ago and I have had a real estate brokerage firm. I finally opted to seek a more respectable line of work.

    As far as a “Deed in Lieu of Foreclosure,” check with whomever collects for the lender. They can help. If you have a decent high school education (forget California or New York) you can even go to the local Law Library and someone there will help you find the references and the “forms” you need. The Law Library is funded by the tax payers and is there for everyone to partake, not just the legal “profession” (if you can still call it that).

    Isn’t it amazing that there is approximately one lawyer for every one hundred americans and the average american cannot afford to hire one.

    This will be the end of my postings. I know some of you will be glad.

    By the way, the lender(s) I have contacted are lusting for “Deeds in Lieu of Forecloseure.” Where have you been? The only down side is that your credit will take a hit for two years.

  99. Seems if a Trustee Sale forgives any shortfall, then a Deed in Lieu is also a viable option just prior to Trustee Sale. That’s if they aren’t going to go to Judicial Foreclosure. But I’m just guessing here.

  100. Does anyone know a good attorney in Orlando fl for modification? I am in a subprime terrible loan and payment is due today. I think I would rather hire a lawyer than to pay it. The economy here is awful.

  101. Great article. I recently started doing loan modification. As a lawyer, I often end up negotiating with the lender’s attorney, the compliance manager, VP or CEO. I find that these people want to resolve the matter quickly and amicably. They’ll typically talk to a lawyer but no one else. Usually, I make reference to other legal claims my clients can rightfully bring. In this age of predatory lending, it’s not hard to find legal violations to gently use as leverage. Having the attorney is helpful if you don’t know your rights or need a quick resolution. You can certainly do it yourself if you understand the loan business and have just fallen on hard times. Unfortunately, many people got themselves into bad deals b/c they didn’t understand what they were agreeing to — so that same person might do themselves a disservice trying to negotiate their own loan mod. I do some pro bono and low cost loan mods in the latin community. They have been greatly targeted by predatory lending.

  102. Hi Tracy,

    Thanks for stopping by RCG. I’m glad to hear that you’re having success with using the past predatory lending evidence to hammer on the lenders for your clients.

    Where are you located geographically?

  103. Hi All! I am a casualty of the lending industry and have been doing Loan Mod’s recently; true story–doing a short sale on a property I bought in Florida-started in December and still not finished doing it myself. The company I work for is taking 5-15 days to modify. What they charge is reasonable, the rep makes approx. a grand and the attorney $1500. You have to ask yourself, do you have the time to experiment and phone and negotiate? Are you shorting yourself? Why not change your own oil or wash you own car? Sometimes it is better to have someone experienced do the job. There is a small window of opportunity while the lender is bending over backwards to keep a non performing asset off of their books. You can just wait and make lots of calls (I did) and if you wait long enough or not act at all, the next visitor will be the Sheriff helping you move. Don’t be pennywise and pound foolish; admit your goof–pay up–and move on!

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  105. Is it against RESPA guidelines to pay a Realtor for a loss mitigation referral? I can’t seem to find a clearcut “yes” or “no” answer anywhere.

  106. Jay,

    If you are a lender, and I expect you are because of RESPA being mentioned, then you can’t pay an agent for anything at all, or give gifts of any kind as a “referral”. There are no referral payments between lenders and agents…PERIOD!

    My $.02 Let’s see what Jillayne and Rhonda say. RESPA doesn’t really have clearcut yes or no answers…it’s more of a “Just Say No” issue. When in doubt…”Just Say No”. When not in doubt say no to that as well. No monies should change hands between lenders and agents.

  107. Just for the record, I’m not a lender.

    Is Loss Mitigation really a “federally-related loan?” I thought it was renegotiating with the bank to get a more affordable payment. Is there anywhere specific you can direct me on the DRE website regarding this? Or, is this just your interpretation of RESPA?

  108. Hi Jay, Here is a reprint of comment number 88 from above. This isn’t a state law issue; it’s a federal law. The state would only get involved inasmuch as a violation of a federal law is ALSO a violation of their state law.

    A person is always free to hire their own legal counsel and obtain their own RESPA interpretation.

    The interpretation below is provided courtesy of Mortgage Law Central.

    This comment does not constitute legal advice.


    “Section 5(b)(6) of Regulation X exempts from RESPA “any conversion of a federally related mortgage loan to different terms that are consistent with provisions of the original mortgage instrument, as long as a new note is not required, even if the lender charges an additional fee for the conversion.

  109. Joe, I’m not sure what your question pertains to (perhaps “Bankruptcy Attorney’s post?), but in Chapter 7 and 13 the courts cannot typically modify home loans (there are some exceptions in Ch 13). Chapter 11 has no such restrictions. I don’t believe the amendments a few years back changed that, but you should consult an attorney to be sure (and to be sure an exception doesn’t apply to you).

  110. Pingback: Five Options For People Who Can’t Afford Their Mortgage | Mortgages Unzipped

  111. I’ve recently made the move from loan broker to an attorney assistant. Some of the comments about borrowers negotiating on their own behalf is laughable. I have yet to see one individual borrower come up with a decent loan modification. Practically none of them have any experience with this, they cannot recite the law, and they probably don’t know how to sue on their behalf.

    Clients don’t just walk in the door. It takes advertising, office expenses, and whatever fees to run an office. So to say that a loan officer is netting $2,000 and the attorney is netting $1,500 is ridiculous.

    There are going to be shady loan officers, shady attorneys and shady people who run websites and charge people to advertise realtors, brokers and attorneys on their site. That’s just the way life is. You do your best to screen people out and make an adult decision on whom your going to work with.

    A loan officer has a better chance than a borrower to get results – assuming they’re honest and work hard. An attorney should get better results than both the borrower and loan officer – assuming they’re honest and work hard.

    If someone has a 13% rate adjustable, they’re upside down and I can drop their loan to fair market value and give them at 5% rate I’d have no problem charging them $20,000. I just performed an “invaluable” service. They will probably save several hundred thousands of dollars over the life of the loan.

    The bottom line is everything is situational. To put every loan officer in the same category is ignorant.

  112. Hi Jim;

    Thanks for stopping by RCG. Question: I’m trying to imagine a scenario where a lender would approve of a $20,000 loan modification fee. Is this what you typically charge when performing an invaluable service?

  113. Your analogy isnt quite correct. If you go straight to the attorney for the loan mod they will also charge $3500. Trying to do a loan mod yourself is damn near impossible. I can tell that you don’t have any friends that are going through or have tried to go through that process without professional help. For that matter, people don’t really NEED a Realtor or agent to buy a house. I bought my house without one and I saved 20k on the price because of it. Why use them? You also don’t NEED a lawyer to go to court but your probably going to want one.

    My best friend tried to modify his loan with Wells Fargo for over 5 months and they rejected him twice a month when he called. They also wouldnt let him short sell even though he had a cash buyer. He hired a loan modification service and 40 days later his $4200 a month neg am loan payment (without impounds) is now $2200 WITH taxes and insurance AND the bank paid his 10k in past due property taxes!. His fully amortized rate was 8.3% now it is 3.4%.

    You tell me how paying $3500 for a service that let him keep his house AND save well over $2500 a month wasnt valuable?

    and to Jill above. The lender doesnt have to ALLOW any kind of fee in a modification. They have nothing to do with the legal services provided or what is charged. It isnt a refinance. The money isnt taken out of a new loan. I think the lack of understanding of what is going on is obvious in this article and it reflects poorly on the company that is writing this blog as an advertisement

    Jill also states above that .”

    We’re all subject to RESPA….

    cannot give OR receive something of value for a referral on a federally-related loan.

    This is great to tell agents that work for you but in reality it isnt an across the board solution as your stating. In CA even the Real Estate Principles textbook for the licensing gives examples of where and when referrals can be paid and to whom. As far as with Loss mitigation and financial services that may include loan modification there is no settlement procedure withe the bank. No escrow, no title.

    Either way your trying to put down a service that is helping people to stay in homes that they may or may not had been duped into buying by unscrupulous Realtors or agents that told them the value would always go up! you can afford this get an ARM!

    Just because a legal service charges closer to 1% for a valuable service instead of 6% as Real Estate Agents do doesn’t make it evil.

  114. The more i read Jillayne’s post the more i realize she just wrote a blog about something she doesnt even understand the basics of.

    There are no ‘guidelines’ for a loan mod. If the borrower has some sort of hardship i.e. arm adjusting out of reach, cant refi out since value dumped down, medical bills, divorce, death in the family, loss of job etc. and they cant make the mortgage payments. The bank can either Foreclose and lose a lot of money and their liquid assets on their books skew and their clients panic and withdraw money and they go out of business. SEE WAMU and INDY MAC.

    OR they can take a look at the borrowers budget and tax returns and see exactly what that person can afford to pay and keep them in the home. That’s really it. All your business with ‘guidelines’ is nonsense. Sure if you have a savings account of 200k they aren’t going to modify your loan but that isn’t a ‘guideline’.

    But if your husband just had a heart attack and you cant make your current mortgage payment and your going to lose the house and the bank has to show another foreclosure. Modifying is often best for both parties. Most banks have loss mitigation teams that deal directly with the larger loan mod services and this is why they can complete something in 20 days that was ignored when the client or a government hired HUD worker calls.

    I suggest anyone who wants a loan mod try to do it themselves and call HUD for free. IF that doesnt work then try a reputable company with an ‘open book’ operation. People email me daily with nightmares about the HOPE program and trying to talk to their bank about changing their payment.

    There is a reason why people dont want to use a public defender in court. In this case a loan modification HUD employee who is paid $12 an hour. Good luck with that. But I still would suggest people try that route first in all honesty. But dont let the lender offer you terms that barely change (WHICH IS EXACTLY WHAT THEY DO). They offer the smallest amount and take advantage of the borrower since they know they will be happy with any change.

  115. Hi dave,

    “If you go straight to the attorney for the loan mod they will also charge $3500.”

    This is not an accurate assumption.

    “Trying to do a loan mod yourself is damn near impossible.”

    I have talked with many homeowners who have successfully received a loan modification with no help from any third party.

    I am all in favor of third party loan modification services, dave, PROVIDED:

    the loan originator fully discloses the fee split up front to the consumer, fully explains the work that will be done for the fee paid, and offers a full refund if the loan modification fails.

    Consumers have many choices: Do it yourself, go with a free HUD-aproved counseling agency, hire an attorney, hire a third party loan mod company, let the home go into foreclosure, and so forth.

    In the example cited in this article, a consumer’s $3500 may be better spent with an attorney.

    I am also concerned that today’s very hungry loan originators are being taken advantage of by loan modification referral services that are charging the LOs a up-front fee!

  116. Hi dave,

    “There are no ‘guidelines’ for a loan mod.”

    Actually dave, there are.

    So, what kind of up front fees are you charging consumers?

    Do you have a fee-for-service agreement approved by your state regulator?

    How much of the fee stays with you, the LO and how much of it is split with an attorney?

    Thank you for stopping by raincityguide.

  117. Why do you assume that there is a ‘loan originator” involved? What if there is no ‘Loan officer’. What if the people who need these services have called a financial planner and attorney to help them?

    Why do you assume there is a broker or loan officer anywhere in the picture everytime? All of the loan modification places I know of dont have ‘loan officers’ You might have a case if a place is misrepresenting themselves as a loan officer only to send them to a loan modification service but this is another law entirely. And when I meant ‘guidelines’ i was referring to what each bank will or will not accept for a loan modification. Although I am licensed as a real estate salesperson (among other things) I do not currently do loans and I do not work as a loan negotiator either.

    I think your assumption for how someone would best spend their money shows a good amount of hubris.

  118. dave, the sheer amount of time you’re spending on this blog on a Saturday morning begs the question of your interest in defending fee-for-service loan modifications.

    dave, this is a really interesting statement: “I do not currently do loans and I do not work as a loan negotiator either.”

    So….then how can you claim to know so much about the loan modification business?

    As a licensed real estate agent, are you referring homeowners to financial planners and attorneys for loan modifications and in return, accepting a fee for doing nothing but passing on the referral?

    If so, I highly encourage you to seek your own written legal opinion as to if this is a violation of RESPA per se. I further invite you to then revisit us and share the written legal opinion you obtained on this site for all to view.

  119. I was up in the shower a few minutes ago and it dawned on me that dave might have had to negotiate his own loan mod. So here I am with a towel on my head in my bathrobe pondering dave’s visit to this site.

    dave, I’m thinking real estate in general has been hit pretty hard in the San Diego area. Many agents even up here in Seattle are in situations of needing loan mods and short sales.

    Did you try to do your own loan mod and it instead were able to get better results through a third party?

    If I’m on the right track please continue to share your experience with us. If I’m off base, the please feel free to set me straight.

  120. My first post explains how I know so much about loan mods and what I went through to attempt to assist friends of mine in loan mods (for free). I was shocked by the lack of response I got. Once we hired a firm to do the mod it was completed and I was stunned by the outcome. We weren’t expecting to have the rate lowered from 8.3% to 3.4% nor to have the bank pay the 10k in back property taxes and forgive the months of missed payments. But they did. I work in internet marketing. I even help people set up blogs such as yours to advertise (as you are). I get emails all the time and I explain to people what pitfalls I hit and what worked.

    Im not even arguing with you about whether or not people should take referrals to point people to services but I felt obliged to set you straight (as I saw) on some issues that you seemed to not grasp.

    Are there companies out there ripping people off? Maybe, but throwing out the baby with bathwater because there is a middle man seems silly. If we did that there would never be a car dealership, real estate agent or any broker of ANY kind.

    In fact, a blog such as this that is in essence used to drum up clients skirts RESPA laws as well. I understand you may mean well but there are also many people that would post an article such as yours to debase an industry that might actually be helping people just to gain the trust of someone less informed that reads it to hopefully gain their business down the road. This is a very common tactic in internet advertising. I am not saying your doing this but I am also not writing blog articles entitled “Predatory Upfront Loan Modification Fees”.

    I also find it strange that people mention people would be better off seeing a BK lawyer. Talk about predatory. Some people need this service and MOST will be unsuccessful doing it on their own and most of those people who are successful will probably get terms that aren’t much better. Banks such as countrywide have set up appointed teams to deal exclusively with private loan mod companies. If the banks think its worthy and people like me know first hand how successful they can be I don’t think its fair to pin the entire industry as “predatory” because there might be a middle man. They sure helped me and my buddy and it was cheaper than a refi and much cheaper than being gouged by a Real estate agent if he was able to short sell. 6% commission with the advent of the internet? Talk about predatory. I might help a friend for 1% find a house or charge a minimal fee if they want a loan done but I cant in good conscience charge 3% for finding them a house that in all reality will probably come to our attention on the MLS by automation.

    Lets agree to disagree. And if anyone wants to hear my personal experiences of what did and didnt work during a loan mod they can email me. I certainly recommend trying it yourself first but make sure you go in knowing what to do. ANd no, I wont refer you to anyone out of respect to Jillayne. Cheers!

  121. I know you dont do loan mods. I meant i wont use this forum as a plug for anyone who might be able to help someone modify theri loan out of respect for the blog.

    I do or did both. ONce in a while someone refers someone to me to see what kind of rates are out there. Usually, i just make sure their broker isnt screwing them.

    Believe it or not some people get education and licensing in different fields. Some politicians were once lawyers. I even know a man who has a law degree AND is an MD. Although he is licensed in law he works as an MD for his living currently.

    I got a license and I used to dabble in real estate but I like helping people market online a little better. I will sometimes help people get some traffic or whatnot. In full disclosure after our experience with getting the loan mod I am helping some full service financial service companies who also offer loan modification to market but I also help realtors and bands. Whatever. 🙂

  122. by the way. The blog is really well done. And from a traffic perspective this article does a good job of being controversial and garnering attention. Kudos.

  123. Think you could flip the sequence so that the most recent post appear at the top?

    Anyway I was Googling loan modification and wound up here. Truly enough insight and opinion to go around.

    My experience is that the lenders LOVE the idea of a homeowner trying to do their own loan modification without the benefit of an education.

    Countrywide will modify a loan for a homeowner lickety split. They offer great rates on these for unsuspecting homeowners. Why, they will even let a homeowner roll the back payments into the new principal balance.

    Their customer service reps are trained to do this well. I have seen them send a loan modification agreement at 7.5% at the drop of a hat.

    And the added bonus for the bank besides working with WC Fields “sucker” they get the homeowner to sign away all of thier rights to remedy any damage done on the prior loan.

    No, I for one do not recomend a homeowner try this on their own without alot of research and education. Lest they be taken advantage of by the lender.

    I would never accept the lenders 1st offer, and never accept anything that is not a realistic long term solution.

    In full disclosure myself I own & operate a full service title and escrow settlement agency in NY, and we do negotiate loan mods for a fee.

    I have also written a “Do it yourself” book on the subject.

    There are many charlatans out there charging clients and not doing the job. They come in all shapes and sizes, there are former LO’s, loan mod companies, and yes even attorneys.

    If you choose to hire a professional ask for references, make them show you examples of successful loan mod agreements. Check with the BBB, consumer affairs, negotiate your fees and most of all call your lender at least once a week to keep track of what activity is going on on your account.

    Your lender will tell you who has called, when, what the conversation was and what progress is being made. Even though you are not negotiating yoursefl you should still make sure the person you hire is in constant contact with the bank.

  124. It is sickening hearing about the ridiculous fees being charged for loan modifications. This is a relatively simple process that can be handled quickly and the fees involved should be minimum at best. No up front money should ever be paid.

  125. This is what I think. Yes you can go to HUD and attorneys and realtors and here and there to do a loan modification. The the truth and the reality is people that are in this situation are still trying so hard to get to work and finding second jobs just to keep up with all of this. The thing is who has the time to do such a lengthy investigation when you are so tied up trying to make ends meet? I mean all the paperwork and foot work is VERY time consuming. I’m sure you have to meet with people fill out tons a paperwork and much more. I do agree that $3500 is alot…However, If I had to pay for the service rather than do all myself I’d rather pay. That’s like doing your divorce without any help. And I did do that and I told myself forget it! I am never doing this again. I had to miss work to go to counsling sessions and classes. It was rediculous. FREE means you get help when they are available. When you pay for services like this you get what you pay for. It’s up to the person to be smart enough to find a good company. I think an attorney would be happy for someone that was trained to get all the necessary documentations together for them without having to pay that person a fee and just go to that person for any additional info that’s needed rather than have his people deal with all these people in distress for all the little details and get $1500 out of that. The people that get all the paperwork together are the ones that have to deal with these people directly and answer a million questions and deal with any discrepancies. So what’s the big deal…HEY maybe they are worth $2000 a pop. It’s called convienence. Some people don’t mind paying for convienence. Yah the lender will do it for free but it ain’t a real great turn out. Paying a loan mod service will probably have a WAY better outcome.

  126. Hello, I don’t think I have seen a list of legitimate companies who will help us with loan modification. As Levani Oct 9th said, she rather pay to get it done right. I rather do the same as I am about ready to pull my hair out, and their is anxiety to it all. Please offer us a list of real people who will not scam us. Really, I can’t figure out who is real and who isn’t , there are so many out there !

  127. Hi Lucy,

    Thanks for stopping by. What state are you in; Montana? Google the “montana bar association.” Interview three attorneys. Look for a consumer protection attorney and a real estate attorney to inteview, and one other. Find out how many loan modifications they have successfully completed. An attorney will typically work on a retainer/fee-for-service agreement. Also, have you had the chance to talk with a local HUD-approved housing counseling agency?

    Go to:
    halfway down, look for the tab “at your service.”
    Click on “talk to a housing counselor.”
    Find your state, etc.
    When the list of agencies pops up, find the agencies that offer DEFAULT counseling.

    Good luck in your quest. Please come back and let us know how it’s going. We care.

  128. I wouldn’t mind some information and a few leads from Dave if you don’t mind.? I don’t even know if my home was an FHA loan as it was probably of the sub prime nature and sold to other lenders a few times or so? Does this matter whether or not it was an FHA loan? I googled state bar, nothing sprang up, but suppose I’ll call attorneys from phone book tomorrow. Knowing the attorneys in this town it will be useless… sigh.. And I think the top HUD lady was just fired here locally, so it sounds sketchy.

  129. Hi Lucy,

    It doesn’t matter whether or not your loan was an FHA loan. HUD-approved agencies can still help you. Here is the link to your state’s agencies:

    Contact an agency that offers “LOSS MITIGATION” services in a city near you so you can make an appointment and GO THERE and talk with a counselor.

    Here is the link to the Montana State Bar:

    Call and ask for a referral to a Consumer Protection Attorney and another one for a Real Estate Attorney. Maybe get 4 referrals, two of each. Call and talk to all four about your situation.

    Meanwhile, go find all your old loan documents from when you originally purchased and/or refinanced. This will help save time.

  130. I contacted the apparent director? Great Falls. He emailed me back giving me a local number for consumer counseling. I called them and she said they would help by offering help with credit card bills, which I don’t have any . So she gave me the number for HOPE, which all they are is another consumer counseling and noone answers your questions except to tell you they will go over your bills with you and advise whether or not you should short sell your home or other suggestions such as renting it out. Well, what good will that do when rent is sky high, added my payment is due to change and noone will pay this huge payment, and or , nor will I be able to. My mortgage bank doesn’t reply back, they said they would email me information to restructure my loan, and that was 3 days ago. of course they are always away from their desk when I call, and never have time to call me back.. So calling HUD doesn’t get me anywhere and neither does this HOPE that Bush signed.

  131. Hi Lucy,

    There are many organizations out there with the HOPE acronym in their titles. The most popular one is 995 HOPE.

    Keep in mind that these organizations are only going to assess your finances and give you some advice. IF THEY think you qualify then they will contact your lender and try to help you get a modification.

    I have had many homeowners who were initially told by these well meaning individuals that they didn’t qualify and should short sell their homes.


    So Caveat Emptor…

    I know that Jill has sugested an attorney, and if you are facing an imminent foreclosure that is probably the best advise.

    A few things to know about modification:
    The numbers you send to your bank have to make sense. Write them down on paper and do the math.

    If you are not able to demonstrate an ability to make payments AFTER a reasonable modification (5% – 6% 30 year fixed) you will not get one approved.

    Depending upon your lender, there are a number of ways they will work with you. I have personally negotiated with most of the lenders and servicing comapnies left in the market.

    Don’t be discouraged. If your lender said they were going to send a package, they will and it should take 3 – 5 business days to recieve it.

    Most importantly you can begin to take control right now TODAY. Gather the following:

    Last 4 paystubs for everyone in the house who earns money.
    If you don’t have paystubs, you will need a cash letter from the wage earner defining what they take home monthly. (Yes your lender WILL accept this)(It’s in their best interest).

    2 years W2’s for each wage earner in the home.

    2 years tax returns

    2 months bank statements – (PSST… If you have big bucks in the bank, you modification will not happen!) Your lender will require ALL pages of your statements. If you don’t have them, go to your bank and get a 2 month printout, make sure that someone in the branch stamps and signs the printout or your lender may not accept it.

    That should be the extent of documents you will need to provide to your lender. (unless you are self employed)

    The above documents will be required to be submitted to your lender. So make copies of them now so you are prepared and ahead of the game.



    Now gather ALL of your bills and make a COMPLETE list of ALL of your monthly expenses, food, transportation, tolls, gasoline, heating bills, electric bills, water bills, trash & sewer bills, car payments, all forms of insurance, child care, tuition, camps & clubs, school lunches, pet food, Absolutely every dollar you spend needs to be accounted for lest you underestimate your living costs and negotiate a modification that won’t work.

    OK… Now your rolling!

    Get your totals down on paper and do the math. You may very well be in the red CURRENTLY, but calculate what your new payment would be and do the math again using your new modified payment. If you above water with the new number you are well on your way to a new life, with one less worry.

    I do not think the average person needs a professional to negotiate a modification. My experience with MOST attorneys is that they are aloof, unreachable, unresponsive and condescending. If you can find one with empathy God bless you, but you don’t need a professional to get a modification with your lender.

    It bears repeating though, if you are in danger of iminent foreclosure then you need an attorney right away.

    If you can’t find your loan documents from the closing, you can get them directly from your lender. Under RESPA section 6 they are ABSOLUTELY required to send EVERY page you signed at closing to you.

    Get Ready, Get Educated – Get Modified and Get on with your life…


  132. “It bears repeating though, if you are in danger of iminent foreclosure then you need an attorney right away.”

    Thanks for your long comment, Dan.

    Lucy, and readers, it is very important that all homeowners in financial distress always consult with an attorney. Attorneys can do things that loan modification book sellers simply cannot do.

    Even if you are not in default on your mortgage. If you are facing foreclosure, thinking about a short sale, or loan modification, please consult a local attorney in your hometown that you can talk with face-to-face.

    Many loan mod companies claim to deal with a “pool of attorneys.” This may or may not be in your best interest when compared with the money loan mod companies are charging. Why not consider spending that same dollar amount on a LOCAL attorney?

  133. I would like to know on a loan modification what happens to the borrower. Is their credit trashed due to this modificaiton? Are their any reprocusions to the borrwer though this process. How much of the modifications are done on the discrepencies of the HUD and the Truth and lending disclosures apposed to the lender just feeing sorry for your situation. Also, how long does the process take with an attorney vs. doing the due dilligence your self. I find this site and all the blogs just fastinating and would like more information. Also if there is not a settlement disclosure in the process how is it a violation to RESPA. Is the modification not just an addendum to the current contract?

  134. Has anyone else noticed that Jillayne is the only pretty face in the crowd. How can I change mine? I digress.

    A loan modification is quite simply an agreed upon change in the terms of the note. The note is the borrowers “promise to pay” the lender according to the terms outlined therein.

    If the borrower is late or in arrears on their mortgage that will affect their credit.

    A loan modification will not affect a borrowers credit in any way, shape, or form. And there are no repercussions if the borrower lives up to the new agreement.

    One side issue –> The borrower upon signing most loan mod agreements gives up their right to remedy anything done in the prior mortgage. Some may consider that a repercussion.

    A forensice audit or loan document review is invaluable when seeking a loan modification. Finding issues with the cuurent loan and documentation will change the equation exponentially.

    I too find the subject of loan modification and the lendrs view on loss mitigation fascinating. It is not for the weak at heart, I have negotiated many, many loan mods. Often I have to push the lender to the brink of threatening legal action before obtaining a truly meaningful modification. Most homeowners are too emotionally invested to play the game, leaving them easy prey for the loss mit crew at most banks.

  135. Hi Dan,

    Question: if a loan modification means changing the terms of the note, then isn’t this the creation of a new contract? In most states, wouldn’t an attorney be required to create such a contract?

    So then if the lender’s attorney draws up a new note and deed of trust, then, as a book author, do you recommend homeowners always seek out legal counsel (even if it’s just for a few hours) so the homeowner has someone representing their interests?

    Thanks for your insights.

  136. Hi Shanz, here are your questions and my answers:

    Q: what happens to the borrower. Is their credit trashed due to this modificaiton?

    Your mortgage history such as late payments (30, 60, 90 days late) still show on the credit report UNLESS you negotiate this with the bank. Loan modifications and short sales are LESS damaging to a person’s credit than a foreclosure or a deed-in-lieu of foreclosure

    Q: Are their any reprocusions to the borrwer though this process.

    A: Well, it depends on how you define the word “reprocussions.” Some people might say that extending the loan term from 30 years to 40 years is “good.” Others might say that the additional interest paid over the life of the loan is “not so good.” If you believe your financial problems might continue into the future, a loan modification might not be in your best interest. For example, what happens if you re-default again in 4 months? Now the lender isn’t going to be so thrilled at modifying the loan again. Maybe you would have been better off to try and sell and start rebuilding your credit as a renter now, today rather than putting this off for 4 months.

