It’s about time. I’ve been saying this is going to turn into a national crisis for a year now. From the AP
The head of the Federal Trade Commission said Thursday the agency is considering banning upfront payments to companies that advertise help for borrowers who are in trouble on their home loans.
Government officials say scammers seeking to take advantage of borrowers in danger of default often charge upfront fees of $1,000 to $3,000 for help with loan modifications that rarely, if ever, pay off.
“If you are concerned about keeping your home, avoid any company that asks you for a large fee in advance. That is a real red flag,” said Jon Leibowitz, chairman of the FTC. Such upfront fees are already prohibited in 20 states.
Let’s ban all up front fees unless the service provider is a member of a State Bar Association. Attorney-backed loan mod firms charging upfront fees are not a good option either. That set up is typically a subprime salesperson boiler room. The California investigation found that with attorney-backed loan mod firms, never once did an actual attorney touch the file. Read more about the loan mod mess in California here.
Third party loan mod salesmen should only be allowed to collect a fee once the loan modification is not only performed but also after the homeowner has made a specific number of on time payments. This will rid the system of the Devil’s Rejects subprime LOs who act like they just walked off the set of a Rob Zombie movie and can only smell money. Let’s leave the real work to the people who can help homeowners figure out if they can actually afford to stay in the home or if they are better off selling.
It seems there will always be a certain percentage of people who will believe anything and an equal percentage of people willing to prey on them. But with a person’s home, the stakes are higher than an acai berry total body cleanse.
I predict that we will have the usual suspects crying that the FTCs actions will only raise the cost of hiring a third party loan mod company. I call BS on that argument because homeowners have always been able to receive a loan mod for free by working directly with their lender, or receiving free help from a non-profit housing counseling agency or by seeking out free legal aid from their state’s Bar Association.
No doubt… It really is about time to clean up the loan mod mess.
Great more laws that send the consumer into the jaws of the attorneys. The reason why there are loan mod companies is because the banks are inept at dealing with the issue. I used to work for one of the largest banks in the country in loss mitigation and I have been a mortgage originator for the last 8 years.
There are bad actors in almost every profession and some how in the Real Estate industry there is this idea that everyone is a bad actor…NOT TRUE. The problem is that the mod industry is barely regulated, and that most of the laws come from pandering politicians who can barely understand the issue. A legal mechanism needs to be put in place that is simple and governs the whole system so the consumer is protected but also so the company doing the modification is protected.
The reason many people like myself don’t get into the mod industry is because although we can advise and do 95% of the work to help someone the ultimate decision is made by the lender and therefore is out of our control. Without being able to charge an upfront free there is too much risk of doing too much free work. Everything has a cost in this world, although lately that concept seems to be lost it is true.
If you remove the option of an outside loan mod company because they cannot make a reasonable profit for their work then the only person who suffers is the consumer who needs the modification and you are just throwing them to the wolves ie the banks and attorneys, who like everyone else in this world don’t work for free and act in their own best profitable interest.
Great more laws that send the consumer into the jaws of the attorneys. The reason why there are loan mod companies is because the banks are inept at dealing with the issue. I used to work for one of the largest banks in the country in loss mitigation and I have been a mortgage originator for the last 8 years.
There are bad actors in almost every profession and some how in the Real Estate industry there is this idea that everyone is a bad actor…NOT TRUE. The problem is that the mod industry is barely regulated, and that most of the laws come from pandering politicians who can barely understand the issue. A legal mechanism needs to be put in place that is simple and governs the whole system so the consumer is protected but also so the company doing the modification is protected.
The reason many people like myself don’t get into the mod industry is because although we can advise and do 95% of the work to help someone the ultimate decision is made by the lender and therefore is out of our control. Without being able to charge an upfront free there is too much risk of doing too much free work. Everything has a cost in this world, although lately that concept seems to be lost it is true.
If you remove the option of an outside loan mod company because they cannot make a reasonable profit for their work then the only person who suffers is the consumer who needs the modification and you are just throwing them to the wolves ie the banks and attorneys, who like everyone else in this world don’t work for free and act in their own best profitable interest.
The down side in advocating the virtual elimination of loan modification companies (if they can’t collect fees up front they probably can’t be in business) is that you become a shill for the predatory lenders.
The lenders are not, and have not been, upfront with their borrowers. They make it very difficult to get a loan modification and they continue to take advantage of borrowers.
LM companies level the playing field by giving the borrower an advocate. Rarely will the banks actually do principal reductions so they are largely playing the “extend and pretend” game. Loan modifications often lead to foreclosures, but they do give borrowers some breathing room. The Lenders want to intimidate borrowers so that few if any ask for modifications so the banks can just defer the underwater homeowners ultimate rescue to the future but meanwhile the banks can pretend that these loans should stay on their balance sheet at their nominal value. The banks by being charged virtually nothing for their money due to Fed manipulation of depositors savings rates can be making very good current profits and it is hoped that these profits will cover the eventual loses of banks on mortgages.
Some states such as California and Nevada have either thru new laws or active enforcement of existing laws substantially reduced the abuses that have admittedly existed.
Jon Leibowitz, head of the FTC, has lived his post lawyer trained life as a lobbyist and Senate staffer. What body has been more controlled by the banks?
http://www.ftc.gov/commissioners/leibowitz/index.shtml
The down side in advocating the virtual elimination of loan modification companies (if they can’t collect fees up front they probably can’t be in business) is that you become a shill for the predatory lenders.
The lenders are not, and have not been, upfront with their borrowers. They make it very difficult to get a loan modification and they continue to take advantage of borrowers.
LM companies level the playing field by giving the borrower an advocate. Rarely will the banks actually do principal reductions so they are largely playing the “extend and pretend” game. Loan modifications often lead to foreclosures, but they do give borrowers some breathing room. The Lenders want to intimidate borrowers so that few if any ask for modifications so the banks can just defer the underwater homeowners ultimate rescue to the future but meanwhile the banks can pretend that these loans should stay on their balance sheet at their nominal value. The banks by being charged virtually nothing for their money due to Fed manipulation of depositors savings rates can be making very good current profits and it is hoped that these profits will cover the eventual loses of banks on mortgages.
Some states such as California and Nevada have either thru new laws or active enforcement of existing laws substantially reduced the abuses that have admittedly existed.
Jon Leibowitz, head of the FTC, has lived his post lawyer trained life as a lobbyist and Senate staffer. What body has been more controlled by the banks?
http://www.ftc.gov/commissioners/leibowitz/index.shtml
Hi Richard,
Why shouldn’t it be very difficult to get a loan mod?