    Q: How much of the modifications are done on the discrepencies of the HUD and the Truth and lending disclosures apposed to the lender just feeing sorry for your situation.

    A: Lenders are not uncaring, unfeeling robots. However, everyone who is asking for help is facing a sorry situation. Lenders are required to look for solutions that will minimize losses for their shareholders and investors. If you believe you may have been a victim of predatory lending or bait and switch lending tactics (being quoted on set of fees at application and then switching you to a different, more expensive, less desirable loan product at closing) then an attorney can take a deeper look at the loan documents to see if your lender was in compliance. Loans out of compliance are receiving FAVORABLE loan modifications when handled by an attorney or a HUD-approved agency.

    Q: Also, how long does the process take with an attorney vs. doing the due dilligence your self.

    A: The due diligence will need to happen in both cases. You must interview at least three local attorneys in your town and find one who has experience working with lenders in this way. Sometimes that means a real estate attorney but more often that means a consumer protection attorney. If you decide to do it yourself I never recommend moving forward without having an attorney look at the loan modification being offered to you by the lender.

    Attorneys are not as expensive as you might believe. Get a few hourly quotes. The more experienced the more their hourly fee, but then the more efficient they’ll be (theoretically) at handling your case.

    DIY- No
    DIY Yes, but always with an attorney, even if the attorney is only needed for a few hours.

    Q: if there is not a settlement disclosure in the process how is it a violation to RESPA. Is the modification not just an addendum to the current contract?

    A: If a third party loan modification person is earning a fee but is not performing work commesurate with that fee and just hands the file over to someone else to do the work, this appears to be a section 8 violation of RESPA as unearned fees are classified as kickbacks. See comment number 88 for a quote from Mortgage Law Central.

  137. I do agree with Jillayne, a loan modification agreement should not be signed without being reviewed by an attorney.

    I do not however dismiss the services of a loan modification company as compared to an attorney.

    If you are dealing with a reputable company that does the work in house and has attorneys on staff (not outside the company) who review loan documents (forensic review) with verifiable references as well as actual examples of successful completed loan modifications, you should expect to do well.

    Compare a well run, well staffed company as outlined above to the sole prctitioner attorney who doesn’t return calls, is in court all morning, and doesn’t have staff to make the many, many follow up calls, and you will understand the need for research prior to hiring anyone to be your consumer advocate.

    The amount of hours in just putting a file together prior to sending it to a lender is cumbersome. Add to that the amount of time spent on phone calls to the lender. ( HomeQ takes a minimum of 45 minutes to answer a call) Would you like to be billed by the hour for that?

    Find a loan modification company that doesn’t collect until the loan mod agreement is in hand.

    All the talk about attorneys being the best route is great, but I have yet to find an attorney taking these on a contingency basis, and paying $150 to $450 an hour can add up quickly.

    Mind you I do have a son in law school, and hope that when he gets out he will be able to build a business based on billable hours.

    I just believe in getting the most for your money, and if you can hire someone who only gets paid upon success, they will work hard to get paid.


  138. Pingback: Foreclosure; Losing the American dream | Rain City Guide

  139. When dealing with an extremely important subject such as your home and overall financial health, why anyone would take chances at this moment in their life without the assistance of an experienced lawyer and tax advisor is really difficult to justify. At this moment in your life, now is definitely not the time “to get cheap.”

    You don’t want to be “Penny wise and Pound foolish.” Such is the case in dealing with loan modifications and short sales.

    What People seem to miss is that there are actually multiple tangible and intangible components to achieving a successful loan modification and/or short sale.

    The tangible components are things like the law, what information the lenders need about the property, the homeowner, the liquidation analysis, and the workout analysis.

    The intangible component that you can only learn through experience and not through reading is “the art of the deal.”

    Sure, everyone can handle their own attempt modify their own loan or attempt to get their lender to agree to a short sale; however, at our law firm, we actually accomplish the goal every day.

    Simply put, there is no substitute for experience in dealing with lenders on a daily basis and actually working through how all lenders handle things differently.

    There is no substituted for experience in negotiations and knowing how lenders act and react to multiple offers and counteroffers.

    The same lenders do not act the same way with different clients. Each case is different.

    Part of the process is mechanical. However, a very important of the process is art in the negotiation process and knowing what it takes to get things done.

    Read all you can and be informed. Ask questions. At the end of the day, hire an experienced real estate lawyer and get this part of your life handled the right way.

    When your kids get sick, some times you know you don’t have to take them to a doctor right away. However, other times, you recognize that you need to get a professional evaluation and treatment for your child to be healthy.

    Right now, your financial and real estate situation is very sick. You need a professional evaluation and treatment in order for you to get healthy again.

    Good luck to all.

  140. I have been a loan modification officer for about 2 months with no Prior experience at all when it comes to mortgages. I was out of a job and narrowed it down to 3 professions with job security: Nursing,Information Technology, and LOAN MODIFICATIONS. I went into this business because I saw job security for the next year or two. My mother works for the State as an Attorney and had done some research on the company I am involved with and gave me the ok. She said that on a daily basis in her office she is seeing complaints filed against companies similar to mine who are taking the money upfront and never getting the client remodified thus resulting in the client either forclosing or just being in a worse situation than before. Watch out for these companys. She also held a free seminar in a town where there are going to over 400 homes forclosed within the next 3 months. Only 15 people showed up. WE are lazy as a nation and want to consume and be served while consuming. She believes this is a wonderful thing as long as it is done the right way. What we do is charge $1,595 which is held as escrow until the modification is complete. Which $400 is paid to me for commission on the sale. It is 100% refundable if our attorney does not accept the new modification of your loan. Our attorney which is in house calls you within 24 hours of your payment to find out if you can afford the new Monthly payments plus to make sure this will not put you in a worse situation than b4. You also have a 3 day cancellation term with generally every contract which is why our attorney calls you promptly. Our attorney will not make a final decision on the modification without approval from the client. If you do find your own private lawyer that you believe is qualified you will have Appraisal fees’, and closing costs. Majority of the people i speak with agree and understand this. And Yes obviously the lawyer is doing the majority of the work. If someone asks if they can do this process on their own I ALWAYS tell them the truth. Am i going to tell them this without them asking, no because i am here to make money and this is a service we are providing. I have found the most success i have is with people who can AFFORD this fee or people who just dont have the time to do this cause they have to work 2-3 jobs to keep their house, or possibly because they have such high Mortgage payments from the BAIT AND SWITCH or ill advise from REAL Estate Agents. But I can see why a real estate agent would advise a client to check out the FREE way to do this only because the client is going to see how time consuming the whole process is, thus inturn going back to them for help. If this service wasn’t available I truley believe that these Free programs would not be able to help out the hundreds of thousands of people in this situation in a timely fashion. Do you agree that with our LOAN MODIFICATION SERVICES we are going to be able to make a difference and increase the number of homeowners keeping their homes???

    Just my thought, please excuse my Grammer and spelling. I am a young college student and since I surely am not as qualified as many of you to speak on this subject. I just would like to think that I am providing a legitimate service to people in need while making money to help put me through school. That is the reason why I got into this.
    Got to go….sorry for not proof reading……..PHONES ARE RINGING OFF THE HOOK….. got to go fix the problem Mortgage Loan Officers & Real Estate Agents had a hand in creating. LOL had to throw that in….Love causing a rukus. Thank you for your time……

  141. For young college student, the previous poster did make some good points. There definitely are legit loan modification services out there that can help homeowners facing foreclosure, but maybe just as many that are scams. Hopefully readers will take in all of the advice given here about doing due diligence on vetting their options for attorneys or “loan mod officers.”

    To me, the central debate on this issue comes down to the DIY or go with a service. I think there is a lack of clear information on the topic that makes the DIY option difficult. The state-by-state legal differences, the lender nuances, the preparation of expense worksheets, hardship letters, etc. can be confusing and overwhelming if you’re trying to research the topic yourself. The young college student above makes an excellent point about time…some people just don’t have enough time to wrap their heads around all of the information and make sure they have the right advice, especially if they are working extra jobs to deal with their financial situation. However, Jillayne makes a great point, the due diligence in preparing for a loan modification is going to have to happen regardless of whether you do it yourself or go with an attorney. Chris Benson tries to make the point that a loan modification legal service is the way to go because they deal in it every day. I somewhat agree with this but I also have to think that the bank really doesn’t want to own someone’s house. They much rather deal in loan modifications or other options, so if a homeowner takes an entire day out of the weekend and gathers all of the information they need and then follow Jillayne’s advice and take the material to a local attorney and pay for a couple hours of review, then they can accomplish the same thing at much lower cost.

    But it still comes back to time and information. Is there enough of it out there?

  142. I have been a Loan Consultant for three years and real estate
    for one years. And I’m about to work for a Loan Modification

    I had sold those “Power Options” Loans but only to investors
    and people I trusted and knew that they knew what they
    were getting into.

    I have been, since 2007, reading, absorbing, and attending seminars about the correct, ethical ways to do loan mod.

    Here is what I can tell you…..


    Yes, you can do this yourself but 90% of those whom had tried failed. 10% of those (50%) ended up getting a deferment on
    their mortgage which is not going to help because if YOU cannot pay NOW, how can you pay 6 months later!!!

    Scams Artist:

    – DIY programs or instructions you can buy online.
    – Upfront fees without doing any work.
    – Attorneys asked for a monthly payment for his/her service.

    The correct way of Loan Mod:

    1) Reduce interest rate (at least 1% lower).
    2) Reduce principle of loan.
    3) Reduce monthly payment & extend longer terms.

    If any of these 3 are not met, a loan mod will not work
    to the advantage of a homeowner.


    1) Applcation + Hardship Letter (package)

    – Purpose is to know your situation.
    – Proof of your hardship.

    2) Attorneys negotiation

    – Attorneys have more leverage than YOU.

    3) Processors

    – Process all the paper works and contracts.

    Yes…don’t forget the Salesperson(LO) he/she is to tell
    and explain this to the potential clients. And depends
    on the company, this Salesperson might do more
    of the above duties.

    Salesperson makes about $200 – $700 commission.

    You have to understand the Attorneys, Processors DO NOT
    want or have time to call…so…that’s why the Salesperson

    Ethical FEES:

    $2500 – $3000

    Collected in 3 separate payments:

    1) Application/package

    2) Negotiation

    3) Processing of papers.

    My thoughts on doing it yourself:

    1) If you don’t mind talking to a lender/servicer…
    2) If you have the knowledge and negotiating skills…
    3) If you don’t mind being transfer from dept to dept…
    4) If you know how to put together a Hardship Package
    that is different for each lenders.

    Finally…is $3,000 worth to save your home without
    going through all these DIY. And image after the
    DIY, you didn’t get approval, ARE YOU GOING to
    do all the above over and over again before your
    foreclosure deadline???

    best of luck,

  143. I have a question…If you don’t have money to pay your mortgage and are experiencing “hardship,” how the hell are you going to come up with $3500?

    Ok, so I have another question…

    If these programs actually work and truly help homeowners and banks avoid foreclosure (which costs banks tens of thousands of dollars), then why doesn’t the bank offer this service at a much lower rate, if not for free?

    The money the banks will save in the long run by avoiding the foreclosure process will far outweigh the immediate cost of the LO, the processors and attorneys.

    • Hi Danilo!

      Thats a very good point! But some ppl will not be able to make a payment even after a modification. Thats a scary part for banks. Banks will gladly foreclose properties which values went up.

      3500 is a lot for a modification, normal fee is between 2500-3000. If there is a second loan, that needs to be modified, you could do it for additional 500.

      Lastly, if you are lets say behind 5 months on your mortgage payment, and each payment is 2000, you owe 10k to the bank. paying 2500-3000 for a modification to save your house is nothing!
      p.s. 10k is typically rolled on the back of the loan.


      p.s. pricas srpski? 🙂

  144. Ugh!!!

    Busy day, but I coudln’t possibly let this one go…

    Spoken like a true Subprime LO, turned Loan Mod Guy!

    Just to start, your statistics are WAY OFF BASE.

    Maybe a refund for your “schooling” would be in order.

    Scams Artist:

    – DIY programs or instructions you can buy online.
    – Upfront fees without doing any work.
    – Attorneys asked for a monthly payment for his/her service.

    You left out the most obvious one.

    Guys that sold those crap loans, that now want you to pay them to fix them.

    Did I mention I was Busy Today?


    I have personally negotiated and closed in excess of 100 loan mods for clients.

    I have a DIY book for those people who have a desire to do it themselves or can’t afford to pay for professional services.

    I have spent many hours of my time counseling and coaching some of those people who couldn’t afford to pay for services.

    DIY is a real alternative for these folks, lest they lose their family home.

    I realize from your post your research is yet to be completed. If you had read through a sampling of what is available out there for less than $100 bucks you would know that the rules of DIY are clearly laid out in most of these publications as follows:

    Your lender has only IT’s beat interest in mind – Not Yours
    NEVER take your lenders 1st offer
    NEVER settle for a “workout agreement”
    NEVER accept a deferment or forebearance as a solution in and of itself
    ALWAYS do the math and figure out what you can really sustain, make certain you do not settle for less from your lender
    Spend the few dollars it costs to at least have an attorney review the loan modification agreement you have negotiated.

    If the DIY book doesn’t mention these in it’s pages then it’s probably not a great book.

    But for less than $100 bucks, it can hardly be classified as a scam.

    And it pales in comparison to the scam perpetrated by LO’s who collect 3-5 points to squeeze homeowners into these exotic loan products, and now that the parties over, they want to “help” their victims out of the jam (For a fee of course).

    Caveat Emptor –

    If you are a homeowner and looking to hire a professional read the many posts above, there is some good advice.

    If the professional or attorney you are interviewing to become your advocate doesn’t start with a complete review of ALL of your closing docs, (the ones the bank has in it’s posession) RUN DON’T WALK to the nearest exit.

    The BEST way to get a loan mod approved is to reverse engineer what happened between the time your signed a 1003 (Loan Application) and the closing date.

    I have looked at hundreds of these and the number of mistakes and violations is staggering. Once these issues are uncovered and shown to the lender they negotiate with THEIR BEST INTEREST in mind.

    They want you to sign the loan mod which will most definitely have a clause that eliminates your rights to go after them for what they did to you in your prior loan.

    Finally…is $3,000 worth to save your home without
    going through all these DIY. And image after the
    DIY, you didn’t get approval, ARE YOU GOING to
    do all the above over and over again before your
    foreclosure deadline???

    Remember WC Fields said There’s a Sucker Born Every Minute.

    Watch your wallet folks.

    I think I need a shower!

    Dan Harris

  145. Do a search for loan modification on Google.

    Wow, now I know how they beat 3rd Q estimates.

    Dan, you are probably correct that some educated folks will be able to DIY, but most of them probably won’t need it.

    There’s a whole lotta folks that haven’t read a book in years, and have an underwater mortgage, and they probably won’t DIY.

    That’s too bad. It’s a heck of an incentive to read a book.

  146. hi, my boyfriend has a 3-family primary residence building that has an ARM about to balloon. He has good credit/never been late, yet can’t get re-financing. He has been offered a Modified loan with a 4,500 fee. I am researching this and found this article. Do I understand correctly that if charging they are predators and we should stay away? Can he Modify by himself or with attorney? He thinks he doesn’t have much time so he should take this deal. Can you advise me please, don’t know much about any of this, but don’t want him to be ripped off or have his credit ruined.

  147. Thanks to all for your information. It has helped me understand the Loan Modificatin process and what to do and look out for.

    Good Luck to all of you and God Bless us all.

  148. Hi julia,

    Has your boyfriend tried talking directly with his lender?

    Lenders do loan modifications with the borrower for FREE. There is no fee charged by the lender.

    Your boyfriend should hire an attorney for far less than $4500 to first advise him of his legal rights, options, and the attorney will do way more for way less.

    Find a LOCAL attorney who specializes in real estate OR consumer protection law.

    In regards to the company making the “offer” in exchange for $4500. are they making promises and wanting cash up front? This is a giant red flag.

    The current sales pitch going around right now will scare you into thinking that attorneys will charge your boyfriend $10,000+ to make it seem like $4500 is a steal.

  149. It’s NOT that easy for some people to find the right service they need and would rather pay someone to handle the paper work and the negotiation process for them. When you pay someone to do something they are obligated to perform their services as agreed..

    Personally I’d rather pay for good service then mess it up myself, having someone else to blame sits better my conscience . And I’m sure I could do it myself but, should I really?? In all reality I could probably build my own house and make my own clothes but, do I dare??? NO. I’d rather have someone do it for me.

    Its all comes down to the client(the homeowner). You could call your bank or a HUG agency that does it for “Free” but, a lot of cases they don’t get back to you, you can’t get them on the phone and at the end of the day they don’t really care if you get a loan modification or not because at the end of the work week they still get paid and get to go home to there homes.

    Most attorneys don’t even know about this modification service. With all due respect they are probably pretty good in their practice but have no clue how to handle this animal. Loan Mods take weeks of negotiations and paper work, which the regular real estate attorney doesn’t have the time for.

    I don’t want to defend For-Profit modification agencies to much because not all them are good and sum are scams. I started working for a modification agency a few months ago because my aunt was in need of a modification, she was losing her house and couldn’t get the bank to work with her. So I researched and researched and researched! I found the agency that I work for now and actually went down to the corporate office to see the whole operation as a customer and as a potential employee. One of the counselors sat us down ,went over different options to make sure a loan modification was the right thing for us and presented us different modification cases that were already complete. They offered a 100% money back guarantee(that was in writing in the application) and they only took half of there retainment fee to get it started. YOUR COUNSELOR DOESN’T GET PAID UNLESS YOUR MODIFICATION GETS APPROVED, Bottom line!

    Of course my statement doesn’t apply to everyone but, I know A LOT of people that feel the same way I feel.

    As a customer and employee I think my company offers the best service! ! !

    Best Regards,
    Wayne Wofford

  150. Jill is on the mark again.

    DO NOT fork over an enormous $4,500 fee to someone who will ultimately have you sign a document that “offers no guarantee” if they won’t work on the contingency that they get paid when you get modified, tell them to “GET LOST”.

    In addition, make absolutely sure that anybody who is going to work as your advocate knows about RESPA, TILA, HOEPA, and Regulation Z, along with having experience working with bank docs EVERY DAY, not just once in a while.

    It will be this experience that will enable them to review your loan docs for fraud, miscalculations, and errors that will set the stage for successful loan modification negotiation.

    A loan modification is MUCH MORE than a simple compilation of documents and phone calls.

    It requires tenacity, and a drive to get it done. Unfortunately it requires the 5 percenters.

    Yes just like anything else in life only 5% of the loan modification professionals out there are really getting it done everyday. The rest are just collecting the $4,500 up front fee and selling their clients down the river.


  151. Pingback: Foreclosures have been a theme on RCG la … | The Hotlist

  152. -Jillayne

    I appreciate you trying to educate homeowner’s on their best options and to prevent foreclosure scams, however, you are way off. While there are definetly unethical loan mod companies and inexperienced attorneys attempting to perform services, there are several quality companies in the marketplace. You can’t label every loan modificaton company that takes an upfront fee as a scam. It’s absolutely perplexing to me that you or some individuals on this thread have never dealt directly with homeowners in distress or actually performed a succesful loan modification but are trying to give advice. How sad!

    I have been peforming loan modifications since July 2007 and last month we executed 181 successful modifications with not one single complaint. In my eyes, I saved 181 home last month. Do you have any idea how happy that makes me feel? Ironically, 70% of these homeowners attempted to work directly with their lender or with HOPELESS-NOW (HUD AGENCY) but were completely unsuccessful. Does the average homeowner know how to package, process and negotiate a loan modification? Does the average homeowner have countless hours to spend on the phone with their bank during normal business hours? Does the average homeowner know how to perfrom a loan audit? Do you really believe that HUD approved counselors have experience in giving advice or performing loan modifications? HUD counselling agencies were implemented to do one thing, “protect the banks profit margins.” Don’t banks run this country? Do you really believe that the lender is looking out for the homeowner’s best interest or their own profit margins?

    Furhtermore, my point is apparent by analysts at Moody’s Investor Services which states, “A whopping 42 percent of subprime adjustable-rate mortgages modified during the first half of 2007 had become 90 or more days delinquent by the end of March 2008.” Guess what Jillayne? These huge default rates can be attributed to the Banks offering higher rates to stabilize or increase their own margins. Once again, the homeowner’s interest is set aside for monetary gain. The majority of these defaults are coming from “rate freezes” when in reality the homowners needs a “rate reduction.” Aren’t you the one advising homeowner’s to work directly with their bank? Wake up!

    These are just a few points….much more to come!

  153. @Jordan “You can’t label every loan modificaton company that takes an upfront fee as a scam.”

    Actually, I can and I do. If your company is so successful, why the demand for money up front?

    Jordan says, “Once again, the homeowner’s interest is set aside for monetary gain.”

    Let’s see. Jordan claims to have completed 181 loan modifications in one month. If the average cost of a loan mod is $3,500. then that means Jordan’s company has grossed $633,500. in ONE MONTH.

    Thanks for sharing, Jordan, so that all the homeowners can read along with us.

  154. Let’s get some clarity on this:

    Mtg lenders performing loan modifications
    Real Estate performing loan modifications
    Attorney Loan modification
    Self Help Loan Modification
    HOPE loan modification

    So who really is qualified to council the homeowner?

    The answer is all of the above, depending on the knowledge base of the company/person

    Is it better to have legal representation than not? One would think so,
    Lets take Joe the plumber who has fallen behind on his house payments, Should Joe do a short sale? Bankruptcy? Loan modification? Walk away? Call the hope foundation? Well? Of course we can’t answer that, why? Because we need to gather more facts. And let’s not forget Joe, and what he would like to achieve. So let’s go on the fact finding mission. Let’s value the property first. Who shall we have value the property, Lets Choose the Realtor, this is what they do. Should Joe attempt a Refi?’ would he qualify? Its time to call the loan officer and run Joes numbers. Perhaps it’s a good thing to have the realtor on close by to discus the financing options with Joe. By the way, has anyone called the bank yet? Should we send in Joe to deal with the $14 an hour decision makers who are trained to hand out standard answers? And besides wouldn’t the bank be protecting their best interests or would they be all about taking care of Joe, it’s a rhetorical question.
    Lets go to the hope foundation, has anyone here tried this place, they return calls every month. If we peel back the onion layer we will discover the hope foundation is funded by the banks. Now seriously if we are going to negotiate the best deal for Joe why would we join the wolf in sheeps clothing ?
    Now that we have explored the initial options for Joe the plumber (and so far Joe hasn’t paid a dime, and find an plumber who works for free) Lets go visit with the Bankruptcy attorney. The bankruptcy attorney might often advise for Joe to file, after all this is how the Bankruptcy attorneys, like all the other players in the loan mod game, keep the doors open.
    Bankruptcy might be a great option, especially if Joe has two loans and one of them is at zero equity. Perhaps a strip down of the second loan would be in Joe best interest, but hold on, what if Joe had a high yielding first loan? Let’s go get some more information and visit the loan modification service company. Joe is told that loan modification is feasible, his property has lost value and his income has decreased. he is advised to do a loan mod on the first trust deed, and if the second is not cooperating then once the interest rate and or principle has been reduced on the first then all being well go back and visit with the bankruptcy attorney. If the first lien holder will not work with Joe, then Joe may want to consider a short sale or a short refi. You see Joe the plumber has a lot of options none of them can 100% guarantee the outcome.
    It would seem to me that the best place for Joe to go is a full service company that provides loan modification bankruptcy short sale and short refi services. Looking for the best outcome and saving Joes house and his family from catastrophe. $3500 for all this? Joe would have paid at least that amount when he secured the loan.
    Now all we have to do is find a company that offers such services.
    By the way the income derived from helping Joe pails in comparison the banks made when they sold Joe the loan.
    I suggest a company that is made up of professionals with licenses and accountability. It’s akin to a department store where Joe will have his personal concierge to help him shop and make the right decision.
    Chris Giddings Las Vegas NV

  155. Hi Chris,

    Thanks for stopping by RCG. I like your story. I had a thought. Maybe you can help me out:

    “By the way the income derived from helping Joe pails in comparison the banks made when they sold Joe the loan.”

    but….the banks are now losing money. Loan mod, short sale, foreclosure, maybe a re-default later on that loan mod….hmmm.

    Could an attorney, who is well versed with the laws that govern all these choices, help this same person for less than the large fees being thrown around out there?


  156. Jillayne wrote: “Could an attorney, who is well versed with the laws that govern all these choices, help this same person for less than the large fees being thrown around out there?”

    I would think so, and they probably wouldn’t be involved in the likely unauthorized practice of law like some of the other players mentioned. If memory serves, I believe that was probably addressed in one of the 190 posts before this one, but it bears repeating.

  157. Wall mart is a popular place to shop, Perhaps this could all be outsourced to china?
    That might save dollars, loose a few jobs, take our money offshore.

  158. It has occured to me that there is no source of reliable data on loan modifications.

    At least, I cannot find any.

    That would be very useful for folks trying to make rational decisions.

  159. I have read too many negatives here. I have been in the real estate and mortgage business in Ca for over 17 years. I have seen the ups and downs.
    Just to share a note with everyone, I had a homeowner walk in with loan modification paperwork which she had not requested. Was not sure what it was. Missed one month payment. It was directly from the bank and reducing her principal over 100K and had a fix rate for the remaining 28 yrs and reducing her payment in half. THANK GOD there are some banks starting to do this. Just one of five that has happened in the last week.

  160. How can I get the phone and fax numbers to my loss mitigation departments. I have a couple of properties with 4 different lenders. None of them actually answer my calls of have any info on their websites about how to do these modifications.

  161. Wow…haven’t been reading this has grown.

    Let me try to answer some of the concerns on my

    Is it worth $3k or $3,500?

    Coming from a loan industry, I had seen how processors
    work. Because I have to pre-package my loan. So what
    do these ethical, honest Loan Mod company do?

    1) Take your appl.
    – collect your info
    – collect your documents.
    – call between you, company, processors, attorney.
    2) Negotiation
    – attorneys or company team
    – call banks, call loan servicers.
    – fax documents back and forth to you, company,
    processors, loan mod agent.
    3) Processing
    – more calling, calling, faxing, faxing,
    – data entry of you file.
    – collecting documents.
    – follow up, follow through.

    NOW, multiply these task by 10 or 20 loans per week!

    If you can do all these, all power to you!

    1) DIY – If most of the homeowners have the time to
    read and do research on DIY Mod then they will have
    a chance of success of modifying their loan.

    The reality is NOT many H.O. can, will, and try to do it
    themselves. (They are confused, mad, and don’t care

    And yes, correcting myself, not all DIY are scams!

    2) No Money

    If you don’t have money, how can you do loan mod?

    Then you will foreclosure your home, live in an
    apartment, foreclosure will be in your credit record,
    and next time you try to buy a home is going to
    be very, very, tough.

    Is that enough motivation to find the money (credit
    card). (30 days to pay it back – by then you have
    a new lower, mortgage payment).

    3) Guarantee

    Yes, there are company that gives guarantee if they
    are not successful.

    Just follow these steps:

    a. Perform, result, pay.
    b. Perform, result, pay.
    c. Perform, result, pay.

    4) Attorneys

    Of course, the attorneys negotiating the mod will be
    a specialist in R.E./Loan, because he/she will know the
    terminology or R.E. Laws.

    5) Why not FREE!

    Banks are swamped with, pressure from gov., to
    do these loan mod and banks do not have the time
    to hand hold each homeowner to answer his/her
    100 questions!

    Banks do not have enough manpower to spend
    30 mins answering questions for each homeowner.