If loan mods were easy squeezy to get, everyone would ask for one when they got a hangnail.
If a homeowner cannot qualify to repay the loan, then shouldn’t he/she consider selling the home, even selling it short, instead of playing pretend and extend with the bank…pretending that they really can make that new modified payment when it’s obvious that they’ll be back in default again?
Dr/Pr. Robert Shiller has an excellent idea in his book called The Subprime Solution where we would create a new mortgage product called the continuous workout mortgage that would modify based on income levels of people in that region who hold that same job. If wages fell, that homeowner’s mortgage payment would modify downward.
Granted that I believe when a product like this does come around, it will be offered at a higher rate than a traditional 30 year fixed. It’s like buying an extra insurance policy along with your mortgage.
I agree with you regarding your analysis of the banks but that’s sidestepping the issue at hand which is the predatory behavior of loan mod firms charging upfront fees, not delivering as promised, and then leaving town.
Hi Richard,
Why shouldn’t it be very difficult to get a loan mod?
If loan mods were easy squeezy to get, everyone would ask for one when they got a hangnail.
If a homeowner cannot qualify to repay the loan, then shouldn’t he/she consider selling the home, even selling it short, instead of playing pretend and extend with the bank…pretending that they really can make that new modified payment when it’s obvious that they’ll be back in default again?
Dr/Pr. Robert Shiller has an excellent idea in his book called The Subprime Solution where we would create a new mortgage product called the continuous workout mortgage that would modify based on income levels of people in that region who hold that same job. If wages fell, that homeowner’s mortgage payment would modify downward.
Granted that I believe when a product like this does come around, it will be offered at a higher rate than a traditional 30 year fixed. It’s like buying an extra insurance policy along with your mortgage.
I agree with you regarding your analysis of the banks but that’s sidestepping the issue at hand which is the predatory behavior of loan mod firms charging upfront fees, not delivering as promised, and then leaving town.
Hi Steve,
Attorneys are duty bound to put their client’s interests ahead of their own interests. Their relationship is the highest legal relationship one person can have with another person in the U.S.
Some people are attorney-phobic or believe all attorneys are sharks. I am not one of them.
I definitely agree with you that when politicians make laws, the industry suffers. It’s way better when an industry becomes involved with regulating itself because the practitioners in that industry are the ones who know what needs to be done.
So….where is the mortgage brokerage industry in all this? It’s no secret that a large percentage of loan mod salesmen came from the subprime industry. Where are the consumer loan companies in this mess? Many of the consumer loan companies out there are offering loan mod services.
If the industry players don’t want to take part in clearing out their sociopaths, then the industry has no place to complain when government steps in to take down the inglourious basterds.
Attorneys are duty bound to put their client’s interests ahead of their own interests.
Thats funny, “Clients best interest”, as many or more Law Firms or Attorneys in the state of California have jumped on the band wagon providing modification services for homeowners as there are Sub Prime Loan Officers and yes all to often they join together and the truth is the Attorney never talks to the client or sees the file! “Attorney + Clients best interest…” Thats funny!
Hi Richard,
Thanks for stopping by. Now that time has passed and we have seen attorney generals in many states expose the exact scenarios that you shared, i completely agree with you. The loan mod scenarios where it’s an “attorney-backed” firm have fared poorly. The same thing is now going on in the short sale “third party negotiator” world where “attorney-backed” firms are not supervising what’s going on leading to bad consequences all around. Read more here: http://raincityguide.com/2011/09/30/its-time-for-a-ban-on-all-third-party-short-sale-negotiators/
Hi Steve,
Attorneys are duty bound to put their client’s interests ahead of their own interests. Their relationship is the highest legal relationship one person can have with another person in the U.S.
Some people are attorney-phobic or believe all attorneys are sharks. I am not one of them.
I definitely agree with you that when politicians make laws, the industry suffers. It’s way better when an industry becomes involved with regulating itself because the practitioners in that industry are the ones who know what needs to be done.
So….where is the mortgage brokerage industry in all this? It’s no secret that a large percentage of loan mod salesmen came from the subprime industry. Where are the consumer loan companies in this mess? Many of the consumer loan companies out there are offering loan mod services.
If the industry players don’t want to take part in clearing out their sociopaths, then the industry has no place to complain when government steps in to take down the inglourious basterds.
Steve, please. You crack me up here:
“The reason many people like myself don’t get into the mod industry is because although we can advise and do 95% of the work to help someone the ultimate decision is made by the lender and therefore is out of our control.”
Hello? Isn’t this what retail loan originators do day in and day out?
Then, you get paid when the loan closes.
So why the heck can’t loan mod salesmen do the same work and get paid…..after the loan mod has successfully been paid as agreed for 6 months?
Why? I’ll tell you why. Because loan mod salesmen only care about the money today and not what’s in the consumer’s best interest. Because 50 percent of loan mods end up back in default and the salesmen would rather just sell than see to it that a client has been well served.
Consumers are better off dealing directly with their lender, a non-profit (with the exclusion of Acorn), free legal aid, or if they’ve got money to pay somebody, with local, direct legal counsel. Attorneys are use to waiting months to get paid. Somehow they don’t seem to have a problem performing.
Steve, please. You crack me up here:
“The reason many people like myself don’t get into the mod industry is because although we can advise and do 95% of the work to help someone the ultimate decision is made by the lender and therefore is out of our control.”
Hello? Isn’t this what retail loan originators do day in and day out?
Then, you get paid when the loan closes.
So why the heck can’t loan mod salesmen do the same work and get paid…..after the loan mod has successfully been paid as agreed for 6 months?
Why? I’ll tell you why. Because loan mod salesmen only care about the money today and not what’s in the consumer’s best interest. Because 50 percent of loan mods end up back in default and the salesmen would rather just sell than see to it that a client has been well served.
Consumers are better off dealing directly with their lender, a non-profit (with the exclusion of Acorn), free legal aid, or if they’ve got money to pay somebody, with local, direct legal counsel. Attorneys are use to waiting months to get paid. Somehow they don’t seem to have a problem performing.
I agree with you Jill. I am sick of hearing the stories and complaints about the loan mod vultures. We have a fraud prevention group here in Portland and our state agency (Department of Consumer Finance) at our meeting this week said complaints about loan modification scams and short sale consultants are way up.