    BANKS ONLY want to deal with loan Mod. Spclst. because
    they speaks the same lingual and know what’s going on!

    Google or read the news, many HO (Homeowners) tried
    to call their banks and ended unsuccessful because
    they got transfer from dept to dept.

    Nonprofit organization or companies will mod your
    loan into a deferment (6 months).

    What you need is:

    – reduce interest rates
    – reduce term
    – reduce payment
    – extend term
    – fixed low rate for 5 yrs (gov. is working on this)

    6) Your Mortgage

    After your sign-off, you moved into your new home,
    your loan has already been sold to private investors.
    (usually within a week).
    Packaged by your bank, with other loans and investment
    products, sold on the international market.

    Your loan is owned by several (Servicers), except
    WellsFargo, they service all their loans. So in order
    to negotiate the loan, the bank has to contact all
    these Servicers and let them know about your term
    and hope all of them agreed!

    7) Fed is Helping!

    Yes, the Fed is looking into hiring thousands of
    employees to help BANKS to process these loans
    from all the states.

    This will speed up the process on the “other end”.

    But the “Front End”, taking a qualified application,
    is still very slow.

    Now, the gov. is setting up guild lines on Loan Mod
    Procedures…guess what…is going to be better but
    at the same time…will be slow because the ethical
    company will have to learn and train their people.

    Loan Mod is just like those company that improve
    your Credit Score & reduce your Debt.


    If you can do it yourself, all power to you!

    I, myself, can do a lot of DIY because I do not give
    up and can be on the phone everyday until I gotten
    an answer or write to 10 agencies to file one, single,

    But I still like to have ethical, professional people to
    help me, do certain task to save time.

  162. at least now we can get do these loan mods to generate some business until the subrpime comes back, or some alt-a loans. you can average about 2-3k upfront. Fomr your own corporation that is not a mortgage company and start getting paid again.

  163. Can a non licensed mortgage professional follow up on loan mod. leads, prequalify them based on basic information, and then refer them on to a real estate attorney to complete the process?? If so, what fees can this mortgage professional capture from the client? Is it also my understanding that attorneys cannot “split” their fees with a non-licensed individual? I was told a client had 2 options: a) attempt the loan mod on their own or b) have an attorney advise and file documents on their behalf. Is this correct? When it comes to filing all of the paperwork and working with the lenders themselves, wouldn’t a good law firm have contacts within the lenders to expedite this process much quicker than if you did it on your own? Thanks for your help and I look forward to your comments.

  164. Odd how mortgage lenders here defend the service charge. Wasn’t it their fiduciary duty to inform the client of the for sure downsides of the option arm. No. It was legal. And they presented it as a harmless rollercoaster that balances it’s self out. Not to worry. Try the interest only program. You can do it for three years then refinance. And they did this to first time buyers. What is a first time buyer? Somone who doesn’t know what is going on and set out looking for some one they can trust. Loan Modification should be free. A simple fine or punishment for placing the uneducated home owner in the situation in the first place. Or did we over look that. Phone calls, filing and faxes. Try working a physical eight hour shift while thinking of your negitave AM future.

  165. Last night I did inquire online to find help. I typed my info in once to recieve two phone calls within seconds for modification. Then two more phone calls this morning. Not to mention six e-mails. One place wanted $2500 and the other $4,000. Got the best advice ever! Just call you who ever you have your loan with. You fax over your finances and they will set up a negotiation with you. Yes, they say the process will take 60 to ninety days. But hey, I save myself $,2,500 to $4,000 by just making one phone call. I stand by by my last post as proof. You malipulated the uneducated trusting home owner just to make a profit. And now your manipulating them again! Fiducial lending my ass.

  166. Hey Thomas,

    Thanks for checking back in with us today. I’m thrilled to hear that you’re going to try it on your own and avoid the high fees. $4,000–that’s insane.

    When the lender offers their modifed loan proposal, I highly recommend finding a local attorney in your city to help you review the modified loan documents. Google your local state bar association and look for an attorney with experience in real estate law OR consumer protection.

    Good luck! Please come back and tell us how it’s going!

  167. I only spoke with my note lender moments ago. I will come back with an update. They say they are going to submit three one being an interest deduction, one being an lower fix, and one (not positive) being a loan based on low current value. In a normal market situation I can see the advice be useful. But people like me don’t have any options but to take the most reasonable lowest offer available. Local attorney, I’m not sure of the cost. Real estate attorney, I’ve heard starting cost $5,000, which is why from experience new owners deal with the false disclosures and repair the problems themselves. Arbitration usually fails in real estate leaving the new owners to sue the seller representing cost $5,000. Consumer protection, I’m going to look into it. Thanks. But even if I end up not being able to renegoitiate my loan and end up losing my home. i would like to take this crusade in lending to a higher level. I just had a brain storm today. Why do we need lenders in the first place? Follow this idea. If robotics replaced jobs, then computer programs can do the same. Each individual is responsible for their own borrowing. So each individual can set up their own loan. A national computer program monitored by the feds. We as individuals would run our own scenarios to see if our financial goals would work and be met. This way you know exactly what’s going on and what you are doing. No tricks, no options. The only way a person could fail is by their own doing. You would type in your plan in and run your scenario The only way you can complete your plan is to follow the hypethetical situation in the program. Therefore you do have a complete understanding of what your borrowing; not only written proof but math mathematically as well. Then when your goal is approved following the federal policies, you can go ahead and apply for a reasonable fee. $24.95 Once approved you’d bring your proof of finances to your bank or an approved federal establishment to complete the process. You did it all on your own. Positive out come : more people confident in knowing what their borrowing. More homes will be purchased and more buisnesses starting up. Like a lender opening a donut shop. No fee’s . No penalties. No high loan organization fees. No closing cost. No lenders. Just you and a program set up by the federal goverment. No manipulation tricks. No false leading. No high refinance fees. Think of possibilities. You don’t need a lender unless you choose so, you could only hire them as advisors. It’s a National Federal Lending Computer Program for eveyone. No joining fees. No required liscensing. I call it, ” A Place We Can Log On To” It’s a program right up there along side “Windows” A program for the actual lendor and the lendee. No financials funds take place here, which is why an individual has to report to the bank to complete the transaction. Complicated? Yes. Possible? I don’t see why not.

  168. Pingback: Loan Modifications | Rain City Guide

  169. I have been a LO for several years. I didn’t put borrowers in homes they couldn’t afford. I didn’t charge prepayment penalities for my profit. I always advised clients of I/O and ARMs and Option ARM (although many chose them anyway). Now I am faced with borrowers who were suckered in by not so honest LOs who told borrowers to “just refinance in 6 months.” Last year I came across a guy who I tried to refinance and couldn’t because he had a 15,000 prepayment penality and his property value dropped about $40,000. I have been working with loan modifications because most of my clients don’t have the time, skill, ability, or knowledge to obtain a sucessful modification. I have had several clients who tried to do the loan modifications on their own and with their bankruptcy attorney and still lost their houses because no one knew the process.

    I say if you have the skill and ability to do a loan modification than good for you…but in most cases if this were the case you wouldn’t be in the situation you are in in the first place. Many borrowers need help from people they trust and who are skilled at modifications.

    Loan modifications require time and knowledge and most borrowers don’t have either.

    I always tell borrowers they can do the loan modfication themselves but many of my clients have tried and was unsuccessful.

    Just do your research and pay what you can afford! If you can do it yourself than do it. If not get some help!

  170. Chase (original lender) did a loan modification, worked directly with them and Freddie Mac. Hubby’s 20 yr. job was outsourced, income reduced by 75%, and it took two+ years for him to find that. Savings gone (rainy day not titdal wave), using early retirement benefits to exist. Not looking for sympathy, just anyones HELP/ADVISE.

    Mortgage amount balance increased (interest, costs, expenses, etc.) interest reduced 2%, and length of loan increased, we thought great. First two new payments, cashiers check only AND $0.00 for the modification fee, closing costs and first months payment. NO statement will be sent during this time. THIRD month, he gets a statement with charges never given to him. Unpaid Late Fees $297.20, Attorney Fee $1,802.50 8/6, Attorney Fee $1,999.50 8/27, Misc Fe $1,999.50 10/28, Suspense Funds App $1,494.90 10/31. Our first new payment was due 10/1, they show it was posted 9/12 , if payment not received by the 16th, there is a late fee, so on 9/16 we were charged a $37.15 late fee. That is not only by the max date BUT received EARLY. Second payment, again paid way EARLY, 10/16 $37.15 late fee, PLUS a $42.00 misc fee. Then on this statement, they increase the escrow monthly amount by $100.00. I know what our taxes are, insurance premium, can caculate that and they had it right on the first TWO payments we made and agreed with. Also know our escrow balance, blonde inactive Realtor (no market in Florida), but NOT dumb!

    Besides sending them a “speical letter”, a copy to the State Attorney General, Director of RESPA (Chase never answered an August letter of the escrow overage error), Neel Kashkari (Head of Treasury Bail-out programme), and Elizabeth Warren a Harvard Professor appointed by Congress to oversee and monitor this Bail-out program. Is there anyone else I should address this to, or anyone I should remove?????? Who else is Chase doing this to, I wonder. Maybe the 40% unsucessuful loan modification were with Chase Home Finance, because their NEW TOTAL DUE is not in our program. I will continue to make the same payment as we did for two months. Prepared to pay it early again, but received the statement just a couple weeks ago, so need anyone’s help ASAP, so I can overnight this no later than Friday. Don’t know why I see $37.15 late charge prior to the 16th of December.

    Thank-you in advance to any suggestions.

  171. Hi jacalyn,

    Before sending off letters to all these people, have you tried calling Chase and asking them to explain all these charges that you and your husband say you know nothing about?

    Also, have you tried making your payment on the first of the month?

    Is it possible that all these weird fees were disclosed in the original loan modification paperwork? Go pull out all the loan modification paperwork and documents that you signed and read them all the way through from start to finish.

    If you do not understand what you’re reading, stop. Put everything down. Pick up the phone and call a LOCAL attorney in your city. Ask to purchase one hour of his/her time, and bring the paperwork and these weird looking fees in to your own attorney.

    If it is true that these fees are unwarranted, an attorney will have the ability to call the Chase LEGAL department, which will be much more expedient than dealing with loan servicing.

    I’m betting that the month you thought you were going to be able to skip, was not part of the final deal, and now it seems that you’re exactly one month behind each month, which would explain the late fees. But it’s hard to say without reading every last scrap of documentation.

  172. Wow…over 200 comments and no one has yet addressed the one skill necessary for a successful loan modification: NEGOTIATION SKILLS! Give me a skilled negotiator and I need nothing else. He or she doesn’t need to be licensed or otherwise credentialed. What does having passed the Bar got to do with anything? I wouldn’t even CONSIDER having a counselor from HUD negotiate for me. I’m going to trust my ability to remain in my home to a $9/hour employee of a non-profit organization? Heck, I need a friggin’ HOSTAGE negotiator or a former Green Beret Special Ops who understands the difference between 6% and 3.5% to my bottom line.

    Would I pay upfront for a highly skilled negotiator? No…because motivation resides in getting paid on a contingency basis for a job well done. However, if he could convince me to pay upfront, then he’s a SKILLED NEGOTIATOR and I would hire him on this basis: “You have fixed expenses just to keep your doors open, so I’ll pay a modest set-up fee to start. If and when you’re successful in negotiating loan terms better than I could negotiate for myself, I’ll pay your fee.” And such a person would be worth every penny of his fee. Of course, I’d have to see proof of successful loan mods, and a negotiator confident in his skills won’t mind providing such proof.

  173. Hi Caitlyn,

    Thanks for stopping by RCG. In terms of negotiating a loan mod, the attorney hired by the homeowner negotiates directly with the lender’s legal counsel.

    loan mod salesmen do ZERO negotiating.

    Non profit housing counseling agencies are actually very well trained to negotiate HARD with the underlying lenders.

    The consumer *can* go it alone.

    It’s important that the consumer be given all their options, including the option to pay a loan mod salesmen several thousand dollars for collecting paperwork.

    Millions of homeowners fell for it the first time around. I’m sure millions of homeowners is who loan mod salesmen are targeting.

  174. Here are some things everyone should keep in mind:

    1. A person’s home is usually the most valuable asset they own.

    2. A person’s largest single debt is their home loan.

    3. There are several very important negotiable terrms of a loan modification and the long term consequenses.

    I do not understand why anyone would not hire an experienced real estate lawyer to watch out for the client’s best interest and negotiate the best deal possible.

    Why would you trust anyone else with this extremely important aspect of your life?

    The comments on this site demonstrate over and over again why you should have an experienced real estate lawyer on your side.

    Our firm has assisted many people with successful loan modifications and short sales.

    We meet with everyone for free to discover and explain different options available; however, we do charge for our services up front.

    When you pay for the fees upfront, you are going to get a lawyer who will try to work out the best deal for you.

    If you want someone who only gets paid when a loan modification gets received from the lender, well, then you are going to get a person who is going to try to talk to into taking the first offer because if you do, then they get paid.

    Do yourself a favor….call a real estate lawyer and follow their advice to help you with this difficult situation.

  175. Fairly well put Caitlyn Coyle…

    But there are many skills necessary to negotiating a successful LONG TERM loan modification.

    Those would be:

    Knowledge of real estate closings with specific skills in mortgage documents, TIL statements, HUD1’s, right to recind, HOEPA disclosures and more…

    I for one have closed thousands of these transactions and have met MANY, MANY attorneys who were hired because of their sheepskin and the shingle they hung above their door that said real estate attorney. Unfortunately there were alot of these attorneys who had no clue what was on the HUD1 statement and just cruised through the closing under the radar.

    If you want proof of how GOOD at real estate and mortgage law most attorneys are…

    Just remember that 99% of the homes that were purchased with 80/20 loans at 100% financing with teaser rates, option arms, and other ill fitting payment terms were closed under the supervision of the buyers ATTORNEY.

    I have no such penchant for the need of an attorney to negotiate a loan modification. I have had attorneys pay me a consulting fee to come to their offices to teach them and their people how to do this.

    To complete the list of skills needed for negotiating loan modifications:

    Negotiating Skills

    A deep rooted desire and comittment to make absolutely sure that your client gets the absolute best deal available from their lender.

    NEVER taking no for an answer EVER…

    Someone at the lender/servicer will modify the loan, you just have to find them.

    If you read all of my post you would have gotten from them that negotiation skills play a very big part in getting a mod done.

    My post are at #’s 153, 162, 165, 169, 177, 183, 197, 198

    Dan Harris

  176. Negotiating is a high skill, learned over years of hammering stubborn opponents. I really seriously doubt that non-profit counselors are very good at negotiating. I doubt that a real estate attorney is necessary, either. Attorneys often think highly of themselves and their fees show it.

    I think Dan Harris is probably a shrewd negotiator. Dan, how would a distressed homeowner go about locating someone as skilled as yourself?

  177. Dan Harris wrote: “Just remember that 99% of the homes that were purchased with 80/20 loans at 100% financing with teaser rates, option arms, and other ill fitting payment terms were closed under the supervision of the buyers ATTORNEY.”

    I doubt that even 1% of 80/20 loans in Washington were done with an buyer’s attorney involved. And where they were involved, if the attorney told the buyer about the increased risk of an 80/20, the buyer would probably say something like: “But I’m saving $75 a month!”

    As to the first post here today, the number one quality for negotiating a loan modification is patience, as is the case for anything that involves banks. The number two quality is a redial button.

  178. Thank you Caitlin…

    If those deals weren’t closed with the advice of an attorney a sharp borrower would find an good attorney and sue the pants off of whoever closed the deal.

    Caitlin just google my name and loan modification together, you’ll find me.

    I also think that names on this board over the posts are links.

    Dan Harris

  179. Dan, Washington doesn’t use attorneys for most transactions, so I don’t see that being actionable at all. Also, it’s hard to argue that using a rather popular finance tool is negligence.

  180. Actually at this point there is plenty of case law that would allow holders of option arms, 80 / 20 loans and other exotic products that were designed to shoehorn unqualified borrowers into otherwise un-affordable homes to go after those who originated, closed, and and advised them.

    The forensic audits we do turn my stomach. On Friday I went over documentation with a lender and showed them that the tax returns they have in their posession today directly contradict the income on the 1003 (loan application). The 1003 STATED 105K in income while the woman has worked in the same place for 12 years and her real income at the time of application was 69K.

    I wonder why she couldn’t afford the ARM adjustment?

    If thats not actionable – nothing is.

    I see it day in and day out, mistakes, errors and outright fraud. In Washington the realtor and mortgage professional have fiduciary responsibilities not to screw their clients regardless of how popular the finacing vehicle was.

    Heroin is quite popular in certain circles but we still have laws to protect people from it.

    What really agravates me is the fact that these lenders were absolutely complicit. It was obvious that the woman in the above example could not have been earning what was stated on her application. Yet the lender probably paid their “underwriter” a bonus to get loans closed. And this was one of them, one of millions.

  181. What you’re describing is quite different than simply having an escrow close a transaction with an 80/20 loan. They don’t advise the buyer at all as to any of that.

    I think perhaps our difference of opinion is due to our escrow system being different than whatever is done in NY. You wrote: “If those deals weren’t closed with the advice of an attorney a sharp borrower would find an good attorney and sue the pants off of whoever closed the deal.” Here that would be a suit against the escrow, which is basically a neutral third party. I’d agree loan originators could be liable in the types of situations you describe.

  182. I’ve been in the finance industry 19 years. I myself see this as being a real problem to our credibility as an industry. We as a whole have taken a real beating in the public’s eye. The loan mods seem like a way for a “sales person” to take the last few bucks from a family or struggling person who is trying to save their home and do the “modification request” that the homeowner can do them selves going direct to the bank they are now with. There is no guarantee that it will even work. I do agree that they may need legal counsel, but I have a hard time with the idea of charging them for something they can do by themselves.

    Our industry has gotten an ugly bad rap and I don’t agree with the attitude a lot of people have towards LO’s these days. I have loved my career and worked hard all these years with integrity, not always making a buck if it doesn’t serve to the client’s best interest. This negative attitude really concerns me. I think in some cases there may be a need for assistance because folks are afraid or don’t really know what to do but this article is right. It’s an avenue for the unscrupulous crooks to scam more money from the public and they really don’t care. There should be a solution to it and quickly.

    So far, I have advised my struggling clients to talk directly to the servicing company that their loan is presently with if I can’t get them a loan better loan and they are sinking. I can assist, but can’t with a clear conscious charge them in there darkest hour, the last few bucks they have for something they can do, regardless of them getting themselves there in the first place. I have 2 families in this spot right now, and I call and check in with them to see how it’s going ever other week. I am not charging them anything, just encouraging them.

    Adrean Rudie
    Loan Originator with Financial Advantage AND Real Estate Agent with Preview Properties

  183. Adrean wrote: “I do agree that they may need legal counsel, but I have a hard time with the idea of charging them for something they can do by themselves. ”

    Well people can do bankruptcies and divorce actions themselves, but I wouldn’t recommend that either.

    And in Washington, most likely this service is the practice of law, so probably an attorney (or a company that utilizes attorneys) is the only choice if someone else is going to do it (free or otherwise).

  184. Hi Adrean,

    The homeowner can certainly do it themselves when it comes to loan mods. I know I wrote the book.


    A brief look at the rate of re-defaults after modification shows that borrowers who get a modification are re-defaulting at a rate of 50%.

    This is the problem with borrowers who are getting modifications themselves from the lenders who screwed them into the ground in the 1st place.

    These lenders try to negotiate “workout agreements” to INCREASE the payments to ALLOW the homeowner to keep the home after falling behind. A workout agreement simply divides up the arrears and spreads out the payment until the borrower catches up. That is a re-default waiting to happen.

    OR – the lender will offer a PUNY modification at a 7.5% rate that moves the arrears to the back of the loan and reduces the borrowers payments by $200 – $300 dollars.

    The borrower feels like the weight of the world has been lifted off of their shoulders only to realize 3 -4 months down the road that they can’t sustain the new payment and they’re back in trouble again.

    If a borrower will do a real financial analysis and figure out exactly what they can afford, then fight tooth and nail and negotiate until they get that, then the modification should be sustainable.

    99% of all of the modifications I have negotiated are at rates under 6% and many are in the 3% – 4% for the 1st few years in a stepped rate fashion finishing with a life of the loan modification.

    A self negotiated modification typically is much closer to 6% -7% because the borrower is emotionally involved and too impstient too fight the lender.

    Many of the modifications I get for clients are AFTER rejecting the 1st offer made by the lender. I have had many deals where we rejected multiple offers from the lender in order to acheive a real long term solution that the borrower can sustain.

    As far as taking the “last few bucks” in their “darkest hour” a real knowledge of what is truth might help.

    Most of the borrowers I deal with were short by a few hundred dollars a month on their payments which is why they fell behind. Once they reach default the bank will not take payments from them.

    Do you really believe that someone who hasn’t made their $2,000 payment for the past 6 – 10 months doesn’t have the money to pay a professional to get them back on track.

    The truth is if they have forgone making $10,000 – $20,000 worth of payments and they have NONE of that money put aside, they should probably be looking for a rental because they can’t afford to make any payment at all.

    We have saved folks from the brink of foreclosure who were more than $50,000 behind in payments which many times includes helping their attorney with coming up with defenses to foreclosure actions because of a lack of experience in the arena.

    Obviously having attorneys in house helps alot. A thorough forensic review of every file is the key to getting the lenders cooperation and a real sustainable modification.

    Recently I helped an attorney stop a “motion for summary judgment”. He had missed the fact that MERS assigned the mortgage to Countrywide AFTER Countrywide filed for the foreclosure.

    Unfortunately this is not the exception to the rule. It is common place and unsuspecting homeowners who expect that their attorney to know the law can lose their homes as a result.

    I only wish that if an attorney is going to take on a foreclosure case, they do it being armed with the full knowledge of the law, both state and federal. So that they can find a way to protect their client.

    The problem is even if the attorney is extremely well versed in this area of the law, they may not be experienced enough in loan modifications to get a great deal for their clients.

    How many attorneys have actually read through a “pooling and servicing agreement” to understand the position of the servicer in relation to the investor?

    How many attorneys have compiled a list of loss mitigation executives inside the lenders and servicers that can get their deals done?

    We have worked hand in had with many attorneys who are trying to help their clients without the pretense of knowing everything. Now that’s a GOOD attorney.

    We hesitate to move our files to the legal departments at the lenders because it slows the process of negotiating a mod to a crawl. Once legal action is threatened the legal department gets the file and will take its time to review, and be very careful not to do anything that could get them in trouble.

    And, modifying a loan by too much could get the servicer in trouble with the investor. So having the file in the legal department could wind up being detrimental to the borrower.

    We use the threat of utilizing counsel sparingly and usually to prod the heads of loss mit into moving the file along.


    I think you may have missed my point earlier.

    When I refer to whoever closed the deal, I meant ALL of the professionals in the transaction not just the escrow agent. I have been in the title business for many years and understand the difference between escrow states, and attorney states.

    I think a real review of the transactions mentioned would uncover all kinds of arrangements between professionals that are NEVER disclosed to the borrower.

    The realtor refers the mortgage guy and the title company and the escrow company. I have reviewed many of these files and find that there is usually an unholy alliance without an ABA disclosure having been signed at closing.

    Furthermore if you do wind up using counsel on these files to uncover what went on, it’s a pretty safe bet that the same crew of realtors, mortgage people, title companies and escrow agents work together on a majority of their deals. That is a RESPA violation waiting to have the light of day shown upon it.

    Try explaining why that’s the case, I know their all just good friends and want to make sure their clients don’t get the shaft so they PROTECT their clients by refering an honest mortgage person and title person etc…

    But if refering good professionals was done to HELP the client, how did so many of these borrowers wind up in “popular” financing vehicles like teaser rate ARMs, 80/20 loans, and option arms?

    Easy if my buddy closes the deal, he will gloss over the bad stuff in the deal…

    The answer is on the HUD1 – VERY HIGH FEES…

    And behind the scenes, dinners, golf outings, theatre tickets and much more.

    So I still hold my position that a borrower with a GOOD attorney could uncover this crap in discovery and render the mortgage un-foreclosable.

    I have seen it done!

    Dan Harris

  185. @Dan
    “The problem is even if the attorney is extremely well versed in this area of the law, they may not be experienced enough in loan modifications to get a great deal for their clients.”

    Dan brings up an excellent point. When interviewing attorneys, ask how many loan modifications that attorney has successfully negotiated.

  186. Hi Jacalyn,

    Sorry I didn’t see your post until this morning…

    Try getting your “special letter” to these folks at Chase.

    It should help.

    JP Morgan Chase & Co.
    Attention: James S. Dimon (CEO)
    Office of Secretary
    270 Park Avenue, 39th Floor
    New York, N.Y. 10017
    Fax: 1-212-270-1648

    Comptroller of the Currency Administrator of National Banks
    Customer Assistance Group
    1301 McKinney Street, Suite 3450
    Houston, Texas 77010-9050
    Fax: 1-713-336-4301

    Dan Harris

  187. Dan wrote: “Maybe some of the folks here who insist that you should use an attorney could start posting the info on attorneys who are taking on cases on a contingency or for the really needy pro-bono.”

    My position is based more on what’s legal. This almost certainly is practicing law in Washington state. Having in-house counsel might satisfy that, but I’d question that, unless perhaps the person doing the work was working right under the attorney.

  188. I’ve been reading lot of the posts. To many to read them all!! I will say that I started with a company that charges the 3500 bucks for a loan mod. The lawyers that are highered to do the loan mod have an awesome track record successfully closing over 2000 loan mods. I am not sure what they charge the company to do the loan mods, but my commissions are $500.

    The question is, why pay the extra fee to the company taking the mod application. I will tell you. This company spends a lot of time and money locating clients and giving them options. These are ppl that are many times less then a month from foreclosure. There is a lot of consultation, and assistance putting a package together. It can be alot of work.

    The commission has to be reasonable to keep us looking for people to help. After screening many of the clients, 1 out of 20 leads will be eligable to loan mod. That is a full time job! I will tell you, that the company averages 5 deals per month per agent. Not a get rich quick sceem by any means.

    Some of these clients have already tried moding with the bank with no success and after we complete their package, the lawyers get it approved.

    Most of these ppl would have lost their homes, but we took the time to locate them and help them.

    Why shouldn’t we be paid for that? $3500 dollars is not a preditory fee to charge, which is 100% guaranteed or money back btw.

    The alternative is that we don’t locate these ppl, do not spend money advertising, or consult them, but whats the alternative? let them foreclose? Or let the lawyers waist time going through 20 applications a day to find one solid client. Their is nothing wrong with having a system.

    On the first post, when the lady was asked how much she makes, thats like walking into a store and asking the manager how much money they are going to make on that microwave. She shouldn’t have to answer that question if she does not want to. Her not answering does not make her a preditor.

    These lead sources should be praised, because it will lessen the foreclosure rate and mabye help the property value in your neighborhood. I lost 30k in equity with all the shorts and foreclosures, and as a homeowner I hope everyone does these.

  189. “My position is based more on what’s legal. This almost certainly is practicing law in Washington state. Having in-house counsel might satisfy that, but I’d question that, unless perhaps the person doing the work was working right under the attorney.”

    As you know I would disagree, and I too believe that my position is based on what is legal.

    Acting as a consumer advocate is not the unauthorized practice of law.

    Negotiating a loan modification is not the unauthorized practice of law.

    Offering legal advice, or a legal opinion is.

    Having a client represented by a corporation that is purporting to act as legal counsel IS the unauthorized practice of law.

    My opinion is that the unauthorized practice of law is something that can be easily defined and having in house counsel can help to avoid crossing the line.

    There are times when it is neccessary to hand the file over and allow the attorney to create a direct attorney client relationship.
    By Knowing at which point this is necessary, you can avoid falling into the trap.

    Just a question…

    What is it called when an unqualified attorney represents a client without a real grasp of the foreclosure or the loan modification process?

    Is that the unqualified practice of law?

  190. Orly is making a case that consumers in financial distress should pay for the cost of finding leads on loan modifications.

    I fail to see how this can be morally justifiable.

    “The commission has to be reasonable to keep us looking for people to help. After screening many of the clients, 1 out of 20 leads will be eligable to loan mod.”

  191. Dan, in Washington, per the Law Practices Board, a real estate agent cannot explain the terms of a purchase and sale agreement to a client. It’s not been that many years that it’s been clear an agent can fill in forms. Loan modifications are much more than simply filling in forms. I think it’s fairly likely it would be unauthorized practice in Washington. Your state may be considerably different.

    I agree with your comments on the fact that just because they’re an attorney it doesn’t mean they’re good.

  192. Response to: Fail to see how this can be morally justifiable

    I am saying that finding these people that would not have helped themselves is a lot of work. Ask any realtor or loan officer what their primary job is. If they are making a living, it is lead generation.

    The application is very similar to a shortsale or loan application. The work load is about equivalent to a loan but with less commission.

    Unless you are willing to spend all day knocking on doors, cold calling, advertising, and helping them get a package together to work in their best interest; I fail to see why this is morally wrong. Realtors don’t shortsale for free and they normally higher a mitigator to negotiate with the bank.

    I forgot to mention that our lawyers charge retail $5,000 to do a loan modification. Many lawyers are charging up to $250 an hour for this type of service @ 30 to 40 hours per loan mod. Going through me saves the distressed homeowner money.

  193. “… in Washington, per the Law Practices Board, a real estate agent cannot explain the terms of a purchase and sale agreement to a client.”

    It is so beyond reasonable for anyone to think that agents do not explain the terms of the contract to their client. It’s like grown men believing in Santa Claus and the Easter Bunny.

    What is the penalty for explaining the Inspection Contingency to my client these days, Kary? What authority does this Board have over me, a non-member? Agents have been practicing for over 100 years. What did they do before they were “allowed to fill in the blanks” recently? Hand the pen to the client?

  194. I, too, agree with the comment that just because one is an attorney doesn’t mean he or she’s a good negotiator. It means only that s/he attended law school and passed the bar. I’ve known many attorneys over the years, and many of them couldn’t negotiate their way out of a paper bag.

    I think Jillayne is unduly biased against pay-for-performance loan modifiers. If a good result is obtained, there’s nothing inherently “predatory” about charging for it. A workman is worthy of his hire.

  195. Wow, sorry for the late entry. I just found you guys. It seem that Jillayne has started this conversation in several arenas with the same opinion of loan modifications and those who provide the service to borrowers, negative. At least at this site several of you have a great deal of positive advise (Caitlyn Coyle & Dan Harris) for borrowers and agree with previous things I have said regarding free enterprise and providing a service to homeowners. I had mentioned that loan modifications are no different a service than paying a premium for gas to have someone stand there and do it for you. You could do it yourself for free, but you don’t. It is no different than paying a CPA or Tax service to do your taxes. The IRS lets you do it yourself for free and provides free assistance but the fast numbers of tax professionals are making money off of us who could if we wanted to, do it for free. Most of us would rather pay someone to do these things for us. Jillayne also offers that sky high rates are being charged for this service. I think it was Dan who said that the market will find a balance and a fair rate will prevail. Way to go Dan, thanks for your comments and advice. Wish you lived in Hawaii. I told Jillayne that we can only control what we do and while there are folks that do not take the best interest of their clients to heart, I still sleep at night knowing that I have helped many folks who needed assistance. It is hard to believe that there is so much discussion on a topic that is just a service to folks. New or old people have always wanted to pay someone else to do a task that they did not want to do, even if they know they can do it for free. It’s the American Way, just as you Jillayne charge for your teaching skills when folks could just buy the training manual and read it themselves for free, but we feel that we need you to help us learn.

  196. Dan wrote: “My opinion is that the unauthorized practice of law is something that can be easily defined and having in house counsel can help to avoid crossing the line.”

    It’s not even 100% clear that Redfin isn’t involved in the unauthorized practice of law. You really need to read the Washington cases and the Law Practices Board opinion to understand Washington law.

    Here is the opinion of the LPB:

  197. Ardell wrote: “What is the penalty for explaining the Inspection Contingency to my client these days, Kary? What authority does this Board have over me, a non-member?”

    They obtain an injunction against you.

    They contact the prosecutor to bring criminal charges against you.

    If you make a mistake, your client sues you under the consumer protection act, which allows for attorney fees and treble damages up to $10,000.

    Of those three, the biggest risk to a real estate agent is probably the third–being sued by your client. Being sued is not fun.

    I agree the opinion of the Law Practices Board isn’t entirely clear, and it’s not clear the Supreme Court would back them up on that opinion. I think you can clearly tell a client what number was filled in on your inspection contingency for the deadline. Beyond that anything you do is at risk, and the further you go the more at risk you are.

  198. Are there any cases in the Country where a real estate agent was prosecuted by a local Bar Association for explaining a real estate contract to their real estate client?

    I’ve had this discussion with many attornies. It’s ludicrous to suggest that an agent does not have to explain that 5 days or less is quite different than 6 days or more because of the “weekend and holiday” kick in. If they don’t want agents explaining contracts, they should at the very least change the method of counting the number of days a client has to complete an inspection.

    Sorry this is off topic for this post, but telling everyone agents simply fill in blanks is never said by anyone except an attorney. It makes it look like only an attorney can be an agent…somewhat self-serving…no? Clearly not reality. How many agents are explaining a contract provision to a client today? The answer is not none.

  199. Ardell, I wouldn’t assume that other states have the same laws on this as we do. We have the two cases that are cited in the LPB opinion. They are not clear at all.

    And again, you seem to be missing the point I made about the greatest risk being simply being sued. Most real estate transactions go off uneventfully. It’s only when things go wrong that this becomes an issue. That’s when the attorney will look for causes of action against the agent, and the unauthorized practice of law is an attractive and obvious cause of action. And being sued is not fun!

    How many transactions have you seen where the agent has written in a couple of sentences into Form 22D? Unless they did that verbatim from a contract approved by an attorney, that is almost undoubtedly the unauthorized practice of law. If that clause gets their client into trouble, they have trouble. If it doesn’t and everything goes fine, that doesn’t mean they didn’t engage in the unauthorized practice of law.

  200. If you want to actually read the Washington Case Law on the unauthorized practice of law and what realtors can and cannot do….click on this link from my website:

    The reality is that Washington real estate licensees are authorized to practice law in a limited scope of 5 factors as set forth in Cultum v. Heritage House as cited on on the link above.

    The other reality is that it is beyond the limited scope of a real estate licensee’s license to advise a client concerning the terms of a loan modification.

    Also, I love the attempts at lawyer bashing. I agree that just being a lawyer doesn’t make them a good negotiator. However, the same is true about pretty much everything in life…just having a drivers license doesn’t make you a good driver. Just having kids doesn’t make a person a good parent and so on.

    The thing to keep in mind though is this…just because a person is a good negotiator, doesn’t make them a lawyer and doesn’t mean they know the law. Think about that one. 🙂

    Have a great day.

  201. No one is lawyer bashing, quite the opposite. Whether or not someone is a lawyer is only one aspect of anything and not the be all end all of all things. So far, Dan’s been fairly credible. Whether or not someone is good at what you need them to do, should not depend on their “Title”.

  202. Just a thought…

    On occasion I like to demonstrate the absurd by being absurd, so with that in mind please indulge me.

    First, a question for the legal minds out there.

    Exactly which documents or legal instruments does a loan modification company whether it be with or without an attorney’s supervision “select and prepare”?

    Since it is held in Washington Law that the mortgage lender is authorized to prepare the legal documents that are ordinarily incident to its financing activities when lay employees participating in such document preparation do not exercise any legal discretion. AND in a loan modification the lender is “preparing and selecting” the loan mod agreement.

    What is it that you contend the loan modification company is doing that constitutes the unauthorized practice of law?

    The loan modification company is simply acting as a negotiator.

    Where in Washington Case Law has it been held that “negotiating” terms of a mortgage is the unauthorized practice of law?

    Be careful with this one, Lest Ye put attorneys in the unenviable position of being the only ones allowed to write a mortgage in the Great State of Washington. For, the act of aquiring a mortgage for a client entails “negotiating” rates between the mortgagor and mortgagee.

    AND NOW for the “Novel” approach to the law…

    In addition doesn’t this narrow interpretation of the law create pitfalls and difficulties for any business that drafts it’s own agreements/contracts without counsel?

    Should a consumer consult his or her attorney prior to signing the credit card slip for dinner since it is deemed to be a legally binding “contract”?

    OR More importantly since the credit card charge slip is a “contract”, isn’t the waitress thereby guilty of the unauthorized practice of law for having prepared this contract?

    AND if she “negotiates” a FREE desert has she engaged in the unauthorized practice of law?

    A new job title “In House Restaurant Counsel”.
    DISCLAIMER: –> Easy… Remember I am being absurd

    If I bring my brother in law (the family car expert) to the car lot with me (In Washington) and he negotiates a great deal on the new car for me, has he engaged in the unauthorized practice of law?

    How about the salesperson (In Washington) who changes the terms of the sales agreement by giving me an extra 5 days to come back with the money, has he engaged in the unauthorized practice of law?

    On my way in the young receptionist “advised” me to watch my step… Since we were in Washington, did she engage in the unauthorized practice of law?

    Do I smell another new job title?

    Now lets throw a real wrinkle into the mix, if a tree falls in the woods (In Washington of course) do the attorneys want everyone to ask them if it made a noise?

    I sense a certain Washington flavor to the board.

    How many of you are from Washington?

    How did I get here, I don’t remember the flight…

    Yes I am in a cantankerous mood this morning.

  203. “No one is lawyer bashing, quite the opposite. Whether or not someone is a lawyer is only one aspect of anything and not the be all end all of all things. So far, Dan’s been fairly credible. Whether or not someone is good at what you need them to do, should not depend on their “Title

  204. Dan wrote: “What is it that you contend the loan modification company is doing that constitutes the unauthorized practice of law? The loan modification company is simply acting as a negotiator.”

    Proposing different language to the mortgage company could be an issue, but what I had more in mind was I don’t see how you do a loan modification for someone without somewhere in there giving legal advise. It wasn’t the document preparation side of things. It’s more the real estate agent explaining terms of a contract side of this discussion.

  205. Dan asks: “I sense a certain Washington flavor to the board. How many of you are from Washington? How did I get here, I don’t remember the flight…
    Yes I am in a cantankerous mood this morning.”

    1) It’s not “a board” it’s “a blog”

    2) It’s called “Rain City Guide”, rain city being the Seattle area

    Questions for you Dan. If someone’s income has disappeared making a loan mod out of the question, who do you refer them to who can negotiate a short sale? It seems to me that a lawyer based service like that of Chris Benson is operating with an 800# nationally, but lawyers are restricted to their State the same as real estate agents. How is everyone getting around going over state lines and practicing in an area where they are not authorized to practice?

  206. Give it up, Kary.

    Even if you were 100% right, and you likely are, it just points out the stupidy of some group who made it illegal for real estate agents to explain the contracts to their clients. Even a Judge would expect me to explain what I am asking him to sign.

    Can you even imagine a scenario where an agent brings out 20 pages of “stuff” for someone to sign, and when asked “What does this mean over here?” they say, “I know, but I’m not allowed to tell you.”

    It’s more of a “get real” thing than a “who is right or wrong” in this argument thing. You have to be wrong even if you’re right, because suggesting agents have to put duct tape on their mouth while handing people papers to sign is beyond anyone’s sense of reality.

    It’s like saying “Kary’s the only one who is allowed to talk to his clients.” So not only is it dumb, it’s self-serving as well. Do you really think if you weren’t an attorney-agent it would make you deaf, dumb and blind?

  207. Don’t know who said it: Whether or not someone is a lawyer is only one aspect of anything and not the be all end all of all things. […] Whether or not someone is good at what you need them to do, should not depend on their title.

    Preach it, brutha! That someone is an attorney means diddley to the desired outcome. The practical reality is that current law doesn’t require one to be licensed as an attorney to assist with the modification of a loan. (The American Bar Association hasn’t yet lobbied effectively in this arena.) That being the case, the only requirements are that they (a) have experience in loan modifications; (b) are effective negotiators (you need a hammer when dealing with lenders!); and (c) don’t charge if they don’t get results. The contingency nature of loan mod fees is what’s important here, in my opinion, not what they charge, which is negotiable. As others have so patiently pointed out, there are lots of things we CAN do for ourselves but that we hire others, for a variety of reasons, to do for us.

  208. Caitlyn,

    I said it, but not specifically to the loan mod issue, though it generally applies in life and business.

    Finding someone good at what they do is hard enough these days. Finding one who also has a specific Title usually gives you a Title more than a good result. Nobody cares about Titles and 82 initials after someone’s name anymore. We want to find the 10% who know what they heck they are doing in this world .

    P.S. That would be “Preach it, Sista”; not Brutha 🙂

  209. Ardell, again my warnings on the agent explaining the contract is more a warning to other agents as to how to be careful. I’m not trying to suggest that an attorney needs to be involved with every real estate contract. The more an agent does in that regard, the greater risk they take. Unfortunately it’s not an area that has a lot of clarity. But when an agent gets sued, the attorney will make the claims that potentially exist.

    Also, it’s exactly like the writing out terms in Form 22D issue. Writing in: “Earnest money will not be paid until 2 days after removal of inspection contingency” although technically wrong is not that likely to get you into trouble. Writing out terms regarding a feasibility contingency would be an entirely different matter.

    The difference between the two scenarios is there’d be better evidence of the written terms than the oral explanation.

  210. Caitlyn wrote: “The practical reality is that current law doesn’t require one to be licensed as an attorney to assist with the modification of a loan. (The American Bar Association hasn’t yet lobbied effectively in this arena.) ”

    Neither the ABA nor the legislature (which would be the entity lobbied) has anything to say about this issue. It’s the State Supreme Court that controls the practice of law within the State of Washington.

  211. OK, so have they set precedent in Washington yet?

    Until then…

    I can’t wait until the day they drag some guy who helped hundreds save their homes from his office for the crime of practicing law without a license.

    I’m thinking he’ll opt for a JURY trial.

    NOW if they grab someone doing loan mods who is taking advantage of people and not doing what they promise, thereby causing harm and even the loss of property, then so be it.

    I’ll bring the tar, feathers and a baseball bat!

    Hot oil, flame thrower, chainsaw, vat of acid….

    Ooops… I got a little carried away, the thought of phony ineffective loan mod negotiators really gets me going.

    I have seen an attorney who negotiated the fantastic rate of 7% for his client who had 8%… And he collected $5,800 bucs for all of his HARD work, oh by the way since he was an attorney he was allowed to collect $$ up front.

    It’s a good thing they’re passing laws to protect the consumers.

    Sometimes it seems like they’ve given the prisoners the keys.


    Hey at least he had a law license!
    And greasy hair to go with his sleazy ethics…

    Every time I hear the “unauthorized practice of law” bit, I am reminded of the Mario Puzo quote —

    “A lawyer with a briefcase can steal more than a thousand men with guns.

  212. Ardell said:
    “Finding someone good at what they do is hard enough these days. Finding one who also has a specific Title usually gives you a Title more than a good result. Nobody cares about Titles and 82 initials after someone’s name anymore. We want to find the 10% who know what they heck they are doing in this world .”

    How about the 5 percenters?

    The Best!

    That’s where I want to be…

    Preach it Sista!

  213. Dan and all the other loan mod salesmen who wish to use this forum to self-promote, please know that your industry is altogether completely unregulated at this time, leading to predatory lending all over again. If YOU want your industry to have a good reputation, you all need to get the predators out of your business.

    The Bar Associations in each state will take care of the lawyers.

    Loan Mod folks need to take care of their own industry.

    Dan, you say that you would take a baseball bat to them. Well, come on. Instead, what are you going to do to better your industry as a whole?

    As far as I’m concerned ALL LOAN MODIFICATION SALESMEN are predators.

    People could care less about your extremely high opinion of yourself.

    I am so sick of reading comment after comment about how you guys rock and almost everyone else and any other option sucks.

    I’ve had enough.

    Tone down the self-promotion or I will delete all your comments.

    I’ll leave comments open…..for now.

    Stop promoting your books, tapes, and your awesome-ness and start working on cleaning up the predators crawling around inside your own loan mod industry raping people with these high fees.

  214. Hi Kary,

    Do you have a suggestion for someone at the Bar or the State Supreme Court who I can contact about this issue? I would like to forward this entire comment thread to the State so we can get an Opinion on how a loan mod salesman can operate in WA state.

    There are licensed loan originators trying to do this, there are Realtors being solicited to start selling loan mods and “get your six figure income back….no experience necessary” ads running on craiglist recruiting loan mod salesmen.

  215. I had a person in my class yesterday, a licensed LO, who is planning on charging $4,000 for a loan mod. She will be keeping $2500 for herself and will give $1500 to another group that has a pool of attorneys who will do the negotiating.

    All she’s doing is paperwork intake. That’s it. For $2500.

    She could refer these consumers to a LOCAL attorney where those same clients would pay $1500. for the WHOLE PROCESS including the paperwork intake.

    She tried to justify the time she would be spending talking to these people, counseling them, listening, explaining all their options.

    I suppose it’s normal for an LO who is use to doing relatively little to expect that he/she would make $2500 for doing relatively little.

    Another person in the class suggested that “the cost of procuring loan mod leads is expensive and we have to recoup marketing costs.”

    Oh for crying out loud. Defaults are at historic record high levels. Loan mod leads should be falling into your lap.

  216. Why would that group of attorneys allow her to use their name to do that?

    The clients have to sign authorization forms for whoever is going to speak to the lender.

    Does she have their approval to charge those fees?

    If she does…

    Does your outrage extend to them as well?

  217. Jillayne, you’re painting all loan modification negotiators with the same black brush. You surely know there are skunks and heroes in ALL lines of work. Every. Single. One.

    You also surely know that when a topic is under discussion, all types of people–even those who provide the service under discussion–are going to post here.

    BTW, I like the goal of your organization, the National Association of Mortgage Fiduciaries. Perhaps you will consider contacting Jack Guttentag, founder of the Upfront Mortgage Brokers Association, to see if you can blend the two groups.

  218. Hi Caitlyn,

    I have had conversations with Jack. He has moved on from the Upfront Mtg Brokers Assoc.

    I have no intent of “blending” my group with another.

    Caitlyn, on this blog we do not allow people to blatantly self-promote, and we do not allow personal attacks. Education is fine. Continuous, constant, over-the-top self promotion is not allowed.

    I’m so sick and tired of loan mod salesmen finding this blog post and dissing all other options for loan modifications, except for the option that would personally line his/her pockets.

    All it does is prove my point, over and over and over again.

    Go to your local craigslist and do a keyword search on “loan mods” in the real estate jobs listings.

    Right now there’s an ad running that says:

    Make $15,000 PER MONTH with no experience.

    This is predatory lending all over again.

    The only people responsible for the current reputation of Loan Mod Salesmen are themselves.

  219. Looking at the LPB page I linked above, they’ve linked two rules, the first of which (GR 24) attempts to define what is the practice of law, both of which I’d presume have been approved by our Supreme Court. Two of those items are:

    (1) Giving advice or counsel to others as to their
    legal rights or the legal rights or responsibilities of
    others for fees or other consideration.

    (4) Negotiation of legal rights or responsibilities on
    behalf of another entity or person(s).

    I have a hard time seeing how a loan modification would not fit within those definitions.

  220. Hi Kary,

    Thanks for the link. I’m printing out the paperwork from the Bar and I’ll also file a formal complaint with the AG’s office.

    Last time I called DFI on this, their advice was to tell loan originators to refer people to the free, HUD approved housing counseling agencies and they had no comment on whether or not a licensee under their division could or could not participate in loan modifications while earning these high, upfront fees.

  221. What I want to know is how someone who needs a loan modification could afford such fees. Prior to filing bankruptcy there are many things that a person in financial distress need not pay (primarily credit card debt). But if these fees are due up front I just don’t see where the money would come from to pay the fees. Also, the typical bankruptcy doesn’t cost $3,500.

    And let’s say they can afford it somehow. Why would a bank then agree to a modification if they were aware $3,500 had been spent on this purpose?

  222. Kary, the loan mod salesmen tell the homeowner to stop making their payment and pay them, or to put the $3500, $4,000, $5,000 upfront fee on their credit card. The salesmen also say that the homeowner likely has the money or “they can get it from relatives” who will want to help them keep their home.

  223. The loan modification programs that I’ve read about through Fannie, etc. all seem to indicate that they’d look for purposeful defaults.

    Making a $5,000 credit card charge when you’re in financial distress could lead to a non-discharge action if a bankruptcy becomes necessary. I’m not sure how active the credit card companies are pursuing such things. They tend to vary in pursuing that over time.

    “Kary, the loan mod salesmen tell the homeowner to stop making their payment and pay them, or to put the $3500, $4,000, $5,000 upfront fee on their credit card. The salesmen also say that the homeowner likely has the money or “they can get it from relatives

  225. “Making a $5,000 credit card charge when you’re in financial distress could lead to a non-discharge action if a bankruptcy becomes necessary. I’m not sure how active the credit card companies are pursuing such things. They tend to vary in pursuing that over time.”


    I realize that your comment addresses the banks behind the credit cards.

    The leading merchant services companies out there strictly prohibit the use of charge cards for loan modification services.

    I believe that at least the top 5 or 6 will not allow it.

    They have already caught onto this scam and have tried to block it.

    Unfortunatley, just like anything else their are bad actors who will figure out a way around it. And there are merchant services companies moving in to fill the void.

    I do admit that there are creeps in the business who are telling borrowers to charge these fees and file BK.

    Those are the same people who tell borrowers to stop making mortgage payments so the bank will give them a modification.

    I believe there are at least a dozen states that have passed legislation preventing the collection of upfront fees for modification services. Some have diluted the rules by classifying borrowers in categories for being current, in arrears, in default etc.

    As if the borrower who is current but facing hardship doesn’t need the same protection from UPFRONT FEE SHARKS as the borrower in default.

    In my opinion charging loan modification fees on a credit card just trades the demons the borrower is facing.

  226. Aloha All From Maui Hawaii:

    After reading the indepth discussion that has transpired since my last comment, I can only say that there doesn’t seem to be much more that can be said. It seems that Jillayne feels that Loan Modifications are wrong done by anyone other than a lender or Govt. assisted free services. I do believe, as I said before, that loan modifications are no different than any other service industry (including CE class instruction). Anyone with the skills needed to be successful could and should be allowed to provide this service to borrowers for a fee. Time will weed out the scams, exorbitant fees and other negative impacts related to this service. Government regulation may step in at and regulate some aspects of this industry, which may be good at some point. I have seen the same frustrations in Hawaii. We still do not have to take an exam or annual CE classes to work as a LO in Hawaii. All we need is $175 bucks and Bam!!! your a loan officer. The State has always depended on the Broker to train the individual. There seems to have been the same issues with LO’s in Hawaii as are now surfacing in the unregulated loan mod industry. I even ran across a company here working loans like Amway. They were recruiting individuals to do a loan and send their friends and they would get a cut of the fee. Of course they have to have a license in Hawaii, but hey it’s only $175. The good news is that the current market conditions have done the weeding out of those individuals that got into the loan brokering business for a quick buck when loans were easy. Now there are very few of us still kicking and paying for office space. I have heard that only about 25% of the loan officers renewed their licenses in Oregon last January. Hawaii renews this January. I will be interested to see the results.
    I also feel that any business person must diversify his/her efforts to support themselves in this time. Loan Modifications are a product of the times like I said before. When the US gets back on track with mortgages, the Loan Modification program may not be quite as popular as it is now due to the type of loans people are currently in. Again, like I said before, it’s free enterprise and the American way. As long as there are people with problems and they are willing to pay to get help solving those problems, people providing those services will be there to help. There will always be unsavory folks in all industries. People need to think for themselves and act in their best interest if at all possible. To put a bad label on all loan modification transactions is, I think, irresponsible.
    There is another industry with similar moral issues. Pay Day Loans! This industry has had it’s share of flack for overcharging and taking advantage. If a person was to really look into this industry, they will find that in comparison, the consumer banking industry is much more predatory in this area than PayDay has ever been. The banks charge fee’s upon fee’s and the laws provide a platform for them to do it legally thanks to the highly successful banking lobbyist.
    All in All, With all of this said, I believe that there are good folks out there and the bad will eventually go away or get regulated, just like always.
    Jillayne, I trust that your motivation for this negative thrust towards Loan Modification folks will be tempered to at least believe that some of us can and will be providing good honest services for the fee’s that we charge and that the service itself is needed. Afterall, there are a lot of folks who just cannot do it themselves, Free or Not!
    One last comment Jillayne, I was a little disturbed to hear you say that certain comments would not be allowed or would be regulated by you. I can understand foul language or deragatory remarks at individuals, but It sounded like your comment suggested that if opinions did not click with you then you would block them out. Not a Good Feeling! It’s folks like Dan and Caitlyn that give us food for thought. I have also learned a few things from Kary that I did not know before. These blogs are beneficial for us all to discuss topics and learn.

  227. Chiming in down here in Oregon. We started a “Prevent Real Estate Fraud” group last May. Realtors, title company people, lenders, attorneys, law enforcement, non-profits and regulatory agencies (Real Estate Agency, DOJ, DFCS) all are coming together to share knowledge, discuss and network. It’s proved pretty effective.

    One of the group members who is an attorney shared a story about a law firm who is paying the referral fee to others for referrals of homeowners in distress. The firm in question has been reported to the bar association. A good example of an industry policing it’s own.

    Fascinating discussion!

  228. Dan wrote: “I realize that your comment addresses the banks behind the credit cards. The leading merchant services companies out there strictly prohibit the use of charge cards for loan modification services.”

    That’s good to know. Back when I was practicing law I’d periodically get calls from companies wanting to set me up with credit card processing, and the easiest thing in the world to end that call was simply let them know that I practiced bankruptcy. To their credit, I think every single salesperson realized that I couldn’t take credit cards and quit trying to sell me their services.

    There would still be the option of cash advances. I’m not sure how much the card companies have cut back on that in this economy. I’d hope a lot!

  229. Aloha Greg,

    “It seems that Jillayne feels that Loan Modifications are wrong done by anyone other than a lender or Govt. assisted free services.”

    Actually, this is not the case.

    The consumer should be given many choices. Working directly with the lender at no cost, working with an HUD-approved housing counseling agency at no cost, working with local, legal counsel at a fair modest cost of $1500, or working with a company that is padding their fees with all kinds of other charges like lead generation charges, sales commissions, and un-earned fees that the consumer pays over and above the value of the work actually performed.

    I believe a consumer should be given the choice.

    Unfortunately, consumers are rarely given all their options by loan mod salesmen charging $3500, $4,000, $5000.

    The problem I have is when loan mod salesmen think that their way is the only and best way and launch into this blog with self-promotional blather.

    We have just a few simple rules on raincityguide. No blatant self-promotion and no direct personal attacks.

  230. Dan your comments will go into moderation from this point onward. This means I will have to approve your comments before they appear on this page.

    Any loan mod salesmen leaving comments that are direct personal attacks or blatant self-promotion will have their comments deleted by me.