Oregon has just past a law that requires the lender to have a meeting with people seeking a loan modification BEFORE they can proceed with a foreclosure. The distressed homeowner can have any advocate they like attend the meeting.
Maybe this will bring a few more of the lenders to the table in good faith.
Actually loan Modification programs are a good thing and anyone here wants to get paid for their work. Doing a loan modification these days is almost better than trying to refinance someone. About 85-90% of the time I am able to help a client.
Jill,
I am an attorney in California, and completely agree with your take. The exemption to attorneys in California has been abused by several firms where the attorney rubber stamps the actions in exchange for %. Several of those businesses have now come under the scrutiny of both the Calif AG as well as the FTC, including a case I am involved with.
Attorneys, while exempt from collecting “advance fees/retainers”, are exempt only to the extent that their services are legal related – that is, services for which the license to practice law is required. If the services can be done by a non-attorney, the exemption does not apply.
The State Bar has also recently come down with a strong arm against law firms who are, in effect, providing predatory practices. The unfortunate aspect is that, once again, the government is “reacting” rather than preventing in the first place.
I enjoy your articles!
Abe G. Salen, Esq.
Salen Law
abe@salenlaw.com
http://www.salenlaw.com
Jill,
I am an attorney in California, and completely agree with your take. The exemption to attorneys in California has been abused by several firms where the attorney rubber stamps the actions in exchange for %. Several of those businesses have now come under the scrutiny of both the Calif AG as well as the FTC, including a case I am involved with.
Attorneys, while exempt from collecting “advance fees/retainers”, are exempt only to the extent that their services are legal related – that is, services for which the license to practice law is required. If the services can be done by a non-attorney, the exemption does not apply.
The State Bar has also recently come down with a strong arm against law firms who are, in effect, providing predatory practices. The unfortunate aspect is that, once again, the government is “reacting” rather than preventing in the first place.
I enjoy your articles!
Abe G. Salen, Esq.
Salen Law
abe@salenlaw.com
http://www.salenlaw.com
Jillayne- I continue to be amazed at the number of operators willing to take advantage of any bad situation. These con artists are experts at spotting any loophole in any program designed to help the public. We have to rely on experts such as you to blow the whistle. Keep up the good work! Jerry
A borrower meeting with their bank without professional guidance IS NOT something I would recommend. REMEMBER FOLKS, those guys OWN BOTH THE HOUSE AND THE NOTE. Lenders don’t want to take ANY financial losses. Understandable, but, they also really DON’T CARE ABOUT HARDSHIPS (EITHER MEDICAL, OR SEVERE CIRCUMSTANTIAL), and they certainly WON’T GIVE ANY GROUND, OR MODIFY NOTES WITHOUT THAT DECISION BEING BASED ON WHAT’S BEST FOR THEM!!
People actually think, and are being led to believe by both the government and the lending industry that a hardship will touch the banks “heart” and that they will understand – PFOOSHAW! It’s all about the money! As often as not, investors, NOT THE BANKS, make modification decisions!!
If you can’t already tell, I work in the Loan Mod Industry, however, the company I’m with is owned by an ex-Sr VP of Countrywide, who was in charge of their entire Loan Workout Division. We offer direct fulfillment negotiation only, and have a 98% success rate. I sell our services to Loan Mod companies. We’ve have already severed relationships with several companies for poor business practices, including one well-known attorney firm, and will continue to do so as the need arises!
My perspective comes from an intimate and PROFOUND understanding that an attorney is NOT NECESSARY in a loan modification negotiation. Many times they actually IMPEDE THE PROCESS! They may be able to “float fees,” but, for the most part, they are VERY INEFFECTUAL NEGOTIATORS in this setting.
The reason that our firm won’t wait for payment until the modification is granted is that the loan has already been funded by the borrower (which as you know is when the origination fees are released.) Modifications to that note requires negotiation; negotiation can take an undefinable length of time and effort. Sometimes a modification negotiation can even be accomplished favorably all the way to the investor, who can then turn it down because it’s their right to do so, WITHOUT RECOURSE!
Oh, and lest we forget, think about the liklihood of completing a modification and having the borrower “stiff you.” Are you saying that the fact they already are having financial problems SHOULD BE OVERLOOKED for purely professional reasons? GET REAL!
Lenders would love to be rid of us because we are very successful negotiators, which costs them money. Government officials have “lumped” all modification companies into a single bucket conveniently…and IT CAN’T BE BECAUSE IT’S ALL ABOUT THE MONEY…can it?
A borrower meeting with their bank without professional guidance IS NOT something I would recommend. REMEMBER FOLKS, those guys OWN BOTH THE HOUSE AND THE NOTE. Lenders don’t want to take ANY financial losses. Understandable, but, they also really DON’T CARE ABOUT HARDSHIPS (EITHER MEDICAL, OR SEVERE CIRCUMSTANTIAL), and they certainly WON’T GIVE ANY GROUND, OR MODIFY NOTES WITHOUT THAT DECISION BEING BASED ON WHAT’S BEST FOR THEM!!
People actually think, and are being led to believe by both the government and the lending industry that a hardship will touch the banks “heart” and that they will understand – PFOOSHAW! It’s all about the money! As often as not, investors, NOT THE BANKS, make modification decisions!!
If you can’t already tell, I work in the Loan Mod Industry, however, the company I’m with is owned by an ex-Sr VP of Countrywide, who was in charge of their entire Loan Workout Division. We offer direct fulfillment negotiation only, and have a 98% success rate. I sell our services to Loan Mod companies. We’ve have already severed relationships with several companies for poor business practices, including one well-known attorney firm, and will continue to do so as the need arises!
My perspective comes from an intimate and PROFOUND understanding that an attorney is NOT NECESSARY in a loan modification negotiation. Many times they actually IMPEDE THE PROCESS! They may be able to “float fees,” but, for the most part, they are VERY INEFFECTUAL NEGOTIATORS in this setting.
The reason that our firm won’t wait for payment until the modification is granted is that the loan has already been funded by the borrower (which as you know is when the origination fees are released.) Modifications to that note requires negotiation; negotiation can take an undefinable length of time and effort. Sometimes a modification negotiation can even be accomplished favorably all the way to the investor, who can then turn it down because it’s their right to do so, WITHOUT RECOURSE!
Oh, and lest we forget, think about the liklihood of completing a modification and having the borrower “stiff you.” Are you saying that the fact they already are having financial problems SHOULD BE OVERLOOKED for purely professional reasons? GET REAL!
Lenders would love to be rid of us because we are very successful negotiators, which costs them money. Government officials have “lumped” all modification companies into a single bucket conveniently…and IT CAN’T BE BECAUSE IT’S ALL ABOUT THE MONEY…can it?
Jillayne:
To your point:
L.A. mortgage brokers are accused of stealing nearly $1 million
“Three Southern California mortgage brokers have been arrested on suspicion of stealing nearly $1 million from borrowers seeking to adjust their home loans.
Michael McConville, 31, and co-workers Garrett Holdridge, 23, and Alan Ruiz, 28, are scheduled to be arraigned Monday in Los Angeles County Superior Court on charges of bilking more than 70 homeowners, said Scott Gerber, a spokesman for the California attorney general’s office.
Jillayne:
To your point:
L.A. mortgage brokers are accused of stealing nearly $1 million
“Three Southern California mortgage brokers have been arrested on suspicion of stealing nearly $1 million from borrowers seeking to adjust their home loans.
Michael McConville, 31, and co-workers Garrett Holdridge, 23, and Alan Ruiz, 28, are scheduled to be arraigned Monday in Los Angeles County Superior Court on charges of bilking more than 70 homeowners, said Scott Gerber, a spokesman for the California attorney general’s office.
Hi Nancy,
That’s an interesting law change. Come back in a few months and let us know if it slowed down the foreclosure numbers temporarily. It would also be interesting to know what kind of advocate people bring with them.
Hi Alan,
Thanks for stopping by RCG. How many of your loan mod homeowner clients do you track through the months to see if they end up redefaulting? It might be wise to start gathering these stats.
Jillayne said: ” Their relationship (lawyer to client) is the highest legal relationship one person can have with another person in the U.S.”
Actually I think the highest legal fiduciary relationship is spouse to spouse 🙂
Hi Abe,
Glad to hear that the Calif State Bar is cracking down on the law firms that are not helping homeowners. This is exactly why I prefer to recommend attorneys over salespeople with no industry ethical oversight.
Hi Jerry,
Part of the problem was the collapse of the subprime mortgage industry in late 07 extending through 08. At that time the mortgage industry had thousands of loan originators living a six figure lifestyle who saw their commissions cliff dive. Many heard about others making six figures per MONTH off of upfront loan mod fees and quickly shifted towards loan mods out of self-interest, knowing nothing about the process or really caring about anything other than managing a revenue stream.
Hi Steven,
I’d actually like to see your company gone, too. It’s not just the government that thinks loan mod firms are a complete and total rip off.
So you say you have a 98 percent success rate.
Why don’t you prove it? Hire an independent auditor to review every single file….AND ALSO follow up with the homeowner to see how many of those homeowners ended up re-defaulting, and publish your statistics for public view.
If this new law passes and your company can’t figure out how to screen clients and make a buck and collect your fee after the mod is finished and a trial repayment period is completed, then some other capitalist will figure it out and make it work.
Retail LOs wait many months (at times) before a loan closes and they get paid. It’s time for the loan mod salesmen to be treated the same.
This is true Jillayne, retail loan officers are often paid 1-3 months from taking an application and yes I would agree to the same in the mod industry, If we were allowed to collect up front and hold it in an escrow account, this way neither party would lose.
Hi Dr. Housing Bubble,
Thanks for stopping by RCG. California is frightening. I’ve personally busted one loan mod company out of Calif advertising on the radio here in the Seattle area. They weren’t licensed in our state and claimed that they had a piece of paper issue by the California Department of Real Estate that gave them the ability to sell loan mods in all 50 states. Everyone up the line believed this. The salesperson, the sales manager, the VP, the CEO.
http://raincityguide.com/2009/04/14/jba-financial-group-get-licensed-or-get-out-of-washington-state/
Hi Dr. Housing Bubble,
Thanks for stopping by RCG. California is frightening. I’ve personally busted one loan mod company out of Calif advertising on the radio here in the Seattle area. They weren’t licensed in our state and claimed that they had a piece of paper issue by the California Department of Real Estate that gave them the ability to sell loan mods in all 50 states. Everyone up the line believed this. The salesperson, the sales manager, the VP, the CEO.
http://raincityguide.com/2009/04/14/jba-financial-group-get-licensed-or-get-out-of-washington-state/
Hi Ardell,
LOL. Nice joke.
Jillayne,
The last two times I “heard-tell” of someone trying to get a loan mod, it was due to a divorce. The spouse that wanted to stay in the home tried to get a loan mod down to their one income level. Not sure why they thought that the lender would be willing. Both failed.
Jillayne –
I think it might be time to blow this Popsicle stand and audition as Tanta’s replacement. CR seems to link to every article you write, so you might as well.
Impossible to fill those shoes, but CR needs someone to sweeten-up his solid, but awfully dry content and analysis. You might be just about right.
Of course, you are cultivating a new career these days, aren’t you…
Jillayne –
I think it might be time to blow this Popsicle stand and audition as Tanta’s replacement. CR seems to link to every article you write, so you might as well.
Impossible to fill those shoes, but CR needs someone to sweeten-up his solid, but awfully dry content and analysis. You might be just about right.
Of course, you are cultivating a new career these days, aren’t you…
Jillayne,
Show me one, ONE, <<>> doctor, lawyer, indian chief, or even you, who is 100% successful 100% of the time!
We keep the statistics that you’re questioning to monitor our own effectiveness, not to impress snipes like you. I’m surprised you didn’t ask about the two percent of the time we aren’t successful! Too bad that you can’t come over and meet with us face to face…would you be in for an eye-opener!
I’ve yet to understand why waiting to be paid until after the trial period would either increase the stature of our professional accomplishments, or make them any more, or less valuable. Basic contract law includes the exchange of valuable consideration AT THE TIME A DEAL IS MADE…duh?! SHOW ME THE MONEY!
Think about this. Using this same, well-intended logic, why don’t you build your own house? How to books and opinions abound on this subject! Besides, there are a lot of contractors out there who are scammers and they charge up-front fees!
Doing your due diligence and utilizing available resources to become more well-informed MAKES SENSE. However, if you watch, you’ll see that the most well educated and knowledgeable people in society, after considering all of the alternatives, almost always hire professionals to help them! What does that tell’ya?
Steve, at this stage of the game loan mod salesmen are not professionals. They are just…salesmen.
I wrote a post about the definition of a professional here:
http://mortgagefiduciaries.com/2008/06/are-mortgage-loan-originators-professionals/
If your stats are so impressive, why don’t you go ahead and post them on your own blog or website and come back here and link to them so we can take a look.