  231. From WA State DFI:

    DFI Advises Homeowners To Verify The Licenses Of Anyone Offering Loan Modification Services Before Hiring Them
    OLYMPIA – The Washington State Department of Financial Institution’s Consumer Services Division advises homeowners who are delinquent on their mortgage to be cautious about using the services of someone offering to help them work with their lender to modify the terms of their home loan.

    The Department of Financial Institutions (DFI) has received a number of inquiries regarding the legality of providing this service in this state. While there is nothing inherently illegal about this business, those providing this service in the State of Washington must be licensed as loan originators, mortgage brokers, or consumer loan companies and be overseen by the Department of Financial Institutions. Additionally, under applicable law, the loan modification provider associated with mortgage brokers have a fiduciary relationship with the borrower and must act in their best interest.

    “DFI is concerned that homeowners in desperate situations may pay substantial fees for loan modification services and not take advantage of the HUD-approved counseling services offered for free by numerous non-profits,

  232. I always thought the original purpose of this thread was about the amount of the fees charged. That’s rather explicit in the title which uses the term “Predatory.” That term is more commonly used with respect to lenders, but the fact that there are predatory lenders doesn’t make all lenders bad people!

    There’s also an element of reasonableness, and that’s related to the fiduciary duty. In the example given in the first piece it sounds more like the person is taking a $2,000 referral fee for a service that costs only $1,500, more than doubling the total cost.

  233. I thought it was this thread where I mentioned debt clinics, but I can’t now find the reference to it. Anyway, the King County Bar Association has a number of free legal clinics it puts on, one type of which includes a debt clinic.

    You’re not going to get detailed advice here about how to do a loan modification, or even necessarily be able to talk to someone who has even done one. What you hopefully will get is someone who can look at your overall picture and point you in the right direction.

  234. Indymac has reported that 58% of loan modifications are re-defaulting at the 6 month mark. This begs the question as to the future of loan modifications at all.

    if 58 percent of ANY loan program went into default within 6 months it would be gone.

    We should not be surprised when lenders announce changes to this program.

    This begs the question…what are we really doing here other than rolling the dice.

    Should homeowners seeking loan modifications be told that a large percentage re-default and be counseled on other options besides a loan mod?

    By counseling I mean counseled by someone other than the person selling loan modifications.

  235. Jillayne, is the IndyMac program one where to qualify they CANNOT have filed bankruptcy? That would be my guess. If you only deal with part of the problem you’re not going to get a complete solution. And is it one where to qualify they have to have been in default? If so, then the interest rates and payments on their credit card debt will probably go up, reducing any relief offered.

    Government is only half serious about solving mortgage problems because they also have some interest in the health of the credit card issuers. There’s no other explanation for the bankruptcy ban. My understanding is that for some workout arrangements the IRS actually wants the taxpayer to file bankruptcy first. That would probably be a better policy for mortgage loan workouts too.

  236. Kary this is an excellent point:

    “If you only deal with part of the problem you’re not going to get a complete solution.”

    At first, the Indymac program was only for homeowners who were in default. Then the FDIC expanded the program to homeowners who were in danger of defaulting. Finally, they decided to do outreach to any homeowner with a mortgage that was set to adjust or any other toxic mortgage product.

    Indy went out in full force claiming they were going to be pro-active. What they realized later is that getting in touch with homeowners and re-documenting CURRENT income is much harder than they anticipated.

    Some homeowners never returned any of Indymac’s calls or letters and the home just went into foreclosure.

    Let me see if I can find that story. Here is is. Vive Tanta!

  237. WOW

    I have watched this blog for a while without feeling the need to participate.

    But what was done here was both surprising and disgusting. All of the post that disagreed with Jillayne were pulled off the site and it has now become the Jillayne & Kary show.

    I for one agreed with many of the deleted post.

    I particularly found Dan to be informed and inteligent with well thought out opinions.

    It reminds me of a book I read by a William McGowan “Coloring The News”

  238. Hi Carter,

    “But what was done here was both surprising and disgusting. All of the post that disagreed with Jillayne were pulled off the site and it has now become the Jillayne & Kary show.”

    There was one comment deleted that was written by Dan that contained direct personal attacks and another one that contained blatant self promotion.

    A blogger named Caitlyn left two comments with direct personal attacks. Both were deleted.

    All of Dan’s other comments are above for all to read.

    We have just two simple rules on RCG: No direct personal attacks and no blatant self promotion.

    Blog authors have the authority to edit out direct personal attacks like the one aimed at me that you no longer see in your comment #287, and to delete blatant self-promotions.

    Many other visitors have left comments here besides Kary and I. I count 26 comments, some of them extremely long, that are available for all to see, authored by Dan.

    Disagreements and differences of opinion are welcome as long as we attack the issues not the person.

    So what’s Carter’s stake in all this? Are you a consumer? How does the subject of loan mods fit into your life? Thanks for stopping by RCG.

  239. Carter, you left another comment yesterday. I approved the comment this morning, let it through, and even responded to you but now I don’t see your first comment or my reply. I believe you were asking if the state was directing people to the same predators who put them in those loans such as loan originators and attorneys.

    My response was that in WA state, the majority of escrow work is done by title companies and independent escrow companies.

    Further, in WA State, LOs licensed under a broker now owe fiduciary duties to consumers. Working with a licensed LO is a far better option than working with an unlicensed loan mod salesman in my opinion.

    Here is a link to our state DFI’s press release directing homeowners to free, non-profit HUD-approved Housing Counseling Agencies:

  240. Refinancing is always an option and those who can refinance are not supposed to be candidtes for loan mods.

    So there are still those folks out there who are in need of loan modification to get out of the exotic toxic loans they were put into.

    Going along with the title of this thread, anyone out there acting as a predator by charging large fees should be put out of the business.

    I think that a registration process for loan modification professionals should be put in place, perhaps the NMLS system being used to register LO’s would work for this.

    I think this registration should be separate and apart from the LO’s and LO’s who want to apply for this title should have to show what types of loans they put clients into before being approved.

  241. Hi Kary,

    Good point. However, underwriting guidelines are still tightening and will continue to tighten into 2009. Someone in default would have taken a hit on their credit score and may not be able to document *stable* income in order to obtain a brand new loan.

    Not sure how “the situation would become worse, though due to more refis” ?

  242. What I meant was that licensed loan people will be busy doing refinances, and thus won’t be as likely to do these workouts. That would leave the work more to the unlicensed people. I was looking at it from the loan officer point of view, not the individual debtor.

  243. This is at the crux of what I have been saying.

    The loans out there right now that are going bad were written by and large by LICENSED LO’s. Washington State giving them permission to do loan modifications is akin to having politicians who got VIP loans in charge of investigating lenders.

    Most of the closings had at least one LICENSED attorney involved.

    Unfortunately licensing doesn’t guarantee honesty & integrity.

    As a matter fo fact licensing could lull the unsuspecting consumer into trusting the licensed individual.

    I don’t know the answer but there should be a watchdog group of some kind blowing the whistle on loan modification companies that are acting as predators.

    There are companies out there doing good work saving many families from the disater of foreclosure.

    My feeling is that we need as many good companies out there helping people as possible.

    50% of foreclosures occur without the homeowner ever talking to their lender.

    Somebody has to help!!!

  244. Hi Dan,

    Where’s the hard evidence showing that “The loans out there right now that are going bad were written by and large by LICENSED LO’s.”

    Some homeowners went to banks, some went to consumer loan companies whose LOs do not have to be licensed and some went to licensed mortgage LOs working under a broker.

    Some of the larges predatory lending settlements have been against consumer loan companies whose LOs do not have to be licensed. Household Finance and Ameriquest come to mind.

    In WA state, there is no mandate that an attorney handle escrow. Instead, many homeowners had their transactions closed by an L.P.O. a Limited Practice Officer. LPOs and escrow closers must remain as a neutral third party and cannot jump in and point out predatory rates, fees, and loan products. I’ve blogged about this extensively as have others.

    In terms of creating a Loan Modification Company watchdog, beyond state law and the regulators that uphold laws, the Loan Modification Companies themselves would create their own watchdog organization, and ruthlessly police their own organization for predators. Then the industry itself would ban those who are preying on consumers in financial distress.

    Think about the classic professions such as law and medicine. Each has its own internal watchdog organization. They’re not perfect but they are better than nothing.

    We all recognize that you are very passionate about helping the consumer.

    What are your plans to help your own industry form its own watchdog organization?

  245. Although statistics can be manipulated to say almost anything here goes:

    In the 2nd Quarter of 08:
    $472 billion originated
    2.4 million loans originated
    50% Retail
    31% Correspondence
    19% Wholesale

    So the statistics would bear out the fact that TODAY the originations models are moving in the direction of unlicensed bank loan officers originating loans.

    However the years 2002 – 2006 show that mortgage brokers were writing the majority of loans.

    More and more lenders are eliminating brokers from originating their loans.

    I believe that the trend away from the broker model is due to the lenders impression that brokers created many of the bad loans.

    When I spoke of licensed Loan Originators I was including Brokers who buy and large are required to be licensed.

    It is my opinion that these individuals had a large part in creating the current debacle, and States like Washington giving them the ability to go after homeowners to fix the loans they made is an injustice.

    I have attended and seen an increase in CLE courses designed to bring attorneys up to speed on foreclosure law, short sales and loan modifications.

    Like Jillayne, I have heard my share of comments and questions in these classes that make my mind reel.

    Perhaps this is the reason for my distrust of some in the legal profession.

    As for starting a policing organization for loan modification professionals. I must admit the idea has occurred to me but the task of doing so is daunting. I have polled many in the business and there are few takers willing to dedicate the time to embark on such an endeavor.

    I would love to be involved in such an organization and will make a better effort to do more going forward.

    If anyone here is interested in starting down this road please contact me.

    Dan Harris

    PS: Pardon the gramatical & spelling errors, as you know my editing privileges have been restricted.

  246. Kary,

    Some lenders will not talk to the owner…refuse to talk to the owner about anything except making payments. Loss Mitigation employees often refuse to speak with the owner, and will only speak with a “3rd party”.

    A “3rd party authorization” is part of the package they want, before they will speak with anyone.

  247. In an article from Monday December 22nd an Indmac Spokesman has answered Jillaynes comment at #283.

    I had answered that comment with “Lenders were doing what was in their best interest with no concern regarding real long term solutions” and “Indymac was originally modifying loans at 7% – 7.5%”.

    But it appears that the comment has been deleted.


    A spokesman for IndyMac federal bank, which was taken over by the Federal Deposit Insurance Corp in August, said up until a few months ago, lenders were only tinkering with loan terms and not doing true modifications.

    “Modifications in the past were never about finding the borrower an affordable payment,” Evan Wagner said. “So I think it shouldn’t be surprising that you are seeing a lot of these folks redefaulting.”

    Quoted from this article:

    US mortgage re-defaults rise, no sign of slowing

  248. Hi Dan,

    There are a couple of different issues here being bunched up together. Let’s sort them out.

    1) corporations have a duty to maximize profit/minimize losses under the bounds of the law. There are no “laws

  249. Dan, you did not address the most important question. If laws were enacted to make your fantasy a reality, that is, all loans no matter where they’re held, if in default, are offered a gi-nourmously cool loan modification, what are the likely consequences?

    What about everyone else? Folks who went ahead and signed for an Option ARM knowing full well they were taking a risk.

    Should banks and lender/services just go ahead and offer everyone a great loan mod?

    No self-promoting like telling us all how experienced you are. No more telling us how many deals you’ve closed. Please just answer this question:

    List the consequences of your fantasy becoming a reality from one to ten:

    Offering generous loan modifications to ALL homeowners in default would;

    1) Encourage people to default.


    Your turn. 2 – 10. Do not post any more comments until you have completed this request.

  250. 1st of all you have mischaracterized my position. I do have a fantasy that every loan should be modified. Just those where the borrower wants to keep their home, has the ability to make a reasonable payment and is willing to work with the lender to develop a meaningful resolution.

    Offering realistic solutions in the way of loan modifications to ALL homeowners in default who FIT into the category above would;

    1) Increase the moral hazard that has always been a
    conundrum in these situations the “me too” for those who
    don’t have an actual need
    1) Slow the rate of foreclosures nationwide
    2) Shore up the asset values of major lenders along with
    securitized and pooled mortgages increasing the NPV
    (Net Present Value) by turning non-performing loans into
    performing loans
    3) Decrease current volume of defaults
    4) Decrease the workload of loss mitigation departments
    5) Decrease the workload of non-profit housing counselors
    6) Deliver better outcomes for consumers and lenders
    7) Correct and eliminate the “payment shock” originally built
    into many of the subprime loans which had the effect of
    pushing affordability out of reach for many that originally
    qualified at the starting teaser rates.
    8) Well-structured and well-underwritten loans that can
    reasonably be expected to perform after modification
    9) (you should like this one) Reduce opportunities for loan mod
    salesmen & saleswomen
    10) Help more people stay in their homes

    Ok I played your way…

    Now take me off moderation.

  251. I always focus on the bright side.

    I thought the original theme of your post was protecting consumers from unscrupulous predatory upfront loan modification fees.

    It sounded like a consumer based theme.

    I don’t believe it is that complicated. Along with Sheila Bair and many others I think the banks created this mess (see the New York Times article), and now they have to made made to clean it up.

    So many of your premises above are out of line I don’t know if there is any hope of getting you on the right track but later on when I have the time I will come back and try.

  252. Only focusing on the bright side means we fail to see the other side which can lead to balance.

    You’re deflecting away from your decision to ignore the possible unintended consequences of offering loan mods to all.

    I’m not open to becoming “on track” with the Dan loan mod religion. I am happy that you have figured that out now that we’re at comment number 310. Please let go of trying to convert me. I do not wish to be converted.

    Dan, I wish you good luck and success in selling only the bright side of loan modifications, where ever life takes you. Goodbye.

  253. Actually, I was never looking to convert anyone. Just voicing my opinion on one of many blogs on the subject.

    As you pointed out there are many sides to the argument.

    Mine is a consumer centric point of view. Tempered with real life application and experiences.

    The position I represent is one that would go a long way towards curing the ills cause by the system that caused this mess.

    I agreed with your original thought about “Predatory Upfront Loan Modification Fees” and believe that consumers benefit by having a vast array of choices from various service providers as long as there is a check on what is being done so that theyb are protected.

    I never believed that the “free” service providers that are being funded by the very servicers and lenders they are “helping” consumers negotiate with was “good” for the consumers.

    How many consumers sitting in these offices speaking with the “free” community counselors actually know that services they are recieving are being paid for by the lenders and servicers?

  254. Dan Harris – Thanks for your post #226, in reference to mine (#208). Will fax the letter I Fed Ex to Chase with Mortgage Payment, to the two mention names. They are starting to send us corrections, late fee’s and legal fees, etc. Glad I found this post, the information is helpful. Just looked it up again now Christmas is over. Again, Many Thanks.

    Jill Schlicke post #209, thanks for your input, read it before my letter went out. Talking to Chase is not an option, if not in writting, answers are not consistance. It would be great, if I were able to trust Chase, but I can’t. Seeing an attorney Jan. 9th, because I am not only right, but there are over charges, I caculated every amoritized interest cent, etc. Thanks for your response, good advice.

    Happy New Year to ALL – jacalyn

  255. I am curious to know if this Loan Modification is real or is it just a Ponzi scheme started by the LO community. Though i am current on my mortgage as of now but my home has lost value drastically …donot see any reason to continue with the current mortgage ..Anyone can share any experience?? Thanks

  256. Hi Vivek,

    Loan modifications have always existed. The servicing side of banks/lenders just weren’t terribly motivated to tell us about this option.

    Many homeowners have seen the value of their homes go down and still don’t have a problem with continuing to pay their current mortgage. Perhaps there’s something else going on in your life?

    Instead of paying anyone any money up front, I suggest contacting a free, HUD-approved housing counselor in your state that offers default counseling. If you’re in Washington state, you can go here:

    Along with that, it’s always a good idea to seek legal counsel when homeowners are facing financial distress. Google your state’s Bar Association or go here if you’re in WA State:

    Thanks for stopping by RCG. Let us know how else we can help you.

  257. Back before declining values and teaser rates were issues, the simplest loan modification was just to add delinquent payments to the balance after X number of timely regular payments had been made. Teaser rates probably complicate things more than the declining values.

  258. Hi Kary,

    Yes, but that’s not really a loan modification. That option is still available today but it’s called a repayment plan. This is typically offered for folks who have experienced *temporary* financial distress and can easily get back on track.

  259. Kary:

    Regarding the primary cause for the rash of defaults, I would say it is declining values first, with teaser rates close behind.

    This is based on the studies that I have read so far, where they were showing substantial delinquencies and defaults before the rate resets, when folks realized they could no longer continually supplement their income by equity withdrawals.

    The ultimate cause MAY be teaser rates (combined with lowered lending standards), as they were what most contributed to unsustainable value increases, that in turn led to the subsequent fall in values.

    It does end up becoming a chicken/egg argument I suppose.

  260. Probably is a chicken/egg thing. Declining values though would catch up additional people–those with a lifestyle of repeatedly running up credit card debt and then refinancing out of it. Those people could have owned a home 5+ years but still not have any equity.

  261. I have just spent 2 hours reading every post here. There are many pros and cons to the loan mod industry. I work for a loan mod company and have talked to many home owners that have tried to do loan mods with their lenders on their own. We are an Attorney based company. We charge $2,500.00 for our services (wihicj includes a loan audit to see if the lender did break any lending laws) with 100% money back if we fail to get the loan modified. We only take payment if they are approved. Not all borrowers get approved, there must be good reason to be able to get their loans modified in the form of a hardship. I for one have told many people that they can try to do it one their own and I have spend many hours talking to home owners that have tried to get their loan modified on their own without any results. In most cases the lenders will not even talk to them or they get transfered to one customer service rep to the next. They will never get thru to the lost midigation dept.
    As far as Hud goes, I spoke to a home owner the other day that was charged $1,500.00 by them to do a loan mod and when it was all said and done Hud did a modification that increased her monthly payment by $247.00 a month.
    When the home owner didn’t want to do the deal she was not givin the option of getting her money back.
    As for the loan mods that have gone into default, how many of those are from people that did the loan mod on their own. There was an artical on MSN with in the last 2 weeks (not sure of the day) that reported 50% of loan mods that are done buy homeowner on their own do not even get a lower monthly payment. The problem is these home owners will have to wait 1 year before they can try to do another loan mod and use a private company to help them.
    You really need to know what you are doing and have many hours of time to do this on your own. You should also do your homework before you choose a company to represent you. There are many loan mod companies that only give you a partial refund if they do not get your loan modified. I have talked to many people that we did loan mods for that have had their loan amounts lowered and monthly payment lowered as much as 50%
    You will not get that on your own.
    Not all loan modifaction companies are scams or preditors praying on the hardship of others. There are scammers and preditors in all industries, Doctors, Attorneys, Stock Brokers etc…
    So please do not judge until you have spent a day talking to these home owners and hearing their horror stories.

  262. 316. Comment from Vivek
    Time December 31, 2008 at 3:28 pm

    I am curious to know if this Loan Modification is real or is it just a Ponzi scheme started by the LO community. Though i am current on my mortgage as of now but my home has lost value drastically …donot see any reason to continue with the current mortgage ..Anyone can share any experience?? Thanks”


    Unfortunately, this post demonstrates the moral hazard many in the industry feared would result from mass loan modifications being made available.


    The fact that your property along with most others in this country has lost value is not a viable reason to request, obtain or expect a loan modification.

    Loan modifications are there for those who have a hardship that causes an inability to make payments as agreed.

    Another reason to seek a modification might be predatory terms, improper disclosures, or fraud on your current loan as a result of dishonesty by your lender or being in a sub-prime mortgage. In a modification you would give up your right to go after the lender and in return the lender would agree to offer you better terms to correct the sub-prime terms.

  263. Hi Steve M,

    “We charge $2,500.00 for our services (wihicj includes a loan audit to see if the lender did break any lending laws)”

    How much of that $2500 goes to the loan mod company and how much goes to the attorney?

  264. We are an attorney based company and all the money goes to our company which also pays for operating expeses and overhead costs. I do not know what the profit margin is (I am not in that loop). I do know it can take 30-60 hours of negotiations to get the modification done and at that rate is is only a cost of $41.00 to $83.00 an hour. Another thing you must know is, this is not a new loan it is a modification. The home owner is not getting put into new 30 year term. They will only have to pay for the years they have left on the loan, at a lower monthly payment and in most cases the new lower payment is $500.00 to $1500.00 a month and with out anything being added to the loan amount. The home owner will not get that done on their own unless they know what they are doing, and if they do know what they are doing then by all means go ahead and do it yourself. It will take the home owner much more time with far less results. And i am pretty confidant that the of the people that are doing it on their own are the ones that are defaulting months later.
    Case in point, i have one person that I have been talking to now for 3 weeks. She has now been trying to work with her lender for over 9 months. She was told not to make anymore payments until it is settled. Everytime she calls them she gets a different person not familiar with her situation and when she asks for the CS rep she talked to before she is told that they no longer work there or have been transfered to a different department. She is always told that they will call her back within a couple days and it NEVER happens. She has pulled her credit report and it shows her 9 months late even though she was told that would not happen. Now I have been talking to this person for 3 weeks, she has the money to pay for our service which we will do in 2 installments but she has yet to sign up for our service so we are making nothing for our time. As people in my industry know you can lead a horse to water but you can not make it drink.
    I never tell a home owner to stop making their payments to pay for our service, It is illegal to do so.
    I do not give legal advise for I am not an attorney, It is illegal for me to do so.
    My job is to:
    1. Explain what we do for them and what the process is and our costs.
    2. Take all of their information IE: Loan information, Monthly expenses, Monthly Income and assets, and find out what there hardship is in detail, (in many cases this might take another phone call to gather all the information) to see if they qualify for a loan modification.

    If you think you can do this in under 10 minuets IE: #84 you are mistaken and misinformed and have never talked to these home owners. It can take 10 minuets for them to just find their loan information. I have spend 30 minuets just listening to there hardship.

    3. Then I turn it over to our attorneys so they can review it to see if it is a case they feel confident enough to get a modification done.
    4. If they are approved then i make another call to let them know that we will take their case and what we will need back from them. If they agree to our terms. I will either email them or fed ex them a pkg for them to fill out and sign along with a pre paid return fed ex envelope (if it is emailed we do except postage due from them).
    5. Process the information and make sure it is all there (many cases it isn’t). So i will need to make another call to get it, which we pay for all cost to do so.
    So far at this point we have put in many hours and not been paid a dime for the time we have put in. There is also no guarantee that the home owner will continue with us or it will take them a few days to a few weeks to gather all the information we need.
    So imangine if you will trying to do this on your own with a customer service rep that is only making 10-15 dollars an hour and gets dozens of these call a day and gets paid even if something is done or not.
    Now again you can do this on your own but like the 2 that have respond earlier #80 and # 208, These are not the exeption but more typical of what will happen if you do it on your own. As for #80 being a vet will help because there is some help for vets. Now in the case of # 208 I hear this day in and day out. She will either have to end up paying an attorney that will probably charge her $250.00 an hr with no gauentees or continue to try to work it out with Chase with the same gauentees. My guess is that they are still going to have to pay at least $2500.00 (I hope they don’t) and they had to endure all the headaches and frustrations that go along with trying to do this on their own.
    BK is an option but it will stay on your record for 10 years. BK attorneys hate the loan mod system because it takes money out of their pockets. If a home owner is still making their payments on time but circumstances now show that they will fall behind if something isn’t done soon their credit will not be affected with a loan mod if they continue making all of their payments on time.
    Do you really think the lender has the best interest of the home own in mind, remember in most cases this will be the same company that put them into this bad loan to begin with like ARMS and IO’s and pre-payment penalties etc….
    One bank that seems to be really working with the home owners is Indymac and from what I have heard (and it is hearsay) they have even called some of the home owners on their own. But they are the only ones that I hear of.
    Fanny and Freddy are doing their own modifications but you will end up with a new 40 year term that will end up costing you more in the life of the loan than paying paying for a service.
    I can not speak for other companies and how they do business or what they charge. But charging $2500.00 1, save their home 2, save them money and a lot more than what they will save on their own seems to be a justifiable option.

  265. Ihave a loan with indy mac, , i also have a second with citi mortg. Called indy mac in nov, sent paper work to me , it been over a month , i have called and usually on hold for a hour to hour and half. All i want to know if they recieved all my paper work. Citi morg the same way they never return your calls. I am in such turmoil do not know what to do. I found a web site for loan mod and i filled out form and they have come out of the wood work. Do i got to an attorney , should i go into default. It seems like everyone i talk to is so disappointed that we are not behind on our payments. I just need help, it is a big hardship every month, i just wish someone could direct me to someone or someplace to get some real honest answers. Do i go to a real estate attorney or to a bankruptcy att, any guidance you can give me would be greatly, greatly appreciated.

  266. Hi marypat,

    Thanks for stopping by raincityguide. Question: What is the mortgage amount of the first mortgage and the second mortgage?

    What is your home worth today?

    What changed? At one point you were able to make your payments without it being a “big hardship,” correct? If so, what is different now?

    Thank you.

  267. mortgage amount on first is 232,000.00 second is 38,000.00 The house was appraised in 2006 at 300,000.00. What has happened to create hardship ,my husband is in the cattle business self employed, need i say more. He took a job this summer at the local golf course which helped but its winter, he is on social security. I have tossed and turned all nite where to begin?

  268. Hi marypat

    What you are going thru with your lenders is typical and what I hear day in and day out. You have a few options. It will depend on your situation. Are you behind on your payments now, what type of loan and interest
    rate(s) you have IE: ARM, IO, Neg Am, Fixed etc. Property value, cash reserves, income, monthly expences.

    1. You can continue to work with your lenders on your own (because it is free) but your have spent much time with no results and will probably continue to get the same treatment for some time to come.

    2. BK is an option but will stay on your record for 10 years.

    3. You can seek the advise of an attorney but make sure the attorney you choose has the experience in what you need.

    4. You can do a loan mod if you qualify. However if you already have a very low fiexed interest rate then it might not be worth it to you to pay someone for the loan mod. If you have a low IO type loan and it will comtinue for a few more years it still might not be worth it to pay for the loan mod. The goal here is to lower your monthly payment significantly so you are able to better your situation. In most cases lowering the monthly payment by 100-200 a month does not help at all. If you do however choose the loan mod route make sure you use a company that has attorneys that negotiate for you (get the name and license of the attorney) and not just some company that have CPA’s or financial planners doing it and they give you a full refund is they do not get it done for you. Please do your home work on this.

    5. You said that your loan amount with both loans is 260,000 and in 2006 it was valued at 300,000. It is possible that the home does not have the same value and you could be less than what you owe. If this is the case then you might be able to do a short refi. This is where you can refi the home for the current value, but i would suggest paying a company to negotiate this for you. A conventional refi looks out of the question because you do not have enough equity in the home.

    I do not know if this helps you, again it all depends on your situation.
    Good luck

  269. I do have a io on the first 6.75. on the second 9.35 fixed 15 yr. Is it at all possible to combine the 2 loans and do a modify? Just to get my payments down where it is not so tough on us till the housing market comes up and we can sell and at leasrt walk with maybe 20k in our pockets.Never have been late and i am not behind now. Everyone i have talked to has said contact us when you get behind in payments. But that is not what i want to do i want to take care of it now so i do not get behind, i have worked hard all my life to have good credit and too think a motgage co has the power to ruin it , when we are willing to continue to pay something, and not throw our hands up and walk. So do i speak to a bk att or a real estate att? We live in a small resort town, right on the water, things will get better and our town has not seen the repurcussion of the economy . I think or i am pretty sure if given a yr or 2 our house will be worth 310 or more. The blogg you have given me do i contact these people and tell them my wo is me story..