In terms of the contract, I am definitely not an attorney but I suppose we could define the word “deal” to mean after 6 consecutive on time payments are made.
That’s right, Jillayne there are plenty of reputable Loan Modsters out there that would never engage in fraudulent activities. Certainly not Steve’s company, Loan Restructuring Solutions!
Oh Nuts.
Hi Cam,
You mean my side career as the lead singer for an all-girl Green Day cover band? Who told you?
So Cam, what do you think? $5 we never hear from Steve again or $5 that he will jump back on here and vehemently defend his company?
Hello Cam,
Thanks for your “research” and for attempting to “throw us under the bus”, albeit uninvited.
So that you understand this story more completely, we do fulfillment services for companies who sell loan modification services, a fact you must have missed before making your post. A company we did fulfillment for in Georgia made advertising claims that were not legal. The Georgia AG’s Office threw out it’s net over the company and by our contractual relationship for these services for them, gobbled us up too. You know…guilty until proven innocent!!
If you have a clue, you’ll understand your own words (those of the AG), “engaged in mortgage broker/lending activities without a license, or under an applicable exemption. Pursuant to Georgia law, it is prohibited for any person knowlingly to purchase, sell, or transfer a mortgage loan or loan application from, or to an entity that is not licensed…..”
THIS SHOULD BE VERY EASY TO UNDERSTAND, but I’ll explain it for any simpleton out there that may not get it.
Loan Modification fulfillment services are neither mortgage brokering, or lending activities and they certainly do not involve purchasing, selling, or transferring loans, or loan applications from anyone.
We have long since severed relationships with the company that engaged in illegal advertising. If a representative of the Georgia AG’s Office would like to contact us directly, we would be happy to discuss the issue with them at length.
Short of them contacting us (we’re not holding our breath!!!!), we are in the process of having this order removed and believe that we have a very high liklihood of accomplishing it.
Hello Cam,
Thanks for your “research” and for attempting to “throw us under the bus”, albeit uninvited.
So that you understand this story more completely, we do fulfillment services for companies who sell loan modification services, a fact you must have missed before making your post. A company we did fulfillment for in Georgia made advertising claims that were not legal. The Georgia AG’s Office threw out it’s net over the company and by our contractual relationship for these services for them, gobbled us up too. You know…guilty until proven innocent!!
If you have a clue, you’ll understand your own words (those of the AG), “engaged in mortgage broker/lending activities without a license, or under an applicable exemption. Pursuant to Georgia law, it is prohibited for any person knowlingly to purchase, sell, or transfer a mortgage loan or loan application from, or to an entity that is not licensed…..”
THIS SHOULD BE VERY EASY TO UNDERSTAND, but I’ll explain it for any simpleton out there that may not get it.
Loan Modification fulfillment services are neither mortgage brokering, or lending activities and they certainly do not involve purchasing, selling, or transferring loans, or loan applications from anyone.
We have long since severed relationships with the company that engaged in illegal advertising. If a representative of the Georgia AG’s Office would like to contact us directly, we would be happy to discuss the issue with them at length.
Short of them contacting us (we’re not holding our breath!!!!), we are in the process of having this order removed and believe that we have a very high liklihood of accomplishing it.
Cam I owe you $5. I bet that Steve wouldn’t be back.
I’m leaning toward the latter. These times are undeterred, even when committing crimes.
Five bucks is only 2/3rds of a beer at the ballgame tonight. With the Yanks in town, I’m guessing I’m going to need it!
All that education just to do covers!?! I pegged you as either bluegrass or Opera, not Green Day. Congrats!
I’m leaning toward the latter. These times are undeterred, even when committing crimes.
Five bucks is only 2/3rds of a beer at the ballgame tonight. With the Yanks in town, I’m guessing I’m going to need it!
All that education just to do covers!?! I pegged you as either bluegrass or Opera, not Green Day. Congrats!
So Steve,
What exactly do your employees “do” when you say that your firm engages in Loan Modification Fulfillment Services?
I’m kind of a visual person. Maybe you could paint a picture for me. When I close my eyes and try to visualize your office, your employees would be doing……..what?
Thanks for coming back and giving us more data.
Ding ding ding!!
Cam the closest I come to bluegrass is the soundtrack from O Brother Where Art Though and the closest I want to come to opera is Adam Sandler doing Opera Man. But I think you were paying me a compliment so, thank you! You totally won the bet.
Well gee Jillayne,
Modifications are negotiated…we are experts at negotiating with lenders…DID YOU NOT READ MY FIRST POST??
From anything I can tell this blog is not about becoming more knowledgeable about the industry, but about perpetrating the moderator’s prejudices!
What, specifically, don’t you understand/want to know more about?
Hi Steven,
I’d like to know more about what your employees do.
I know what a loan mod salesman does. I know what a loan modification firm does. However, I do not know what a “loan modification fulfillment center” does.
If I were to guess, and you’ve given me a hint, a fulfillment center does most of the work. The negotiating, the paper gathering, talking with the homeowner, talking with the bank.
Is this what your employees do?
Thank you.
Hi Steven,
I’d like to know more about what your employees do.
I know what a loan mod salesman does. I know what a loan modification firm does. However, I do not know what a “loan modification fulfillment center” does.
If I were to guess, and you’ve given me a hint, a fulfillment center does most of the work. The negotiating, the paper gathering, talking with the homeowner, talking with the bank.
Is this what your employees do?
Thank you.
I love the tension! Bring it on!!
If the homeowner does not have the ability, knowledge, or saavy to call their lender and initiate their own loan mod I believe this same person will redefault at a later point anyway. I suspect nearly 80% of these homes will become a short sale or foreclosure in the next 5 years due to the property being more upside down then it is today . So many of these homeowners shouldn’t even be homeowners.
I see this loan mod profession as a way to “buy time” for the home owner who will eventually lose their home. I have a vast network of Buyers and Sellers that would like a Loan Mod now and none of these people would ever pay for this service upfront. The public I deal with is just too smart and too strapped for cash.
** What I would really like to know is are you able to reduce principle balances on homes. Not just a simple 5% or 4.5% and then adding the unpaid amounts onto the backend of the Loan. All the investors I know doing their own loan Mods got 5% with no fee, no points, and all payments in the arrears were added back onto the principle ON RENTALS. They will all redefault, and they know they will, but again they buy time to suck up the rental cash. As long as the properties remain so under water the homes are all coming back.