  270. Hi marypat,

    The reason I asked you about your loan balances was because I was wondering if you would qualify for an FHA Hope for Homeowner’s loan instead of a loan modification.

    The question is, can you and your husband make ANY kind of monthly payment at all. You mentioned that your husband’s income has declined. What about your income? Do you work, too? Has your income declined?

    Whether or not you decide to try for a new FHA refinance loan under the Hope for Homeowners program or try for a loan modification, it’s important that you realize the lender will need to confirm that you will be able to make your new monthly payment and this means documenting your monthly income.

    It almost sounds like you are also considering selling the home as well.

    These are big decisions.

    THe reason I mention the FHA Hope for Homeowners program is because with this program, you may be able to receive a write down on a portion of your principal balance which would dramatically effect your monthly payment.

    Way more so than a typical loan modification.

    The loan modification salemen who have found this blog and are posting comments here are doing so because they will make money off of you if you choose their company.

    I’m just a teacher. I have no motive other than to give you all the possible options.

    First, contact a HUD-approved Housing Counseling Agency near your city. Start here and look for the agencies that offer default counseling. These agencies typically charge nothing to help you.

    Second, find a local consumer protection attorney or real estate attorney in your town and inquire as to how much they would charge to give you a set amount of time counseling you as to your legal optins.

    Third, find a local federally chartered bank in your town. Go in there and ask to speak with the bank branch manager. Ask for a referral to someone in their company that can originate a new FHA loan. Call that person. Expect to spend at least one hour on the phone with that person. You are inquiring about an FHA Hope for Homeowners loan.

    Last and only last should you consider a loan modification.

    Read more about the Hope for Homeowners program here:,7601299&_dad=portal&_schema=PORTAL

  271. Because of the incessant comments from loan modification salesmen who continue to troll for customers on this post, comments are temporarily closed. Consumers who have questions can email me directly at and I will do my best to help you.

    I do not sell anything. I am not a loan mod salesmen or a loan originator or an attorney. I am a teacher. I do not collect any fee for reading and responding to your emails.

    Remember, no one should have to pay ANYTHING to get a loan modification. If you do chose to pay, you are better off hiring local legal counsel instead of hiring a loan modification salesman.

  272. Pingback: Government Intervention in Foreclosure | Rain City Guide

  273. I agree that most people can do Loan Modifications themselves, but the process becomes complicated for many out there. I have a sheet of instructions on exactly what they need to do that I give my prospects, and what they can expect. However, people realize very quickly that the maze they have to go through is not something they have much time with. It can really be time consuming, and can earn you serious headaches especially when you work and have a boss breathing down your back. I even tell my clients to shop around first before they decide to do anything. The reason I do this, is because I want them to see how much is being charged out there. My fees are simple. A simple 1K to get it done. If I can’t get it done, I give them their money back minus $200 because I have adminitrative expenses to cover. I am self employed. I never guarantee anyone anything only that I am qualified, and have demonstraded that 25 times last year. Also, I am a licensed Realtor, a real professional with a degree in business, and someone who truly cares about the success of others, and my community. No one is ever under any obligation with me, and I don’t sell anyone anything. They choose whether they want me to handle the process or not. Take good care. Ralph.

  274. Hi Ralph,

    Thanks for stopping by RCG. Questions: how many of your loan mods have re-defaulted? That would be something good to keep track of. Also, are loan mod salesmen required to be licensed at all in your state or can anyone do loan mods with no experience and charge your same fee or higher?

  275. Jill your message #333 I hope won’t happen. I have received the BEST info from YOU & Dan Harris. Is this not YOUR web sight Jill? I speed read a lot of, what you mentioned. WHEN YOU ARE RIGHT, YOU ARE RIGHT, inasmuch as I scan more comments now. IF anyone uses this sight, they are looking for help to save their HOME. Jill, continue this. Inasmuch of you, I’m kicking some serious ass, right to a Federal violation. I was tired and drained, NOW I more pissed.

    PS. Disclose, my sight, my way, CHANGE!

  276. A little PS, no “M” in there! (my humor ps/pms, sometimes a laugh is good, or , if only a smile , that brings you back to YOU, IF a man you still get it, IF a gay man, I understand ) Kept appointment with an attorney. Great advice, I’d like to share. We have a 2nd mortgage, no pressure from them, the reason is this. IF the property/home, is less than your first Mortgage, a second Mortgage becomes an UNsecured debt. Therefore, the second “mortgage” is a debt you can charge off in bankruptcy. All states are different,so help others.

  277. Pingback: Pimps and Whores of the Loan Modification Industry : San Jose-Santa Clara County Real Estate UNCENSORED

  278. It’s nice too see that you have re-opened the blog to comments.

    There are many homeowners out there who need help, and if they can come here and get FREE advice by posting questions and getting answers that would be GREAT.

  279. Pingback: La Prostitucion en la Industria de Modificacion de Prestamos : Bienes Raices en San Jose : Mi Casa y Mi Dinero

  280. There was much discussion here regarding the use of attorneys and/or loan modification companies.

    The real question to ask when searching for professional help with your lender is what experience and knowledge does the individual or company have.

    Attached in this link is a PSA (Pooling and Servicing Agreement).

    Anyone purporting to have the ability to gain an advantage on your behalf when negotiating with your lender should know these agreements backwards and forward.

    If you are having a discussion with someone and they are not familiar with these agreements you should escape immediately.

  281. Jillayne…

    A couple of points. First section 8 of RESPA deals with settlement services. Negotiating a loan mod is not a settlement service so when you say the lender is violating RESPA you are mistaken.

    For the “bankruptcy attorney” who thinks any attorney can do a loan mod needs to control his ego. If takes an experienced real estate attorney to know the financial results the lender has to have. If you don’t work with these lenders and know how to directly contact the right person good luck even getting through the automated phone system and find someone with the authority to negotiate the loan mod. The “bankruptcy attorney” needs to stick with the no-brainer BK’s.

    Lastly, are you related to Gordon Schlicke? I have heard him speak several times and he is a hoot!

  282. Hi Wayne,

    Yes, Gordon is my father. He is retired and works for me every now and then on expert witness cases that are beyond my scope. He still writes and publishes columns and is working on a new class for 2009 full of case studies. I just sent him the courtwork and told him to get moving on it. Not that he ever listens to what I tell him to do. Kind of a role reversal. LOL.

    In terms of RESPA, here is your answer, posted up there in comment number 88 but I will repost since we have so many comments now.

    “Section 5(b)(6) of Regulation X exempts from RESPA “any conversion of a federally related mortgage loan to different terms that are consistent with provisions of the original mortgage instrument, as long as a new note is not required, even if the lender charges an additional fee for the conversion.

  283. Hi Kary,

    I saw that article, too. It was a good one. Thanks for posting the link. Here are the FTC’s red flags:

    “…the FTC has compiled a list of “red flag” signs to help homeowners determine whether promoters claiming to be able to forestall or prevent foreclosures may not be legitimate. In general, according to the FTC, you should avoid doing business with any firm that:

    • Guarantees to stop your foreclosure, irrespective of how much you owe or how much income you have to resolve your unpaid bills. Most major lenders and the servicing companies they employ are willing to negotiate loan modifications to cut payments or reschedule debts, but if you don’t have the income to handle lower payments, foreclosure is hard to avoid. Any company that spins you a different story is probably a scam.

    • Requires you to pay money upfront before any services have been rendered. Liebes said some states specifically prohibit foreclosure-rescue firms from collecting any money in advance, but Internet-based companies often ignore those rules.

    • Tells you to avoid contacting your lender or servicers directly, delegating all negotiating duties to the firm. In fact, borrowers tend to be in the best position to speak with servicers about their situations and possible alternatives to foreclosure, including short sales, in which lenders take less than what’s owed on the mortgages and forgive the remaining debt.

    • Instructs you to send mortgage payments to its office address instead of to your lender or servicer. Such firms not only take your money with little or no services rendered, but dig you into a deeper financial hole with your lender.

    • Asks you to turn over the title or deed to the property so that the company can be in a stronger position to deal with the lender. That’s the equivalent of kissing your house — and any remaining equity — goodbye.

    If you spot any of these red flags, take the FTC’s advice: Walk away fast.”

  284. A good part of this problem was caused by lenders who absolutely refused to forgo scheduled rate increases on their ARM loans. I’ve seen many people with perfect credit who were driven into foreclosure by lenders who ratcheted up monthly payments by $500 and more even though they KNEW they were pushing otherwise sound borrowers into default.

    I would put my money behind an attorney-run program ANY DAY before I would suggest a client try to do their own loan mod. The individual just doesn’t have the knowledge of the law or the respect of a lender’s legal department that is necessary to cut through the B.S. that currently is the “mortgage banking industry”.

    As for fees, the average that I have observed is $2995. The “originator” gets nowhere near 50% of that money; $900 seems about average for my area. Is $900 too much to pay for a “salesperson” who is presenting a (potentially) valuable program to a wide audience? I don’t know, you tell me. How much does the “salesperson” spend in performance of their duties, in time, effort and hard expense money? How many people are just walking away from a default/foreclosure because they don’t know they have an alternative? Apparently quite a few. How many LO’s were making far more than $900 to sell some of these crappy loan programs to their clients in the first place? I think we know the answer to that question; far too many.

    A good part of our problem in the mortgage (and other) industries is our unwillingness to allow the market to set the price. I can tell you this from pretty extensive experience; you get what you pay for. If you think you can do your own loan mod in today’s market with the rapidly changing credit and banking climates, you will probably end up with what you usually get when you try to do something “for free”; NOTHING!

    Is it worth it to the client? Well, considering the fact that the average borrower will very often end up with two to four months of “payment vacation”, I think it’s worth it in the vast majority of cases. Simply calculate the savings represented by that two to four months without monthly mortgage payments and you have your answer. That savings is generally far greater than the fee paid to a reputable (aka attorney managed) loan modification service. If the borrower fails to fulfill the terms of the loan mod, “nothing ventured, nothing gained”. They are no worse off than they were before they tried to modify the terms of their loan. It seems to me that it makes sense to at least take a shot at it. The only sure loser is the lender, but they are already losing. In any event, I don’t have a lot of sympathy for them. It seems we are already bailing them out to the tune of trillions of dollars in taxpayer money.

  285. Hi Michael,

    Thanks for stopping by RCG. Question. If you’d pay $900 or so for a salesman’s portion of the fee, if it was your own personal loan modification, would you then choose to forgo paying a salesman and instead just pay an attorney that same $900?

  286. I have read most of this blog and I am very angry at the stupid comments made by people who have not gone through any of this. I sold a home last year in Snohomish County, lost over $100,000. on it even though it sold for 600,000. I am considered lucky since it sold.

    I also owned a condo rental that the buyer walked away from before closing last summer after begging me to let him buy it—took over 3 months for the lender to approve and then the renter/buyers took off and left me hanging.

    I had lost my job and just gone through a messy divorce that cost me a lot so was in tight spot. I tried to negotiate a short sale, fell through due to lender slowness and ignoring paperwork and realtor. I moved in and tried a loan modification myself and was treated like a criminal by Countrywide (threats, people stopping by and demanding to enter and take photos, lots of threatening phone calls and obvious drive bys and people knocking on my door to see if I lived here and all of them stating they worked for Countrywide) Countrywide behaved like the Italian mobsters.

    So I tried a loan mod with a loan mod company—-took 5 months but I gave up, disgusted. The loan mod wasn’t good so I didn’t take it. I am working again and using my IRA and small savings to supplement my smaller income. I am retraining as a LO, not to take advantage but to help people. I know what they’ve gone through. Apparently, many of you do not and do not believe someone’s time and work is of value, except your own. I thought this forum was for helping peopl FIND HELP, not criticism of LO’s and attorneys. Yes, there are predators but they are everywhere, lawyers, bankers, school teachers, and LO’s or Brokers.

    Why waste time blaming the LO’s for the problem? Doesn’t everyone know the banks negotiated all of this when they relaxed their lender restrictions and rules? They also started the packaging of the loans and offloading them to AIG and other insurers so they could take on more unsecured loans. They do not care about anyone—and do not listen to home owners when they try to do loan mods themselves. Countrywide’s HOPE dept gave me these suggestions: skip 3 to 5 months payments even though it will ruin my credit, find a stranger and rent my extra room out, work 2 or 3 jobs, use my charge card more, and a few other very stupd suggestions and then they “might give me a loan mod”. I got mad and called them the HOPELESS department and asked if it was their plan to steal everyone’s home.

    Jillayne, your constant statements that people can negotiate these themselves is wrong. I am not the only person who has tried. I am not a wimp. I have friends who have lost homes here in Wash due to the banks ignoring them and refusing any type of modification. The Loss Mitigation dept usually fights with the homeowner or ignores them. I have people coming to me to help them since I am a notary and have stopped them from signing predatory agreements with unlicensed fake Loan Mod companies who do not even try to negotiate with the banks. I know I can possibly get in trouble for speaking up against these companies but I could not let these sharks steal from families in trouble.

    By many requests of hopefull families that I have met recently who trust me, I am now training as a LO and trying to align myself with an ethical attorney who is experienced with the negotiations through the legal dept of the bank and skips the stupd Loss Mitigation dept

    Everyone needs to never forget that the banks are the greedy bastards who have not only ruined this country, many peoples lives, homes and credit but also have stolen billions of our future earnings and our children’s, grandchildren’s,etc earnings while still giving themselves bonuses and big paychecks out of our tax dollars that our stupid government has given them without demands. You complain about LO’s but the finger should be pointed up all of the bank’s *** for their predatory, unethical, deceitful and inhumane treatment of our whole country. They do not care if people’s lives are ruined by bankruptcy and homelessness since they will just take more money from the government to stay afloat. The banks have negotiated the end of prosperity.

  287. Hi Carla,

    It sounds like you’re still really angry about what’s happened, and that anger is being directed at the banks.

    Let’s take a look at what the banks have done thus far to help you. They gave you an opportunity to own not one but two homes. Did they hold a gun to your head and force you to buy those two homes? Did anyone at the bank lie to you as to what might happen if you couldn’t make your payments? I’m thinking no. I have an extreme amount of compassion for people who were lied to and preyed upon. Bait and switch tactics, and blatant federal law violations happened during the predatory lending days. I have no idea what happened with your loans.

    There is no doubt in my mind that you would have been better off finding a competent attorney at the very beginning of your financial troubles rather than try to do this by yourself or paying an incompetent loan modification company.

    First of all, no bank is ever going to help a homeower by way of a short sale OR a loan modification if you have other assets. You’ve indicated that you had other real property and money in the bank. No wonder Countrywide pursued you. I would have too, if I held the note. An attorney or even a free, HUD-approved non-profit agency counselor could have told you that.

    Blaming the asshole bankers is part of the cycle of grief and loss and I’m sure that someday you’ll be able to look back and realize where you were in the cycle.

    You indicate that you’re going to become a loan originator. LOs work many places including banks. If you’re going to work for a broker, then you’ll be brokering those loans to….a BANK. If you hook up with a consumer loan company then your company will have credit lines with…BANKS.

    Banks don’t care if homeowners have to liquidate their grandchildren’s inheritance for folks to make their payments. They could care less.

    If it makes you feel any better, the bankers are getting their just reward as they face even more financial trouble of their own. If the banks are nationalized, the large bonuses to their executives will likely end…for a while.

  288. In comment 348 Jillayne said:

    “Thanks for stopping by RCG. Question. If you’d pay $900 or so for a salesman’s portion of the fee, if it was your own personal loan modification, would you then choose to forgo paying a salesman and instead just pay an attorney that same $900?”

    If I’m understanding your question correctly I would have to answer the same way many people answered me when I was an independent mortgage broker. That answer was “yes”.

    When I was brokering home loans I realized that there were different niches in the offerings of various lenders. I knew those niches far better than any of my clients and they paid me for my knowledge. Could they get a loan without me? Of course, but, as you know, different lenders had different programs that were directed to different market segments. It was my profession to understand those programs and segments and put them together.

    I don’t think the loan mod business is as complex as the mortgage loan business was, but there is still something to be said for personal contact with an agent while seeking out the credibility of dealing with a real estate attorney who, like physicians and many other professionals, specializes in a given field. I think understanding real estate law as relates to default/foreclosure while having experience as a loan mod negotiator is a legitimate skill set that is of value to a client who is in jeopardy of losing their home (I’m referring to the attorney here). Is it wise to expect someone with those professional skills to have the time, inclination, interest and/or ability to market themselves? Remember, their time is billed at $300+ per hour. How much would it cost for them to find each new client? Once again, remember that we are finding people who NEED these services, but attorneys in general don’t have the time to walk up and down the street looking for them.

    To more directly answer your question; having been in business all my adult life, I usually feel a fairly high degree of loyalty to vendors and service providers. I personally would have a hard time trying to “go behind the back” of a sales person. If I decided to take the time and expend the effort to find an attorney, interview said attorney, contact some of his/her previous clients and then pay the attorney $300+ per hour while they walked me through the documentation I would need, including the additional time it would inevitably take for me to get THAT stuff right, I don’t think my savings would be significant.

    I believe the market provides compensation for services rendered in a fairly coherent way. If an attorney is willing to pay a “salesman” $900 to seek out prospects, solicit their business, interview them, obtain their documentation and assist them with document completion and correction, I personally believe there is a reason for that. If I were to seek out an attorney directly, I have to believe that the advertising he/she paid for, plus the time spent in the various paperwork and administrative chores he/she would provide (once again at $300+ per hour) would probably cost more than the $900 I would save by “going direct”. Why else would attorneys use agents or “salespeople” to solicit clients??

    Don’t you agree?

    Thanks for the welcome. This is an interesting thread.

  289. I am a mortgage broker here in Washington and have been facinated by the way this industry has taken off. Even people who can make the payment think they deserve a modification. Or even more they have a right to a modification. I am a believer in capitalism, and this is all nonsence to me.

    I hate to play the other side of the fence on this issue, but I’m really tired of hearing about people that got in over their heads and think it was the evil bank that gave them the loan. You signed the loan, you had ample chance to read the docuements and were given full disclosure of the terms you requested. If you though you were getting a $500k loan for $1400 a month you didn’t even research the biggest purchase you would ever make? You have to take some responsibility for that choice.

    Face the facts you gambled and you lost. I wish I lived in a nicer home than I could afford to buy; we all do. I’m stuck in my loan around 6.5%, yeah I can’t refinance because my value dropped. But why should someone who broke the contract they signed, and possibly lied about the income to qualify end up getting a better deal than me. My view of this mess is that we are rewarding those who took exceptional risk and lost.

    My position on this is as follows. Lets say I have an identical twin. We both make 50k a year, and bought a house around the same time. Lets say that I took the safe route and bought a $2ook house with a safe fixed rate of 6.75%, and payment of $1200 that remains the same forever. Then my twin went out and filled out an application that said he made $100k (when he really made $50k) and bought a $400k house with a option arm with a 1.95% teaser rate, with a $1300 payment. While I’m pluggin along making my 1200 payment, my twin realized that his payment is soon to be $3000 and he won’t be able to make his new payment or sell the house. So he goes and get a loan modification and gets a 3% rate for 40 years, and ends up with a $1300 payment. So the consequence of his reckless action is that he gets a house much nicer than mine, with a similar payment, because he gambled and lost? Where is the logic here, and what about me. The one who didn’t pay his payments ends up with a better house and a better rate than a person who is making the payment cause they took the safe route.

    I personally believe that housing debt if not paid back should require a default judgment against any other assets you have including 401k, HSA’s, Savings, and any other asset you have. It should require a total liquidation of all you assets. And if you can’t cover the debt you file bankruptcy and start over again, as a renter.

    I’m sorry guys but house values dropping didn’t change one aspect of your home or what you got when you asked the banker to give you the money to buy it. Maybe it doesn’t feel as good as it once did but you still got the same thing you purchased. You buy a car it goes down in value, you don’t try to modify your car note?

    I know that there are some out there who truely were screwed by a loan company or had a major medical issue or job loss or some other hardship which should qualify them for a helping hand. But I don’t feel that your hardship should become my hardship or anyone elses. What you borrow should be paid back by you, not by me or anyone else. If you need 2-3 months to get on your feet again, you bank will listen. If you have to work 16 hours a day that is what you should do. You shouldn’t be given anything just because it will make your life easier at another persons expense.

    And if you cannot make the payment do something to make it work. I used to make $10 an hour and worked a full time job, I needed to make $20 an hour to get by. I didn’t quit working alltogether because I didn’t make enough, I had to take on another job at $10 and hour and work 16 hours a day to get what I needed. You need to do what you need to do, puting your problems on others doesn’t work for me.

  290. Hi Angry Broker,

    I have been hearing the same stories from loan originator students. They’ve been telling me that homeowners are calling asking for a bailout. “Hi, it’s me, you former client. I’ve heard that everyone is getting bailed out and I was wondering if I can get a loan modification bailout, too.” The assumption is that loan modifications are available for everyone now.

  291. Hi Michael,

    There’s an assumption out there that attorneys charge $300 per hour. I’m sure that’s true, depending on the attorney and depending on the type of legal counsel needed, however, I’ve interviewed attorneys here locally and all have quoted a fee of $1,500 for a loan modification.

    The $300 per hour attorney could arguably be more seasoned and thus more efficient. A baby attorney fresh out of law school would charge way less per hour yet the consumer is paying for a different kind of relationship with his/her service provider.

    First, the $1500 is going towards purchasing legal advice which is, in my opinion, far better than paying the same or higher fee to a company that’s “attorney backed” which means what exactly? That there are attorneys located in some other state doing the legal work? If it were my own deal, I’d rather walk into that attorneys office and meet with him/her face to face locally for less money. Second, a client’s relationship with an attorney is a different kind of relationship than what a consumer may pay a loan mod salesman.

    Attorneys owe consumers the highest duty of good faith and loyalty as spelled out in their standards of professional practice. If I believe that I have not been well served, I can take that up with the local Bar association. There is no such oversight that exists with loan modification companies.

    Lower price, higher duties owed to the consumer, plus local legal advice. In my opinion, attorneys outweigh loan mod salesmen.

  292. I think we’re in agreement on many of these points.

    I’m not suggesting that anyone hire a “salesman” of any kind to actually DO the loan mod. It’s my position that any borrower who is at risk should look for legal help as provided by an attorney. I would further suggest that it would be wise to find a real estate attorney who specializes in loan mods. That said, how to find this attorney?

    My only point is that agents who represent attorneys who are trained in and expert at loan modification negotiations and the legal aspects of R.E. and lending laws provide a valuable service to those who don’t know that, one, such services are available, and two, who they should contact when seeking those services.

    This is the same as when people pay for a salesman to sell them a car. If you can buy the car for less, by all means cut out the sales commission, but car dealers don’t work that way. They NEED someone to stand outside in the rain and show the cars, even if the car saleman knows nothing about the cars they are selling. It’s all part of the process, but it’s a valuable part or it wouldn’t exist.

    To take it one step further, why do so many people respond to those who are “marketing” loan mods? Because they don’t KNOW about this program. Would you advertise loan mods on the radio to help these people? Would you personally PAY to advertise this information on the radio? Of course not (I assume you wouldn’t), at least not for free. You would want to be paid for this service. I used the analogy of my former business as a mortgage broker. Any one of my clients could have gone direct, sometimes even to the same lender I was using, but they chose to deal with me. The banks felt it was less expensive for them to market through me than through TV/radio/print. Looking back, I can certainly understand why. I used to run the TV/radio/print ads FOR them, at MY expense, so I could reach clients that I (might) send to a specific lender. In fact, the lenders even had dedicated outside sales reps to call on brokers like myself and encourage us to push their programs.

    This is all there is to the concept. The loan mod business as “sold” through agents or reps is no more/no less than the business model used by many other businesses. It is up to the consumer to decide if it makes sense to them.

    Best Regards

    P.S. There are always some people who will prefer to “go direct”. I had personal friends who wouldn’t give me their businesses if I wrote their loans for free. They were convinced they could go to and benefit from the “When Banks Compete” nonsense. I had a lot more, though, who came to me AFTER being run through the “When Banks Compete” wringer; they were more than happy to deal with a broker, even if they thought I was costing them a bit more (which it wasn’t).

  293. “Section 5(b)(6) of Regulation X — EXEMPTS — from RESPA “any conversion of a federally related mortgage loan to different terms that are consistent with provisions of the original mortgage instrument, as long as a new note is not required, even if the lender charges an additional fee for the conversion.

  294. Has everyone forgotten that the lenders are doing all they can to keep as much of the loan as possible? I tried negotiating a loan mod with my lender, and I am a real estate agent. However, I quickly learned how unwilling my lender was to deal with me. They offered me 5.25 down from 6.25 and no balance reduction. However by paying a measeley $3,995 I was able to get 2.9 fixed 30 years and my balance was reduced from 585K down to 480K. People, trust me, I know the modification company made money on me. But the point is you’re going to get better results with an attorney backed modification company. Remember, O.J. could have represented himself for free also…….

  295. I’m an ex-loan officer and mortgage account executive, and I’ve recently been interviewing with loan mod companies, as that is the only place my experience is worth anything right now. I can tell you from my experience that most of these companies are paying the sales agents between $200 and $500 per file. I have been mostly concerned with the ethical standards of the companies I’m checking out.. Wanting to make sure that they aren’t charging too much, or taking fees from people they know they cant help. The fees have ranged from $1495 to $3495. 2 of the 5 companies that I sat with said that they would refund the entire fee if the loan mod was not completed, and the other 3 refunded everything but a small processing fee(<$500).

    As far as collecting the fee up front. It IS legal if the company is attorney backed, and it is considered a retainer. The idea of getting an attorney to do anything worthwhile for a few thousand dollars is kind of laughable.. But it makes sense in a “buy in bulk” kind of way that they would work cheaper if they were being fed a constant flow of work that they didn’t have to solicit.

    I was VERY wary of this new boom when I started learning about it, but it seems that, from what i’ve seen, there is fair business being practiced that is actually helping people.

  296. Chris, I think your post points out something that should have been apparent from the beginning. Not every one of these companies is the same, and not every one is unethical or worthless. The title of this thread starts with the word “predatory.” That is the modifier, exactly like predatory lending. Not all lending is bad, and not all upfront loan fees are bad. But at some point, both cross into the area of being predatory.

  297. As a senior level banker with nearly 28 years of banking experiences in the various fields of banking and recently focusing upon loan modifications, I’ve witnessed many abuses on the part of wantabe experts in the field of banking. In fact, I have witnessed what now has become a common practiced among attorney’s seeking out networks extensions through the use of LO’s to help expand their modification service business. What I discovered is that these individuals are not fully trained, let alone properly managed by the very entity that has hired them to seek out potential clients. The fees alone are totally out of control for something that granted a homeowner can directly go to their lenders and seek out help. However, as much as I oppose such a practice, I have also seen what lenders first hand are doing to these very same homeowners that come to them for help. I praised a certain company that offers a third party escrow account protection, with them not collecting any funds upfront in their own name but rather, setting up the escrow account in the name of the escrow holder and escrow provider. Their refund policy is very fair and it assure full protection to that of the homeowner. To me this is the way to conduct business. They handle all the processing, filings, negotiatons, and if need be, they forward cases to a third party legal service for added protection. Its a win/win deal all around the table. In fact, they are closing nearly 100% of all their deals. For this I say, bravo! So lets not be so harsh on those companies that truly are earning their keep.

  298. Kirk,
    Why should you get such a program? What makes you more deserving than someone who bought a house that they could afford to pay even during a down cycle of the economy.

    Reading your post makes me sick in my stomach to know that, indirectly I am going to be paying for your bad descion.