What is your success rate with principle reduction and what % are you getting lopped off the loan on owner occupied and rentals. 20%, 30%, 40%, 50%….If you are able to do this show me the proof and I have got many clients for you!
Dear Ray:
I, for one, resent your tone in reference to what you consider the unsavvy (please note the correct spelling) homeowner. Our household income has dropped $5,000 over the past year. We are not unsavvy, we are educated, albeit not lawyers or doctors, and when we bought our home we COULD afford it.
We tried for months to get our mortgage company to work with us, but they simply waited until they could foreclose. Now we have an attorney helping us, and have been offered a modification in the realm of what we can NOW afford.
When the economy is as bad as it is in Michigan, education, experience, know-how, etc. don’t count for much when there aren’t well-paying jobs. If we decided to move, we would have to walk away from our investment totally, let the mortgage company forclose, and ruin what credit rating we do have, but we’re too responsible for that, whether you consider it savvy or not.
The regulation should be on the lenders to force them to work with homeowners that borrowed on the basis of their jacked-up real estate ratings, that are willing and able to abide by a modification (with the actual property value). And, I agree that someone needs to step up to weed out the fly-by-nights. We have been fortunate with our choice of help because we researched them, asked questions, checked them out. We will get through this tough time with some professional legal help and keep our home. It may not take a lawyer to do a modification, but there is some hope of resolution with the bar if things go wrong. It makes things for us “unsavvy” homeowners a little less scary when dealing with lenders that have thus far refused to “deal.”
If you’re not willing to help or see this happen for the homeowner, then shame on you. I wouldn’t wish this situation on anyone, even you. Good for you that you’re so SAVVY. People in duress need knowledgeable professionals to help them get through a very devastating time.
I hope no one intends to hire you for a loan mod.
I love the tension! Bring it on!!
If the homeowner does not have the ability, knowledge, or saavy to call their lender and initiate their own loan mod I believe this same person will redefault at a later point anyway. I suspect nearly 80% of these homes will become a short sale or foreclosure in the next 5 years due to the property being more upside down then it is today . So many of these homeowners shouldn’t even be homeowners.
I see this loan mod profession as a way to “buy time” for the home owner who will eventually lose their home. I have a vast network of Buyers and Sellers that would like a Loan Mod now and none of these people would ever pay for this service upfront. The public I deal with is just too smart and too strapped for cash.
** What I would really like to know is are you able to reduce principle balances on homes. Not just a simple 5% or 4.5% and then adding the unpaid amounts onto the backend of the Loan. All the investors I know doing their own loan Mods got 5% with no fee, no points, and all payments in the arrears were added back onto the principle ON RENTALS. They will all redefault, and they know they will, but again they buy time to suck up the rental cash. As long as the properties remain so under water the homes are all coming back.
What is your success rate with principle reduction and what % are you getting lopped off the loan on owner occupied and rentals. 20%, 30%, 40%, 50%….If you are able to do this show me the proof and I have got many clients for you!
Dang…..Whats up with “your comment seems a bit spammy!”..I had to lop off 1/2 of what I said. loosen up that filter….
There was brilliance in my original post.
Ray,
As I have intimated in previous posts, lenders are focused on salvaging as much profitable business as they possibly can from the current mortgage crisis. Principal Reductions, while theoretically possible, only occur in about 5% of ALL CASES +/-. From the lenders perspective, they would much rather make the rate/term change, versus principal amount. Their opinion, and of other industry experts, is that in the 5 – 10 year time frame, the market will rebound. The 50 – 75% of their existing business has a chance of performing, IF THEY MAKE THESE CONCESSIONS NOW. The futurity of principal reduction does not fit favorably into their profit-making paradigm.
I don’t know if this is true, but you seem to direct many/most of your negative comments on the subject of loan modifications on the “subprimes.” Is this true Ray?
I look at it this way and I think that the lenders attitude bears this out. 25% of their current portfolios will stick without assistance; 25% will stick with some assistance; 25% will stick only with assistance; 25% will not stick, no matter what help is available. If this statement is true (I’m believing it), the subprimes (lowest 25%), who should not have bought, over bought, etc., will be foreclosed on. The question seems to be, what will be done for those middle 50%, or so, who have become casualties of the economy, and/or made some poor financial decisions along the way, and/or were “SOLD” into their circumstances, rightly, or wrongly?
Regarding your comments on the lack of ability for some persons to speak with their lender personally again, I have a different view.
A substantial number of persons today have never understood (really taken the time, or spent the effort to understand) how to purchase vehicles wisely, balance checkbooks, make investments, let alone, how to understand a mortgage. I don’t choose to make any judgement about these folks, other than this. Most of the lenders out there will not “give ground willingly” in a modification negotiation. The situation is somewhat similar to walking into the IRS and asking for them to help you maximize your income tax return. At best, the response will be to read the US Tax Laws and/or to hire someone to help them. I think you’d agree that the direct assistance given as a result of the request wouldn’t amount much!
The resolution percentages that I gave in another post are TRUTHFUL! Are the homeowners you know who wouldn’t pay for loan modification assistance, a one-time negotiation perhaps worth more to them than 5x the cost to have it done professionally, substantially any different than the tax payer who doesn’t understand why anyone would hire help to file their income tax?
It’s pretty simple – some people get it and can do it without help and some can’t. Why do you think that this fact should make the available assistance illegitimate? If you do your homework beyond your client base you’ll find that a very high percentage of persons who have attempted to represent themselves have failed outright, or been given very marginal help. LENDERS DON’T CARE ABOUT THE HARDSHIP…they do care about retention of profitability, and rightfully so! Knowledgeable help can REALLY BENEFIT these people and at only about the cost of 1-1/2 mortgage payments!
Steven I just have a couple comments. We also charge Sellers up front for a service. 100.00 and 500.00. Its a very limited fee for a service at a very low price.
What I believe is —–without Mtg Cramdown all these homes are coming back at a later date anyway. Maybe 6 months maybe 3-5 years…whatever. The money paid for a Loan Mod I find futile and just causes more financial hardship on a high % of homeowners at a later date. In essence you are delaying the inevitable if you cannot cram down that Mtg principle.
When/if the banks start doing this I truly value your service and paying 3-5k to drop 50-200k off principle is well worth the price of admission. But, if only 5% of the cases do this now I cannot advise anyone to sign up for this and pay up-front. NEVER. I strongly urge the masses who are upside down greater then 20-25% to live in the home as long as they can, and save save save. After 1 year secure a good rental but all along the way do as my clients have done. Stay in touch with your Lender and listen to what they have to offer. If it makes sense compared to renting DO IT!