    Let me guess you did a 0 down, stated income loan, then when times are rough you think about looking for the easy way out. You should have short sold the house for what it was worth or you should be subject to moving out of the house and a family that made wise choices should be allowed to move in.

    Sorry to be so harsh, but this makes me angry. You have been rewarded for your irresponsible choices at the expense of others.

  299. In post 358, Kirk said:

    “Has everyone forgotten that the lenders are doing all they can to keep as much of the loan as possible? I tried negotiating a loan mod with my lender, and I am a real estate agent. However, I quickly learned how unwilling my lender was to deal with me. They offered me 5.25 down from 6.25 and no balance reduction. However by paying a measeley $3,995 I was able to get 2.9 fixed 30 years and my balance was reduced from 585K down to 480K. People, trust me, I know the modification company made money on me. But the point is you’re going to get better results with an attorney backed modification company. Remember, O.J. could have represented himself for free also…….”

    Excellent point.

  300. In post 356 Dan Harris said:

    “The loan modification boom as it currently exist is the Wild West and needs much more regulation and clarification, which will continue to evolve in the coming months.”

    Sorry, I’m a free market kind of guy. I don’t think the ever tightening noose of “regulation and clarification” will serve the consumer any better here than it did in the run-up to the mortgage/banking meltdown. The last thing any of us need is more “help” from the government.

  301. In post 362, Angry Broker said:

    “Sorry to be so harsh, but this makes me angry. You have been rewarded for your irresponsible choices at the expense of others.”

    You echo my feelings to a degree, but I’m not willing to lay all the blame on the borrower. The mess we are now in was, to a large degree, created by government regulation. and is now being addressed by MORE government regulation. Where will it all end? With even greater regulation, I’m sure.

    I do disagree with your sense of moral outrage, though. There is no morality here. We have a system that seeks to shield consumers from failure and their own foolish choices. If we don’t like that system, we need to change it, but we will be swimming upstream. In the meantime, it’s a little harsh to condemn someone for making a choice that was offered to them on a sliver platter.

    Should consumers be “blamed” for accepting sub-prime loans that allowed them to “purchase” homes they couldn’t afford? I don’t know; seems like the government bears at least some responsibility. How to allocate that responsibility between the consumer, the lender and the government is the question. Don’t blame the borrower, though, without laying proportional blame at the feet of the regulators who helped create this mess.

    As for personal responsibility, I may not be the person to ask. I still resent having the government tell me that I MUST wear a seatbelt, even though I would always do so voluntarily.

  302. This country is built on failure. I think it’s always been true that a majority of new businesses fail rather quickly, and the results are not so good over 100 year periods either.

    Absent lying on an application or otherwise qualifying for something you don’t qualify for, I don’t see how you can fault the borrower. They were just taking a risk. With risk comes reward—or failure.

    I would place the blame more on the supply side of the lending transaction. Loans started to be structured such that the lenders didn’t care about the risk.

  303. Yes, some bad loans were written and some people were tricked into Arm’s that exploded.

    The guy that said he was a real estate agent should have known better. He deals with this stuff everyday, and bought more than he could afford and I don’t want to fit the bill for him to maintain his lifestyle. He should sell the house for what can be gotten on it and move into a 1 bedroom apartment and work at McDonalds like other and rebuild his finances or work 16 hour days or maybe work 2 jobs to make things work.

    He is flat out being rewarded for his speculation on the real estate market. I planned according to a sound business model and didn’t over extend myself. While I’m extended, its not beyond what I can make. And yes I have had $100k months before, should I have bought a $5m home and then request a 0% rate to keep me in the house, because I once could pay it and now I deserve to maintain my previous lifestyle. If I made that choice, I should be in the poor house, and have to start over and learn from my mistakes.

    What about my portfolio that is down 50% yoy, should I be given a 0% loan to put that money back in my account, no. This is “free market”, things change, money is made and lost, houses are bougt and sold.

    Plenty of families of four live in 1 bedroom apartments. We should be responsible for our choices. We should make sure full disclosure is made on loans, but if Ameriquest disclosed the risks in an acceptable format then the borrower is liable for this mistakes.

    We are going to become the USSA and China is going to become the next America.

  304. I guess cannot edit.

    PS. Most of you brokers and industry types know that subprime loans are based mostly on Libor + Margin. Current 6 month libor is around 1.5%, and most margins are 3-6%, this results in the floor rate being inforced. That is the initial rate the borrower was given to start with. Very few Arms are increasing. Only if you have interest only that is expired, or you took a option arm are you looking at higher payments. Or if you had really really bad credit your margin will be higher. This is not the excuse for the borrowers, is that the easy way out is to stop paying and treaten the lender with no payments if they don’t modify the loan.

    My guess is that over 80% of foreclosures can actually make the payments if they had a little determination or were stuck with a judgment similar to a studen loan if they don’t pay it back. Drop this loophole in the debt payback and it will fix the problem. I’m sure of it.

  305. As a person who has done over 100 modifications in the past 45 days I can tell you that there is a lot of work involved. The reality is there are a lot of crooks out there but there are a few sound companies that do this business well. When I started doing them in August 2008 I had very little experience and offered the clients a 100% money back guarantee if I couldn’t get their deal modified. I had no track record of success but had a burning desire to fight for a homeowner who wanted to stay in their home. After 60 days of pounding lenders and compiling experience and statistics there are some things you all need to know about mods and a company or person doing them.
    1. Not all mod companies are crooks. There is a cost of doing business. People dont’ work for free. There are HUD assistance programs and other government sponsored ones but not all can help every homeowner. If any of you know what H4H you’ll understand what I mean.
    2. On average, fees for services will be levied by the size of the loan balance. I have done my own research into some companies regarding there services. Most charge based on the loan amount. They range from $1500 and up.
    3. ON average I get denied on a file at least twice. No kidding. I call the lender state the case and they deny me. It’s only after sound work and a “pitbull approach” that I did earlier do they work with me. I’ve been on calls with lenders and modified loans in 30 minutes and have had calls last 2 1/2 hours just to be denied. What are you worth per hour?
    4. Attorneys help keep you compliant. There are some services out there that discuss they are attorney based. If you are a mortgage professional, realtor, or the like do note that if the company has attorneys working they are taking the liability to keep up with federal and state regulations. There are a TON of gray areas in this business.
    5. What does the sales agent actually do? Well, a lot actually. The sales agent is the one who has paid for the lead, has talked to the client, done due diligence based on the conversation, completed a budget analysis worksheet, and then collected all of the client’s income/asset documents. Once the file is in my hands I have all of this information and my job begins. There is a cost on my end. Technology, employee overhead, legal fees, and the list goes on and on. Since my mortgage business has dwindled to almost nothing and my bills are the same I had to something that would pay decent money during the crisis.

  306. It varies to be honest. It’s based on loan amount and what situation they are in (ie- just late, notice of default, or notice of trustee sale)
    typical fees are
    loan balances to $100k ($1250)
    loan balances to $150k ($1695)
    $200k ($1995)
    $300k ($2795)
    >$350k ($2995 and up)

  307. Thanks Chad. So on the low end, the income you’ve made during the last 45 days could be

    $125,000 and on the medium end, could be $199,500

    is that correct? Over the last 45 days you have made over one hundred thousand dollars?

  308. Yes. You can make a good amount of money doing it. There are some cases where I know we can’t help someone so I give them advice based on the experiences I’ve had with lenders. Also, I have expenses, of course, like anyone else. I can’t do that many files alone. I have a couple of people who work underneath me collecting docs from the client and also people who are doing some research for me (values in a particular neighborhood, current listings, etc).

  309. Wow… the loan mod business is WAY more profitable than being a mortgage originator. Why…if Congress hears about this, they just might cap your annual income to $500k per year.

    I just can’t imagine….it must be like upchucking and enjoying your meal twice for a loan originator who’s doing loan mods.

    Jillayne, forgive me, this post has so many comments–these questions may have been asked before–

    1) do mortgage originators who do loan modifications in WA State have to be licensed with DFI?

    2) can home owners utilize FREE or LOW COST services (such as HUD approved vendors) or DIY instead of shelling out money they don’t have (typically charged to a credit card or shelled out by family who wants to help so badly)?

  310. Hi Rhonda,

    1) Yes.

    2) Yes, or they can hire a LOCAL attorney for half the cost of typical loan mod salemen fees and receive local, face to face legal counsel with their loan mod.

    Consumers: Loan modification salemen are completely unregulated at this time.

    Though some states have come out with harsh-sounding statements, these loan mod companies are popping up fast.

    Don’t be a predatory lending victim again.

  311. There are 12 states that are regulated at this time (where you must either be a licensed mortgage broker or an attorney to collect upfront fees)
    WA, OR, CA, NV, CO, IL, IA, IN, MD, NJ, FL, NC. They all mirror the rules set by the DRE in CA so they make it easy to understand. There are some attorneys who won’t touch the loan mod business because there isn’t much interpretation of the law to go by. I made more than this selling 30yr fixed loans before. I never sold the garbage that was available. The lender list is shrinking too fast. Too many companies are going under and it’s effecting us all. Housing touches so many businesses (from Home Depot to WalMart). The mod business is only going to be strong for about 18 more months then it will peak.

  312. Some stats for you.
    1 in 10 homeowners are at least 1 month past due or in forclosure (as reported 1/09 by the Mortgage Banker’s Association)

    in 2008 there were 3,157,186 Foreclosure filings which was up 225% from the previous year

    There are an expected 2.25M more foreclosures this year.

    These are scary numbers. The fact is the lenders and capital markets guys saw dollar signs for years. Mortgages were traded and traded again with ever increasing profits. I started off in the capital markets in this business and received a great education of the inner workings of asset management. There are so many flaws in what the government is trying to fix in mortgages. The losses are staggering more so because lenders are difficult to deal with. They hire $12 a hour loss mitigation reps who know absolutely nothing about the business. They punch in some data into an excel spreadsheet and if it doesn’t fit they tell the client sorry. The client gives up and thinks they have to pay or lose their home. They’re wrong. Here’s why
    You bought your home in 2006 for $350,000 and it’s now worth $250,000 if you were to try and sell it. You can’t refinance because you owe more than it’s worth. YOu decide to walk away
    The lender has to pay interest expense, property taxes, maintenance fees, legal fees, broker fees to the tune of about $80,000 total.
    With the property being worth $250,000 they are going to take a hit because the buyer will know it’s bank owned and will take advantage of it and get a 10% discount ($25,000) off the sales price.
    $350,000 you paid and owe on this property
    -$100,000 (value loss since purchase)
    -$80,000 (lumping all of the costs mentioned earlier)
    -$25,000 (discount the new buyer will receive)
    Final true sales price:
    This is the reality the lender has to face. They take a $205,000 hit
    Now. If we have a home owner who is paying their $350,000 mortgage at 7.25%($2387 per month) but that same homeowner could benefit and pay their mortgage payment if it were 5% ($1879 per month) then the lender is out $508 per month (or $6096 this year).
    I know it’s a lot of numbers but what it means is the lender can take a $205,000 loss now or $6,096 loss over the next 12 months. If you were a lender which would you choose? Seems easy enough. Now, try telling this to someone making $12 a hour.

  313. A modification does not effect you AFTER the modified loan terms begin. There are some lenders who will not allow you to refinance within 24 months of the modification. If you end up getting a modification please be sure to ask before you sign anything. Your lender will advise you.

  314. Here is a question for Chad. I value your experience in the loan modification field. What are the steps that I as a realtor can take to assist some of our clients in staying in their homes?

  315. I am a former mortgage broker with 8 years experience writing mortgages. I have had to get creative with how I am going to feed my family these days. I decided to get into the loan mod business, and I am extremely offended by anyone who would say that in my 11 hour work days, that in those 11 hours all we do is push paper. You have no idea how much work this is to gain a clients trust, explain the benefitsl, chase that person around for weeks, and eventually they decide to go another route. Are you kidding me, that sounds like a non-profit to me, so in a nutshell what is so bad about a person doing a loan mod for another person? I can pull my own tooth but Id rather have a dentist do it!

  316. Hi Bob,

    When we are put in a position of having to choose between self-interest (feeding ones family) and the interests of others, all of us would likely lean toward feeding our family. That is why charging money for something that a consumer can do on their own for free is such an ethical dilemma. A consumer can:

    1) negotiate their own loan mod for free. There are many self-help books available now on do-it-yourself loan mods. You’re right, not everyone wants to pull their own tooth.

    2) Second choice: Enlist the free services of a HUD Approved Housing Counseling Agency.

    3) third least expensive route: Hire a competent attorney for $1500

    4) hire a loan mod salesman for 2,3,4,5, and I’ve even seen $6,000 being charged.

    I noticed that your twitter feed is in spanish. If you’re a bilingual loan mod guy, this is probably a bonus for you and I sincerely hope that you can find success helping people.

    There are some ethical loan mod guys out there. The problem is that consumers can’t tell the good guys from the bad guys. This will continue to be problematic until some sort of enforcement mechanism is in place to clamp down on the bad guys.

    In WA state, anyone doing loan mods must be licensed as an LO and working under a broker or consumer loan company (unless otherwise exempt from the law such as attorneys.)

  317. Loan Modifications are a very gray area. Let’s try to absolve some issues and concerns, and address real truths. I work in the industry, so I know how everything works, from the front-end, to the back-end, to the processing, legal’s, and negotiations.

    #1) Anyone can get a loan modification done for them. ANYONE. It’s not about succeeding in the loan modification; it’s about getting affordable mortgage terms that you’re able to remain current on for multiple years ahead. Not a band-aid fix situation. Most lenders offer some type of 5 year ARM, putting delinquencies on the back, and lowering payments by $30-100 (if at all). In some cases, borrowers on their own achieve this. Let me explain why this is often the case.
    A) Achieving a Loan Modification is NOT a 5 minute ordeal. This is not an instant gratification industry. This a long-winded, costly, and very involving negotiation, that requires the breaking of a binding, hundred(s)-of-thousands-of-dollars contract.
    B) There are four levels of Loan Modifications.
    1) Specialty Forbearance (As noted and explained above)
    2) Interest Rate Reduction (Done by either utilizing the TARP program, or Barack Obama’s Program to match your mortgage payment down to 31% of your gross income.
    3) 20% Mortgage Overhaul – Combination of Principal and Interest reduction to bring you a 20% over-all savings. This is where the negotiations become harder, where the Forensic Loan Audit becomes of use, and where the months of negotiations start to tack on.
    4) Mortgage Subordinating. – To combine two loans together, either from different lenders, or from the same lender, to achieve one low monthly payment. Often adjusting the loan amount to a 40 year, raising the principal balance, but often bringing interest rates well below the 5.25% margin.

    Let’s also talk about Fee’s, and why they’re required.

    When you go into any industry, you accrue fee’s, that you have to pay for monthly, to remain afloat. In order for any company to operate at maximum efficiency, they need to maximize their profit (seems like something you’ve heard a million times, right?). Let’s see where your money could go in a Loan Modification program…Let’s talk about the facility needed to house the rep’s who are just (glorified taco bell workers, right?). Then there’s the phone call, at which, you spend between 3 to 6 hours of compiling information, contacting and working with processing, and putting together a solid form of finances, mortgage information, and other erroneous information. Then there’s the “Reviewal process”. Someone has to get paid to ENSURE these borrowers they’re able to get a loan modification. That’s a good 6-10 hours of work. Reviewing your entire application, contacting lender to see what type of servicing their offering. THEN after ALL of that, The Attorney’s who review your case file, have to put THEIR BAR NUMBERS on the line. THEIR YEARS of school, THEIR HUNDREDS OF THOUSANDS OF DOLLARS IN STUDENT LOANS. Once it’s been accepted, it’s back to the “Glorified Taco Bell Worker” to re-contact, provide documentation, as well, collect documentation, and payment for the trust fund at that point in time. Then there’s the Courier Fee’s, overhaul, then payroll for those “Glorified Taco Bell Workers” who are so avidly attempting to save your property.

    There’s plenty of ways to make an education decision in life. One of them is to perform do-diligence and ensure that the company you’re attempting to work for is the company that they say they are.

    There’s dozens, upon dozens of red-flags to look for. Here’s a few.

    1) No Merchant Account (Doesn’t accept Credit Cards).
    2) Can’t provide an Attorney’s Bar # Or a License # for Business.
    3) Fine-Print, Illegible legal documents that in essence say if you do anything other than breathe properly, you loose your retainer fee.
    4) Spend more time selling you on the Interest Rates, and Lower Payments, than focusing on the restructuring of your mortgage, or saving the property from Foreclosure.
    5) Attorney’s CANNOT “Cease-And-Desist” order “ANY” Lender to stop a Foreclosure. This process is a tricky one that utilizes the sneakiness of attorney’s to ‘freeze’ loans for a short amount of time while ‘work’ is being done. Then during the negotiation, you’ll be brought current, at which point, the foreclosure is absolved from the picture.

    Moving on. There’s a natural flow and progression in life. Bottom feeders weed there way out over time. The real individuals who work hard, and are legitimate, will reign supreme.

    The last thing I’d like to say, is just a few more key points.

    #1) If you had a court-case, that was worth, let’s say, $300,000; you would for-surely hire an attorney, or lawyer to work that case, unless you were yourself, an attorney, or for some reason, completely enamored in the field, and educated above all others, including the judiciary committee you’re placed before. You would hire a professional to assure the safety of your asset(s), and the safe negotiation of your freedom. Correct? I believe the answer would be yes.

    #2) Don’t let yourself be part of the bandwagon of uninformed homeowners who just ‘assume based on internet blogs’ that because someone was victimized, *I* will be to. Be educated, don’t be a blundering idiot, and you’ll be able to come out victorious.

    #3) Ask questions, be inquisitive, ensure accuracy.

    #4) Realize that not everyone is a thief. I myself spend all day long reviewing everything about Loan Modifications, the law’s, guidelines, how things work, all day, to ensure that I’m the most honest person in the industry. I’m sorry that I need to get paid to ensure your safety.

    Oh, And one last thing. ALL of those free-servicing industries that are going to help you to save your home, are not funded by tax-payer dollars; they’re funded BY YOUR LENDERS. That’s why ALL of those Government programs combined haven’t saved more than 200 Homes. Verifiable on the internet, do your research. Independent attorney’s and individual homeowners have had more success. And a Loan Modification “Counselor” does not know how to perform a forensic loan audit, nor do they understand how to negotiate with the TOP negotiators in the industry.

    If you work full time, and have a child, you’ll never be able to find the time to save your property, and learn the lingo, and legal mumbo-jumbo involved.

    If you can find the money, and you want to save your property. Seek legal counsel to help you.
    Click on the #2, and #3 questions under the “lawsuit faq’s” section. You’ll be surprised what your ATTORNEY general says you should do.

    Good luck to all of you homeowners. I hope you’re able to be educated, and not naive, and be open to all permissible points of view that may help to save your property and bring you into a better situation.


  318. Jeremy,

    In light of the huge announcement today from the U.S. federal government regarding the massive fraud being uncovered in the area of predatory loan modification/foreclosure rescue companies, is it any wonder that homeowners would chose to use a third party loan mod company at all?

    Seriously, you had my attention until this sentence:

    “If you work full time, and have a child, you’ll never be able to
    find the time to save your property, and learn the lingo, and legal mumbo-jumbo involved.”

    I think you are definitely under rating the ability of the average homeowner who has one or more children to help himself or herself. Do you seriously believe homeowners who work full time and who have children don’t have ‘time’ to learn anything? What about the thousands of gainfully employed homeowner parents who attend college in the evening?

    This sounds more like a scare tactic which is manipulative and a red flag for any homeowner reading this blog.

    Here is a link to a story that ran today about the government’s crackdown on predatory loan modification companies:

    “The FTC announced today five law enforcement actions and sent 71 warning letters to operations using deceptive tactics to market their mortgage loan modification and home foreclosure relief services, said Jon Leibowitz, Chairman of the FTC. “We’re enforcing the law against these scam artists who are deceiving consumers while they’re down.

  319. I wish the banks had more qualified people working in their loan mod/making affordable programs. I’m hearing from people that w/regards to Obama’s new loan mod program, some banks don’t have a clue… and today I received an email from a home owner in So Cal looking for help. When he called his bank (one of the big 3) for help, he was told that he was not delinquent on his mortgage so they couldn’t help him. What did he do? He stopped making his payments. I’m not sure if the person he talked to told him to stop or if this is just how he interpreted the conversation. Now he’s facing foreclosure…the only advice I could offer was to call an attorney asap.

    After reading his long email… (and a few recent emails I’ve received from other people)… I’m just wondering how qualified the individuals are who are trying to give advice, make decisions or help people who are in financial distress. What type of training do these individuals have? Do they know the difference between a loan mod or refi?

    One person I talked to this week trying to get the “Obama refi” keeps being directed to the loan mod division when he is not delinquent. He’s having to educate the bank employee.

    I would like to think the banks have trained, qualified and competent employees in their loan mod/Obama refi departments… but I am really questioning it this week.

  320. Hi Rhonda,

    Loan servicing departments at the large banks and lender/servicers were never set up to handle the kind of volume that’s happening right now. This is like a Hurricane Katrina hitting the financial sector.

    Subprime loans is where it started so I’ll start there. We know subprime borrowers are high risk. Before the bubble run up, hard money lenders and consumer loan companies charged much higher rates and fees for subprime loans because they KNEW that these loans would default at a higher rate. Subsequently, their loan servicing departments looked a lot different than those of today. They were staffed with well trained loss mitigators who went out to the homeowner’s house and did a face to face meeting, helped them put together a workable budget, restructured the loan or helped the homeowners do a short sale…..face to face. That was a long time ago, but this is the way subprime use to be, before we securitized loans and sold off the risk.

    I believe that homeowners who choose not to hire an attorney from the start should consider working with a local, FREE, HUD-approved housing counseling agency. Local non-profit agencies are trained by HUD on how to help homeowners facing foreclosure on all the possible options, including receiving training on how to help homeowners with short sales and loan modifications, so even if the short staffed banks aren’t helpful, your housing counselor will know what to do.

    Also, consider the high stress work environment of today’s loan servicing employee. You go to work from 9 to 5, you have two 15 minute breaks and one hour for lunch. The rest of your day is spent picking up the phone and being yelled at by Realtors all day long. High stress = high turnover = a challenging training environment.

  321. A tiresome high-stressed job is one thing… not hiring qualified staff is something else.

    And Jillayne, it wasn’t just hard money lenders and consumer loan companies that were providing subprime loans–let’s not forget the BANKS…many of them had their own subprime divisions including WaMU and Countrywide. I think Wachovia (now owned by Wells) was one of the last to stop offering stated income loans and other subprime/alt-a products. I think they (the banks) have a responsibility to have at least qualified and trained employees to assist these home owners.

  322. Hi Rhonda,

    My mistake; I apologize. I should have made it more clear that I was reminiscing about consumer loan companies doing subprime in the 1970s and 1980s, way before the bubble run up subprime loans.

    This time around, the banks and lenders that got into subprime didn’t set aside enough money in loss reserves to cover the costs of servicing the defaulting loans.

    You bring up an excellent point. In light of Wells Fargo’s announcement today about record first quarter 2009 earnings, it would be nice to also hear that they provide record-fast service in their loan servicing department.

  323. Hey I just finished reading “Chain of Blame”, it has a pretty good description of how subprime lending operations worked before securitization, pre 2000.

    The loan originator was the loan collector, and the workout department!

    Whoa, what a concept.

  324. I think that because of the negative actions of SOME loan modification companies, all of them are being associated with that negativity. The main reason people pay these fees is because they do not want to deal with it. They would rather pay someone and have that someone provide the service for them than to make the effort themselves. This method of service has many a analogy. If you have the $3500 to pay for an attorney, then go to that attorney. Most people do not care about how the money is split up amongst its divisions. When I purchase the TV i do not ask how much the on or off switch costs and the person who designed it what did they get compensated for it. It is ridiculous to ask that woman what her share of the monies are. What is your share of the car your wife sells if she purchased it???? Loan modifications done the right way are very helpful. I have been in business for not long, however my experience in mortgages is adequate. I do a lot of good for people and i do not charge upfront fees. I do charge a fee but it is after my contracted work is completed. Do not think that all mortgage modifyers are not legit.

  325. Hi Jake, the big screen TV analogy doesn’t fit. A retail purchase of a television is very different from making a decision regarding a mortgage that’s arguably much more expensive that a television. It is definitely not ridiculous to want to know exactly how money is divided up between service providers.

    That’s why the federal government gave us RESPA in 1974: so mortgage lenders could show consumers how their money is spent, and give consumers a chance to challenge those fees and shop for the lowest settlement costs.

    The general public should question whether ANY loan modification fee is legitimate because loan modifications are done by lenders for free and done with assistance from HUD-approved Housing Counseling agencies….for free.

    Consumers (with extra cash lying around) who are so helpless that they need someone to hold their hand through a loan mod should hire an attorney instead of a loan mod salesman.

    For the same price and often LESS than a loan mod salesman, they will get the hand-holding, they’ll get their loan mod, and they will even get legal advice.

    The legitimacy of loan modification salesmen will and should always be questioned by consumers, by attorneys, by regulators, by bloggers and by the mainstream media.

  326. if this is so free and such a great option for home owners loan mods are free with the lender however the lenders are totally reluctant to work with home owners as well as they will modify your mortgage in their best interest if you don’t believe me try and do it on your own and put yourself through the lenders mill trust me when your good and sick and tired of their BS you wil be totally willing to hire a legitimate company to modify your loan and yes there are real loan mod companies out there and its amazing how with free enterprize in America you’ll get people like this who wrote this column and he doesn’t not even mention the reality of modifying your own loan try it homeowner please.

  327. Hi Victor,

    I mention several times that homeowners can work directly with their lender on a loan modification for free. It’s even in the body of the main article.

    There biggest problem legitimate loan mod companies have right now is that the consumer can’t tell who is legit and who is not.

    Since the loan mod industry is too new and made up of too many predatory lenders left over from subprime, their reputation is questionable… an entire group.

    An industry is judged not by its best performers but by their lowest common denominator.

    At this point in time, homeowners who need hand holding and who have money to spare, are better off hiring local, legal counsel for less than they would pay a loan mod salesman.

  328. Hi Jillayne,

    I read your post and you bring up some very good points.
    One thing homeowners fail to realize and a lot of others who are telling homeowners that they can do it for free by calling their bank or lender, yes they can do it for free but remember who they are talking to, the bank. The bank or lender IS NOT going to give the homeowner the best deal, the deal is going to be made by the bank for the bank. Over 80% of loan mods being done by the homeowner end up back in default. What does that say about banks helping homeowners. Yes, some of these defaults are the homeowners fault, loss of job etc. but the banks are not helping in ways they could or should.
    Any smart homeowner should get there loan mods done by an attorney who specializes in loan mods. There are plenty of them out there.
    Yes there are scams, most of them are do it yourself kits off the internet or by those preying on the weak and looking for a fast buck. Those scammers will always be out there….fortunately the FBI is now starting to crack down on these low life people.

  329. Hi JA Smith,

    If over 80% of loan mods are re-defaulting, this begs the question as to why anyone would pay for a loan mod in the first place.

    I’ve been following industry statistics on this and I have yet to read a report that states “80% of loan mods have redefaulted.”

    If you have a source on that, please post the link.

    Thank you!