I get asked weekly what should I do? I’m upside down 100k, 200k, 60k……The answer is blatantly obvious and the homeowners know it. Yet, we do NOT like to discuss it. Its family 1st people! Do what makes sense because we only live once. You WILL be able to buy again. I guarantee it. Much sooner then you think. Holding onto a LEAD WEIGHT with a lower interest rate is insanity and toxic on the family unit.
This article sums up my opinion:
http://www.latimes.com/classified/realestate/news/la-fi-harney20-2009sep20,0,2560658.story
Hi Steve,
We get it: Some people choose to hire a third party to help them in all kinds of situations.
That’s not the point of this blog post.
The point is, why not do what you do and then receive your fee AFTER the lender says yes to the loan mod.
If what you claim is true, there should be NO PROBLEM since you have such a high approval rating.
Steve,
I’m still waiting for an answer to my question: What is it that a fulfillment center does? See the recent comment just above Ray’s comment.
Hello again Jillayne,
My firm does the direct lender negotiation for loan modification for over 240 affiliate sales organizations all over the US. I should describe “affiliate.” These are companies who pay us to negotiate in behalf of their clients.
One of our owners, Jon, is a past Sr VP of Countrywide, who was directly responsible for their entire Loan Workout Division. He directed the establishment of their internal “ratios,” which served the needs of both the lender and the investor. He left their employ over a year ago because of the position Countrywide took on one of their borrowers, a cancer patient who worked 2 jobs to make their mortgage payments. The lender turned down this persons application for modification assistance for heartless and unjustifiable reasons – it didn’t benefit the lender financially to grant the mod.
His knowledge of investor ratios helped him, with the help of a programmer, a pre-qualification tool that we use to determine the probability of a successful modification negotiation and he has been VERY SUCCESSFUL in doing so.
He hired a staff of three loss mitigation negotiators. These guys are on the phone over 8 hours daily negotiating with lenders in behalf of our clients. To date, they have over 230 completed resolutions and are negotiating over 1,000 more.
We normally don’t have direct contact with a homeowner, however, the same pre-qualification tool that I mentioned above has the ability to auto-respond emails to our affiliate sales organizations to keep them up to date on each of our lender contacts in behalf of their clients. This capability, in my experience, is VERY RARE in the industry and has significantly reduced the communication problems rampant in the industry regarding the status of modification completion.
We also negotiate shortsales.
I am one of three Account Managers – we are involved with finding sales organizations who are having difficulties negotiating on their own with lenders, or are having difficulty with their current out-sourced negotiators.
Other questions?
Hello again Jillayne,
My firm does the direct lender negotiation for loan modification for over 240 affiliate sales organizations all over the US. I should describe “affiliate.” These are companies who pay us to negotiate in behalf of their clients.
One of our owners, Jon, is a past Sr VP of Countrywide, who was directly responsible for their entire Loan Workout Division. He directed the establishment of their internal “ratios,” which served the needs of both the lender and the investor. He left their employ over a year ago because of the position Countrywide took on one of their borrowers, a cancer patient who worked 2 jobs to make their mortgage payments. The lender turned down this persons application for modification assistance for heartless and unjustifiable reasons – it didn’t benefit the lender financially to grant the mod.
His knowledge of investor ratios helped him, with the help of a programmer, a pre-qualification tool that we use to determine the probability of a successful modification negotiation and he has been VERY SUCCESSFUL in doing so.
He hired a staff of three loss mitigation negotiators. These guys are on the phone over 8 hours daily negotiating with lenders in behalf of our clients. To date, they have over 230 completed resolutions and are negotiating over 1,000 more.
We normally don’t have direct contact with a homeowner, however, the same pre-qualification tool that I mentioned above has the ability to auto-respond emails to our affiliate sales organizations to keep them up to date on each of our lender contacts in behalf of their clients. This capability, in my experience, is VERY RARE in the industry and has significantly reduced the communication problems rampant in the industry regarding the status of modification completion.
We also negotiate shortsales.
I am one of three Account Managers – we are involved with finding sales organizations who are having difficulties negotiating on their own with lenders, or are having difficulty with their current out-sourced negotiators.
Other questions?
Hi Steve,
Based on what your firm does, it appears as though you will likely need to be licensed state by state to earn fees. Here is a link to the WA State DFI website. Click on the first interpretive statement link:
http://dfi.wa.gov/cs/loan-modification-services.htm
negotiating a loan mod for a fee meets the definition of loan originator. Your firm must be licensed in WA State and the people who are doing the work must also hold a loan originator license.
Further, in WA State there is a fee cap to how much you can earn for your firm’s end of the work (with some exceptions.)
Further still, you should make sure that any of the salesmen pushing loan mods out there also know that in WA State there is a fee cap on how much they can earn as well (with some exceptions.)
Washington state is just one state.
It would be wise and prudent for you and your firm to check the ever-changing licensing requirements in all 50 states before making a statement such as the one made by you in comment number #343082:
“Loan Modification fulfillment services are neither mortgage brokering, or lending activities”
Hi Steve,
Based on what your firm does, it appears as though you will likely need to be licensed state by state to earn fees. Here is a link to the WA State DFI website. Click on the first interpretive statement link:
http://dfi.wa.gov/cs/loan-modification-services.htm
negotiating a loan mod for a fee meets the definition of loan originator. Your firm must be licensed in WA State and the people who are doing the work must also hold a loan originator license.
Further, in WA State there is a fee cap to how much you can earn for your firm’s end of the work (with some exceptions.)
Further still, you should make sure that any of the salesmen pushing loan mods out there also know that in WA State there is a fee cap on how much they can earn as well (with some exceptions.)
Washington state is just one state.
It would be wise and prudent for you and your firm to check the ever-changing licensing requirements in all 50 states before making a statement such as the one made by you in comment number #343082:
“Loan Modification fulfillment services are neither mortgage brokering, or lending activities”
Jillayne,
Let me again describe how my company charges – AFTER SUCCESSFUL COMPLETION OF A PRE-QUALIFICATION. We would rather do this than accept fees and then return them if they can’t qualify for the program.
What I don’t understand is why you and most of the other regulars on this board think that charging fees in advance makes companies offering these services more “illegitimate.” If the Federal Trade Commission, or the US Justice Dept., or the Congress, or the H of R decides that fees in advance of these services, or for up to 6 months following the delivery of these services is illegal, I can easily imagine a lawsuit! Gosh Jillayne, imagine the outcry if there was legislation for payment for groceries for six months after purchasing them, or for any other product or service!?