  330. Hi Jillayne,

    I’m not saying all loan mods have an 80% going back into default, What I am saying is 80% of the loan mods done by the homeowner on their own will end up back in default.
    I will look the link for the stats and post

  331. Hi my name is Brad and there is a dumb loan Mod, and a smart one where you hire an attorney, Attorneys save you in the range of 120k if you have a 250k plus mortgage balance. And if you do it with your lender you acually losse maybe 10k in the long run and 75 percent of the time the house goes back into foreclosure in 6 months. It might be a 1000 retainer but, if I said lets go to the casino with 1000 dollars and you will win 120k, would you do it? Sure you would every time so dont listen to these bainkers who are tired of submitting to Attorneys hire one and save you life while you still can but do alot of research and make sure you find a real Loan Mod company.

  332. HI! Jillayne – You said “keep in touch”. Posted 12/3/08 #329729/330895, looked back to refresh your memory. Brief, payments reduced…to where they were, AND a REFUND CHECK, from Chase. Still looking for we owe money, or not.

    NOW…Jillayne sit down, because this is true. Chase credit card has since 11/08 been garnish 25% of my hubby’s salary, of what $8.40 an hour do to down size of his $86,000+job. . The credit line balance at the time the account was closed was, $16,500. Wish we would of “f” them. During all this Chase sent us an invoice on an account, three (3) years earlier on an account we never activated for “FEE’s”. Closed, after blunt input, but more stress. Soooooooooo, we have another loan modification. Time is four months…why!

    I layed next to my Mommie in a nursing home when she died. Was not recent, just focus on facts. We like things, but things consume/take over us. My Mommie, had her hair/nails done weekly, great home, lavish decor, traveled and died after years, in a nursing home bed.

    My attitude is, and wish to share. A building with walls, should never consume the quality of you.

  333. Hi Jacalyn,

    Did you have your bank account with Chase as well as that credit card?

    Did you hire a local attorney in your city to help you through all of this, as I suggested back in December?

  334. While I do agree, very much in fact, with the idea that a loan originator has a fiduciary responsibility to the client – I strongly disagree with the OPINION that the consumer can work directly with thier bank to resolve thier issue. I have worked on a few of these for friends and clients. Just as you would not expect a consumer to work thier own refinance or purchase file through the process, they lack the experience, perserverance and knowlede of the system to get a loan mod through the process. and make no mistake…. this is actually a refinance transaction and if it isnt handled with the utmost care, dilignece and attention, it will be turned down. The banks have not created a process that most concumers can succssefully navigate. We have all read the stories in the NYTimes about how the fax machine is the first obstacle you have to get past. But think of this, you also have your faxes sitting in a stack of hunderds of faxes. than you have to hope the right processor picks it up and gets it imaged into the correct system at the bank. If pages are missing, how is the consumer to know. It takes up to 3 days to get verification that they recieved your fax at all. Than it sits in line with hundreds of files waiting for various delaying processing before it gets anywhere near a netotiator. This process could take weeks. If something in your pack is missing or in error when you find out, if ever, your file gets moved to the end of the line. meanwhile the poor consumer who is doing everything they know how to do with little knowledge of the process is left vurtullay in the dark. Loosing sleep thinking the preocess is working for them. Than, even though they may have filled out all the info to the best of thier ability, not understanding how a lender evaluates the info, they are told they are declined for some simple reason that, if a loan officer had taken thier information with the experiance of knowing how a bank will want to look at it, might have presented in a a more throught way. And to make matters worse…. The folks at the bank lack treaining. I have had files that were turned down bu one negotiator ( at this point most consumers start packing) only to hang up and call back and get a different negotiator who went over the numbers and approved a modification that would work for the client. Yes I would prefer a world where consumers could work with a bank and in a reasonable time receive fair and honest treatment to resolve thier issues but that isnt this world. Consumers come to us after they fail on thier own. I do turn down files. Some people simply think they deserve a break despite the fact that they can afford thier mortgage. But for the rest, that come to us in tears, after failing to pass through the guantlet that the banks have decided is a user friendly enviornment. For those folks, we fight sometime literally round the clock to help them save thier homes. I look forward to a time when these services are no longer needed because it is a lot more fun to help people buy thier first home than it is to help them save it. The banks have not made this an easy process and untill someone makes that happen someone who knows the system, knows how to navigate it with persistance and without getting angry (as most consumers do) must help these folks out. People are loosing thier homes simply because they cant and dont know how to get throught the process. Yes, fees are charged but the man hours involved are not minimal. And a reputable comapany will refund most of the fee if the process is not sucessful. Yes I agree there are vultures out there, but niether the government nor the banks have created a process that consumers can survive. therefore I say it should be loan officers to handle it, not lawyers ( when was the last time a lawyer processed a loan or other financial document with a bank?) sure there should be regulation and control, but our first priority should be to help the consumer throught the process.

  335. It’s been a while since I have posted here but my opinions have not changed much.

    Many of the attorneys out there who got involved in loan modifications at $1,200 per file have fallen by the wayside because they have realized that spending 3 to 6 months dealing with lenders can’t be done at those rates.

    I believe that the more options available to consumers the better.

    I believe that regulation (without banking lobbyists intfluence) can play a key role in protecting the consumer from scams.

    I believe that nationwide registration and oversight would cure many of the ills in the loan modification industry.

    Recently I had an experience of trying to help a homeowner by contacting a local Congressmans’ office in California.

    The Congressmans constituent had been taken advantage of by a mortgage broker and a predatory loan. 6 months ago the borrower was granted a 6 month forebearnce while the lender “processed” the permanent loan modification. Well surprise – surprise the permanent modification was never granted.

    Rather than make a call to the lenders governmental affairs laison to ascertain what had been done to the constituent it was suggested that she call the local HUD counselors and stay on to of them 24/7 because they are inundated with work and the squeeky wheel gets the grease.

    Can you imagine?

    There are now thousands and thousands of homeowners who have turned to HUD approved counselors only to be told that they don’t qualify, they should sell their homes and more. Many of them have lost their homes because of this advice.

    For many of these homeowners if they had found a GOOD loan modification representative they could have saved their homes, lowered their payments and moved on with rebuilding their finances and their lives.

    I agree with the portrayal of the process by “J”. The lenders and servicers have turned the worm and are loath to offer assistance without much hard work and perserverance.

    Calling lenders every day one would quickly see that there are many untrianed people answering phones and giving out alot of incorrect information to borrowers in distress. In fact if you call the same lender 4 times and ask about assistance it would be impossible to obtain the same information all 4 times.

  336. Hi J,

    Thanks for stopping by RCG. It’s a fact that homeowners can work directly with their lenders for a loan mod, not just an opinion.

    I am willing to bet that the number of consumers ripped off by loan mod companies outweighs the number of consumers helped by loan mod companies.

    But where would we get those facts to prove my hypothesis?

    They don’t exist for the whole U.S. just yet. California’s attorney general sure has been busy. Pretty soon there will be more predatory loan mod companies going down.

    Banks and servicers DO have stats showing how many loan mods they have performed.

    Yes, the numbers are dismal but there never will be enough people in loan servicing to help everyone that needs help. We shouldn’t hold our breath and expect anything more out of the banks unless we want to see government intervention and there are consequences on both sides if we go that route.

  337. Hi Dan,

    “Recently I had an experience of trying to help a homeowner by contacting a local Congressmans’ office in California”

    A local attorney representing this homeowner would have avoided the path of going political and would probably have had much better luck dealing directly with the lender’s legal counsel, especially with bona fide proof of predatory lending.

    “There are now thousands and thousands of homeowners who have turned to HUD approved counselors only to be told that they don’t qualify, they should sell their ”

    Sometimes, people don’t qualify for a loan mod and need to sell their home.

    A loan mod for all is not a right or a law. If they don’t qualify to repay the loan mod….if chances of default are high, then by all means it’s time for them to move on.

    Loan mod re-default rates are still quite high which begs the question as to who is being helped more with these loan mods….the consumer or the loan mod salesmen?

  338. Hi Jillayne,

    I’ve missed you. 🙂

    “A local attorney representing this homeowner would have avoided the path of going political and would probably have had much better luck dealing directly with the lender’s legal counsel, especially with bona fide proof of predatory lending.”

    Conjecture without full knowledge of the case & facts could lead to misconceptions. Avoiding the path of going political in this case would not have been in the best interest of the homeowner. We had the advice of counsel and after a careful review of exactly what we had, it was decided that going political prior to running up legal expenses was the prudent thing to do. After all a constituent has the right to expect the assistance of public servants when needed. You should also know that prior to a Congressman or Senator getting involved it is mandatory that any fees that are to be charged by a for profit entity must be waived, which I do gladly when I ask for their assistance. In other words when I suggest to a borrower that we contact their local politicians I am eliminating my fees.

    “Sometimes, people don’t qualify for a loan mod and need to sell their home.”

    **Not the folks we were successful in helping that were turned away by the HUD approved counselors. The truth is that the HUD approved counselors are overburdened underfunded and need to dispense with their caseload as quickly as possible. Unfortunately sometimes that means not trying as hard as they should to help. In many cases they simply explain to the homeowner what THEY need to do, pat them on the back and wish them luck. Add to that the fact that much of the funding of these groups comes directly from the lenders and their motivations may be less than what a homeowner actually needs.

    I hearken back to Marypat from Oklahoma who tried the HUD counselor route and was turned away. I was able to help her (no fee) and she and her husband are still in their home today with affordable payments.

    I am not saying that HUD approved counselors haven’t helped many people, but I know in many cases people are being turned away just to reduce caseload.**

    “Loan mod re-default rates are still quite high which begs the question as to who is being helped more with these loan mods….the consumer or the loan mod salesmen?”

    **In the case in California the lender originally offered the homeowner a trial payment period with rates down around 5%. At the end of the trial period the lender First Franklin / Home Loan Services flipped the script and did some fuzzy math to raise the payments and the rate to 8.875%.
    In this case the chances of re-default would be drastically increased. Re-defaults are a direct result of servicers and lenders who want to maximize their returns and squeeze every last dollar out of borrowers.

    As long as that is their goal the rate of re-defaults will be high. I have tracked hundreds of my own clients who were granted assistance that actually helped and they are making their payments, thankful for the help they received, rebuilding their credit and financial health.

    The rate of re-defaults on borrowers who have been offered assistance that brings their payments down to a DTI between 31% and 38% is very low.

    The government is touting the success of the HAMP program which lowers the housing payment to 31% of the borrowers’ gross income. Please provide a source of credible information that debunks the government statistics and shows that borrowers who get assistance at this level are re-defaulting. **

  339. Hi Dan,

    That’s interesting that the attorney would recommend the political route. I have had attorneys recommend using the media in cases like this but have not heard of this. Thanks for the education.

    “I have tracked hundreds of my own clients who were granted assistance that actually helped and they are making their payments, thankful for the help they received, rebuilding their credit and financial health”

    This is amazing. You should really consider putting together some sort of report. I know you also know some independent third party loan mod people. Maybe you could pool your data and publish the statistics.

    Especially if you get back in touch with them at regular intervals: 30, 60, 90 days after the loan mod…six months, one year, etc.

    Here are three stories regarding loan mod re-defaults:

  340. I definitely agree. A ban on upfront fees would certainly cure many of the problems with loan mod scams.

    I think this should apply to EVERYONE doing loan mods including Attorneys. Working on a contingency is a great motivator for making sure the job gets done.

    Unfortunately as you know there are already states where upfront fees are illegal and there are loan mod companies collecting upfront fees anyway.

    I think the legislation should also include a national registry where borrowers could go to see if the comapny is registered and if there are any complaints.

    • So, you are pretty much saying that an attorney should work for free for a few months, and pay for a Forensic Mortgage Loan Audit from his own pocket, along with the mailing and other costs… and if the lender is willing to approve a modification than your attorney should get paid…? If you were attorney thats what you would accept and do? I thought so. (I still agree that you should pay later, in order to avoid scams)

      Also, before checking out the company, check out your lender… see what kind of programs your lender is offering, or if there are any programs available at all! Not all the banks are part of this program.

      You know, I spoke to a Citi Bank’s rep the other day, and you would be suprised what he said!
      He called it a “Blind Modification”. The rep is sent to a room where they keep stacks of aplications, all around; he is put a blind on his eyes, rotated, and let to pick a stack of files. Those applications that were selected automaticaly get approved! Ha haha what a way to approve a modification.
      He also said that when his bank approves a modification they offer a reduction in monthly payment of about 50-100 bucks; however, when the aplication is submitted by a loan mod company, the reduction is about 30-40% of the current payment.

      Money is definitely worth the investment. Problem is finding the right company to do this for you.
      Forget about finding a company that doesn’t charge upfront, there’s none. Instead, you should look for a company that offers 100% money back if not successful.
      Now this should be passed as a law! If a company is not successful, you should be fully refunded your investment 🙂

  341. Great article and I read it just in time. I am working with a Loan Modification Specialist. He called today and said I am approved. BUT!!!! I will have to pay upfront $2885.00 or provide him 2 checks one in the amount of $1445 for this month and $1440 for next month. I had asked this guy at the beginning if there was a few to pay and he said no……Now he is asking for a fee..Loan Solutions out of Florida is the company. So thank you….Now I know what I need to do!!

  342. I work for a loan mod company, and yes, we do charge upfront. There is a split payment option if a client is not in a position to make the payment in full. Same thing, its “upfront”…
    However, we do give 100% money back if we are not successful with providing a client with a good modification.

    Although I am in the business that everyboy is complaining about, we have done some great work so far! Saved ppl’s homes when they owed over 30K in late payments, lowered their monthly payments and principle balance ( btw guys, only Wachovia does principle balance reduction, so do not fall for it when a company you are working with promises you this… unless you are with this lender of course, than it possible)

    Lastly, I agree with you 100%!!! There should be no upfront fees. I hate even charging the fee! If I was modifyng these loans myself, I would just charge for the Forensic Mortgage Loan Audit, thats it. That is the only thing in the whole processing part that costs money (about $1000)

    For all of you who are curious how much comission we make at this end, I will tell you! I make $350, and we charge $2,900. Haha smebody posted that $1500 goes to attorney and $2000 to a LO… thats a BS!!!

    Anyway, the fact is that we have modfied more loans than what banks have approved to clients directely so far. BofA approved only 4% of all applications submitted, 91% came from Loan Mod Companies… impressive! I know there are lots of fraudulent companies, but they are everywhere, in any field, even banks are fraudulent!

    My point is that neither side is right. If you really have to pay for this upfront, than do your research. Make sure that the company your are dealing with is a legitimate company, and that there is money back guarantee. Thats the only way to do it… If the company wants to keep more than $500 if unsuccessful, thats a SCAM!!!!!
    Good luck to all 🙂

  343. Hi Jovana,

    My, my where to begin…

    1st of all YES I think everyone regardless of license or lobbying efforts should be on the same playing field. So in answer to your question CONTINGENCY means CONTINGENCY for everyone.

    I do however believe that the borrower should bear the cost of some of the work done. I agree that paying for a forensic audit is worthwhile and can produce results. I don’t believe the attorney or anyone else involved should bear the burden of this cost. In this instance the borrower is paying for a service that although I think is neccessary and complimentary in nature is independent of the modification process.

    Dan Harris

  344. Now for some of the other assertions you make:

    Regardless of what the “Citi Representative” told you I find it inconceivable that Hala Farid would permit a system where they play “pin the tail on the loan mod” with peoples homes & lives. She came from an extensive non-profit background and has always come from the angle of an assistance practitioner. She truly has the interest of both sides at heart and wants to help those who need it. My experience with her office has shown a true fairness in the process of searching for a way to help distressed borrowers.

    The sheer notion that this “blind awarding of mods” is going on would cause a scandal of epic proportions and bring the house down on their heads.

    Dan Harris

  345. No one should pay upfront loan modification fees to anyone. There is absolutely no guarantee that a lender will grant a loan mod, and as such you are gambling when you pay upfront for a loan modification.

    This statement is very simplistic:
    “Also, before checking out the company, check out your lender… see what kind of programs your lender is offering, or if there are any programs available at all! Not all the banks are part of this program.”

    The fact is that most lenders are also servicers, Citi services some Chase loans, Wells Fargo services some Aurora loans, and so on.

    This is where the difficulty for the average homeowner begins. Without knowing who your investor is you are fighting with a blindfold on. It doesn’t matter who the servicer is if your investor has decided not to modify loans.

    Dan Harris

    • Reading my post this evening I realized that a large portion was cut out?

      Many servicers are hiding behind “the investor” to deny modifications. Indymac has a form letter that goes out to borrowers to tell them that their investor doesn’t allow for modification.

      When a request is made for the identity of the investor Indymac has a form letter that tells the borrower that their loanis not owned by a single investor, rather it is pooled and as such identity of the investor is complicated.

      What nonsense! They just want to baffle their borrowers with crap.

      They won’t offer the identity of the investor without a knowledgeable request. It is important to request the name of the Trustee and The Pass Through Certificate Number. With this information you can find the SEC filing and start to identify the investors in your “pool”. Contacting these “investors” can bear fruit I have experienced it 1st hand.

      Imagine some pension fund manager getting a letter asking why he is invested in a mortgage pool that is forcing families into the street with a cc to their local news outlets.

      Involvement of The American Securitization Forum can help rebut he claims by servicers that their pooling and servicing agreements don’t allow for modification.

      A good attorney or loan mod practitioner will know how to navigate this chain with relative ease. If the person / cpmpany you are speaking to doesn’t understand this end of the business cross your fingers and hope you are in a GSE backed loan,or a portfolio loan where the investor can be easily identified.

      Sorry but I have never seen a Free HUD counselor offer to dig in this deep, they don’t have the time.

      I have had many servicers claim that the “investor” denied the mod only to find out that they are in fact the investor. Escalation to the executive offices at this juncture usually yields results.

      This is what real loan mod practitioners do that sets them apart from the crowds, the real work in the trenches, really working to offer the best representation available. An absolute commitment to the client that they will go above and beyond what most others will do.

      I don’t run into these people often.

      Have you?

  346. Is some legislation hurting borrowers?

    Here’s an example of well meaning legislation that hurts borrowers:

    The State of Connecticut just implemented a rule that requires loan mod practioners to post a $40,000.00 bond and limits their fee to $500 to be collected after the mod is achieved.

    That’s what happens when public officials who have never started or run a business set out to try to do something good.

    The average loan modification today takes 4 to 6 months to process that’s 17 to 26 weeks.

    Let’s use 20 weeks as an average. If your mod company is not following up on your file twice a week it will take longer. Let’s assign 2 hours per week of follow up.

    It takes approx. 4 hours to set up a file and submit it to the lender. Let’s assume they acknowledge receipt of this file on the 1st try (this is fantasy; normally it takes 2 or 3 submissions to get acknowledgement – but play along).

    As the file “ages” the lender will require update financials let’s assume 2 updates during the 20 week process taking a total of 3 hours.

    So we have 4 hours to process, 40 hours of follow up, and 3 hours of updating. that is a conservative estimate of 47 hours to process a modification to completion. ( we haven’t counted the time speaking with the client, data entry, updating contact logs etc along the way).

    But using the 47 hours with a decent employee in Connecticut wages should be at least $10 per hour, but I think more. With FICA and other taxes this employee would be costing at least $15 per hour.

    47 hours at $15 = $705

    How can anyone offer assistance to a borrower that is effective when their fee is limited to $500?

    They can’t – borrowers in Connecticut are now left to do business with loan mod practitioners who will now flout the law and continue to charge what they want, or they will be forced into HUD approved counselors who are overburdened under funded and take no for an answer very quickly.

    There is a caveat; the ruling provides a carve out that exempts attorneys, whether or not they have experience in the field.

    I had a client in Connecticut about a year ago that had an attorney (the same attorney who closed her mortgage) represent her in a foreclosure action. Part of that action in Connecticut requires a mandatory settlement conference. At the settlement conference the attorney for Countrywide reviewed the borrowers financials and determined that the lender coudn’t offer any assistance and the ruling from the court was that as a result the foreclosure case could move forward. (the exact result that Countrywide wanted). Why the court allows the attorney for the lender to determine eligibilty with their client “the plaintiff” is beyond me.

    With our assistance the borrower did get a loan modification from Countrywide that enabled them to keep their home.

    Today I would be forced to turn that client away, they would quite simply lose their home….

    Just some food for thought…

  347. Hi Dan,
    No editing was done by me today; I’ve been at the WA State Realtor convention these past two days.

    “Sorry but I have never seen a Free HUD counselor offer to dig in this deep, they don’t have the time.”

    I’m afraid you are right, Dan.

    Question for you. At the state Realtor convention yesterday, one of the attorney/speakers said that negotiating the modification of a legal contract between two parties, for a fee, would be a definition of the practice of law.

    What’s going on in your state regarding regulating loan modification firms and what they can/cannot do without it being considered as practicing law?


  348. This is a nice enhancement on the prior DRE rules. I think providers should be made to perform prior to collecting fees for modification.

    Unfortunately this may have the unintended consequence of pushing some good providers out of the business.

    Depending on how one reads the law it appears that attorneys have now been put in the same boat. They will now be representing clients seeking a loan modification on a contingency basis.

    Will it be long before the “carve out

  349. I am glad CA passed into law regulating what was mortgage fraud feeding on the distressed. How much more consciousness does an entity have to make money on those who are already suffering?

    Your article is not only educational but it helps us as realtors communicate the bottom line realities and caution for our clients. The distressed are already experiencing hardships and they end up contacting their realtors for ways to navigate the system in helping them make a deicision to retain their home via the loan modifications or just sell it at either a loss (short sale). We are the point person and it is in our best interest that we provide or refer our clients to the proper steps and journey in reflective, thoughtful and ethical ways. I faced this situation with a client who was thinking of refinancing his loan. He would start calling or responding to these letters or phone calls about the mortgage service on I have a client who asked me about these letters and phone calls he received. He was ready to sign the dotted line and pay the company in CA a sum of $3500 – out of desperation and haste. I asked him to please hold back and reconsider while I do some research. He did hold off and now has worked with his lender to refinance without cost.

    It is these times that your blog affirms our ethical ways of working and advising our clients.

  350. A tiny bit off the topic, but an important piece of loan modifcation information.

    Will the Dell you buy for Christmas help fund your neighbors foreclosure?

    “Dude You’re Getting A Dell” could have a whole new meaning. It could mean another process server has dropped the foreclosure bombshell on another American Family suffering from the subprime mortgage crisis and a lousy economy.

    That’s right!!!

    Michael Dell has joined forces with a few of the 21st Centuries newest Robber Barrons.
    MSD Capital, L.P. is part of the partnership formed to purchase Indymac from the FDIC.
    The new company is IMD Management Holdings and they are running One West Bank
    which is among the worst performing lenders/servicers when it comes to offering
    distressed borrowers assistance.

    Calls to Dunes Capital and IMB Management Holdings are ignored as the new corporate
    philosophy of throw the deadbeats into the streets and tell them to go scratch has permeated the entire company.

    Managers who under the supervision of Sheila Baird and the FDIC use to help borrowers with a true empathy now dish out the lies of their corporate masters. Customer service representatives now tow the company line and Deny, Deny, Deny is the new corporate motto.

    In lawsuits, complaints and interviews, borrowers contend that Indymac (Now One West Bank) denied loan modifications because borrowers failed to submit unimportant paperwork; because Indymac phone log notes did not detail discussions correctly or at all; because paperwork sent had mysteriously disappeared and as such was deemed “never submitted”, borrowers have been told routinely that “their investor doesn’t allow modifications”, borrowers have had “phony modifications” sent that were actually just a sleazy attempt at collecting arrears never intended to be really honored by the company and much, much more.

    As I follow the exploits of borrowers who are unfortunate enough to have one of the Indymac Alt-A loans that were able to close within days of application because of lax underwriting guidelines and the knowledge that they could sell the “toxic paper” off their books before anyone would know the debt couldn’t be repaid, I am reminded of the Francis Ford Coppola Movie “The Rainmaker”.

    Todays One West Bank follows the lead of the movies Great Benefit Insurance Company whose first, second and third courses of action are to deny a claim, hoping the people will give up or die. In one scene an insurance company employee reads a letter written to an insured “Dear Mrs. Black, On seven prior occasions this company has denied your claims in writing. We now deny it for the eighth and final time. You must be stupid, stupid, stupid.”

    I have seen letters to Indymac borrowers along the same lines, their newest tactic is a letter that explains how complicated it is for the “stupid, stupid, stupid borrower” to understand who the “investor” in their loan is.

    These tactics are apparently very good for mortgage company profits.

    How a man like Michael Dell whose philanthropic efforts are to be commended could be dragged into investing with the kind of creatures who would treat people this way is beyond me.

    But it certainly begs the question, does the phrase “Dude You’re Getting A Dell” now mean the same thing as “You’ve Been Served A Foreclosure Notice”?

    Does Michael Dell actually subscribe to the philosophy of the Robber Barrons who deny, deny, deny in the hopes that suffering families will give up or die?

  351. New FTC Rule would ban all up front loan mod fees!

    I predicted this would happen back in 2008 when all the predatory subprime LOs started opening up loan mod firms. #totalfail.

    Reboot the system and start over: Fee only payable after the homeowner has accepted the lender’s modification offer.

    They’ll cry like babies: “Waaa, we do all that work up front.”

    To that I counter: LOs, you do all kinds of work up front on a traditional loan and only get paid when it closes.

  352. Does the proposed rule prevent attorneys from collecting up front as well?

    And what constitutes acceptance? Temporary mods (of which there are many), or permanent mods (of which there are very few.

    I’ve stayed out of this field, so far. To much uncertainty, too little benefit for all parties.

    Yes, there will be tears.

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  354. To that I counter: LOs, you do all kinds of work up front on a traditional loan and only get paid when it closes.

    Jillayne, this is true, loan officers do get paid at the end of the loan when it closes. The difference here is, they (the buyer/homeowner) are not left to pay us. We depend on a title company to dispurse the funds. There is no way here to guarantee that the homeowner will pay once they get the loan modification. We used to do it that way and 62% refused to pay. Not happy that we saved their homes from foreclosure, lowered their interest rates and payments. Some were pissed because their friend got a 2.000 and they didn’t they got a 2.875. Most of them told us that their credit was already bad so they didn’t care if we got a judgment against them….So, laws and or guidelinnes need to be put in place to protect all parties involved. We got our contracts reviewed and approved by the AG’s office. So we are compliant!

  355. Hi Jillayan. I will admit I’ve read nothing beyond my last comment. No disrespect to you.

    Saw an atorney, come up with $$$$$ first, several times. The one that was hired, eazy terms. Let’s just say she is yesterdays news. It is my husband filing, and I found this excellent web sight. I am going fot it. IF it works, I’ll let you know.

    With High Respect,

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  359. How are homeowners going to deal with balloon payments after the loan modifications still going on. I just found out I should be paying down the principle balance since I received this modification which was 4 1/2 yrs. ago. My daughters are going to try to pay an extra $300 a ek towards the principle and that should give us 6yrs. ahead of the balloon payment. My question is should we try this and should I add them to the mortgage now so they have a better chance of getting a refi. I’m 63 and I’ll be 83 if still alive when that balloon becomes do. If we start now we’ll have six yrs. before it becomes due in 2037. We’re on Long Island NY. in a good neighborhood. Loan mod. was 2% fixed balloon. $1610.14 includes taxes and insurance. What do you think? It’s also Ocwen and they stretched out the time to get a modification till I hired a lawyer who hired a guy that did mods. The guy the lawyer hired took off with everyone’s payments so the lawyer who didn’t have experience finished all the mods. When I asked what’s in the balloon payment he said I don’t know. If you don’t sign it you lose the house. My husband died in 2013 and never knew I saved the house. Though there are no difficulties now and my credit scores are 742 742 and 825. At my age alone no one is going to give me a refi and I think at 2% it’s good. I’m worried about 20 yrs. from now and would like some advice as I never want to shake every day and night worrying about where I’m going to live. I need advice. Anyone? Thank you in advance.

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