Answer this question – why do you think that it would make sense to legislate a six month guaranteed history before receiving payment for services. What would be achieved by this action, other than making it like it is for the LOs? Backlash anyone?
Jillayne,
Let me again describe how my company charges – AFTER SUCCESSFUL COMPLETION OF A PRE-QUALIFICATION. We would rather do this than accept fees and then return them if they can’t qualify for the program.
What I don’t understand is why you and most of the other regulars on this board think that charging fees in advance makes companies offering these services more “illegitimate.” If the Federal Trade Commission, or the US Justice Dept., or the Congress, or the H of R decides that fees in advance of these services, or for up to 6 months following the delivery of these services is illegal, I can easily imagine a lawsuit! Gosh Jillayne, imagine the outcry if there was legislation for payment for groceries for six months after purchasing them, or for any other product or service!?
Answer this question – why do you think that it would make sense to legislate a six month guaranteed history before receiving payment for services. What would be achieved by this action, other than making it like it is for the LOs? Backlash anyone?
Steve,
I’m still under-impressed.
The way the predatory loan mod salesmen work, anyone could become “pre-qualified.”
It’s pretty easy to knock down the straw man fallacy in the groceries story.
Regarding waiting until the homeowner has made six on time monthly payments before receiving a fee should not be a problem for your firm, since you keep saying that your firm’s success rate is 98%.
A period of time passing before the incentive payments are released is being used right now in the current administration’s home modification plan with servicers. I don’t see why we couldn’t also make this a requirement for loan mod companies collecting a fee for service.
Changing the definition of a successful modification to mean “a homeowner who is making payments as agreed for 6 months following a modification” would be all it would take.
Thanks Jillayne,
Some states have legislation, many are considering it. Arizona will require individual LO licenses and business licensure by July ’09. In many respects we hope for a national law – individual state compliance is difficult enough. Again, backlash anyone?
Be as under-impressed as you need to be Jillayne,
We (I) can only be responsible for what we do. I fail to understand what our 98% success rate has to do directly with waiting six months for payment – WHY IS THIS SO IMPORTANT TO YOU? WHAT MAKES THIS SUCH A WATERSHED ISSUE FOR YOU? The lenders willingness to do the “trial mod” period before finalizing the modification is a matter between the lender and borrower. Successful negotiation services in behalf of the borrower is outside of this completely. Why should my company be held financial hostage for the irresponsibility of a borrower who chooses not to pay his bills.
Wow, you sound really emotional about this, Steven.
If your success rate is 98 percent, that means you’ll get your money 98 percent of the time. What’s the big deal about waiting a few months? Any good capitalist can figure out how to make that work.
If all your company cares about is earning a fee and performing a service, then why not tell your customers this up front:
“Our company motto is that we negotiate a modification in exchange for a fee. We don’t care if you make even one payment after the modification is over. We don’t care if you make two or three payments. We just care about earning our fee for the work we perform.”
Sounds honest.
Shouldn’t part of what a loan mod company does is make sure the homeowner is making their payments after the modification is complete?
You’re arguing against that thesis.
On the retail side of loan origination, if a loan goes into early payment default, an investor asks the mortgage broker or lender to buy the loan back.
How about on a loan mod re-default, your company refunds all fees earned to the consumer?
IF you have a 98% success rate, this shouldn’t be a big deal for your firm.
Wow, you sound really emotional about this, Steven.
If your success rate is 98 percent, that means you’ll get your money 98 percent of the time. What’s the big deal about waiting a few months? Any good capitalist can figure out how to make that work.
If all your company cares about is earning a fee and performing a service, then why not tell your customers this up front:
“Our company motto is that we negotiate a modification in exchange for a fee. We don’t care if you make even one payment after the modification is over. We don’t care if you make two or three payments. We just care about earning our fee for the work we perform.”
Sounds honest.
Shouldn’t part of what a loan mod company does is make sure the homeowner is making their payments after the modification is complete?
You’re arguing against that thesis.
On the retail side of loan origination, if a loan goes into early payment default, an investor asks the mortgage broker or lender to buy the loan back.
How about on a loan mod re-default, your company refunds all fees earned to the consumer?
IF you have a 98% success rate, this shouldn’t be a big deal for your firm.
Jillayne,
We receive our money less than 98% of the time for doing 100% of the work…how/why should a loan mod company control/be responsible for either the economy, or the independent actions of persons? The last time I looked I am responsible for my actions…not yours, or anyone elses!
If you are so convinced that the industry you represent is so above-board and responsible, why were so many predatory loans originated in the first place? Why doesn’t a medical doctor INSURE UNDER PENALTY OF WITHHELD FEES, OR OTHER LEGAL RESPONSIBILITY that their client would never get sick again…Jillayne, your thesis of logic makes no theoretical, moral, or logical sense!!
And, and please be honest…tell me that your employment all these years as an LO ISN’T because of the money…it simply gave you the opportunity to be altruistic!
Jillayne,
We receive our money less than 98% of the time for doing 100% of the work…how/why should a loan mod company control/be responsible for either the economy, or the independent actions of persons? The last time I looked I am responsible for my actions…not yours, or anyone elses!
If you are so convinced that the industry you represent is so above-board and responsible, why were so many predatory loans originated in the first place? Why doesn’t a medical doctor INSURE UNDER PENALTY OF WITHHELD FEES, OR OTHER LEGAL RESPONSIBILITY that their client would never get sick again…Jillayne, your thesis of logic makes no theoretical, moral, or logical sense!!
And, and please be honest…tell me that your employment all these years as an LO ISN’T because of the money…it simply gave you the opportunity to be altruistic!
The thieving bank is lucky to get any payments from anybody, so you saying you’re negotiating is a joke.
Today anybody can call up the bank and say they’ll make payments if they feel like it. The bank’s only recourse is to apply fees, interest, and penalties, or foreclose. The credit score is the other hammer the bank has, but they have already beaten that to death.
Always beware of any one collecting up front fees for doing absolutely nothing for you.
Steve, now that I’m aware of your company I will ask my Congress person how your company can exist. Thank you for pointing out a loop hole that needs to be closed. Any one who has provided you financial information should be protected.
Jillyanne this was a great post, thank you especially.
The thieving bank is lucky to get any payments from anybody, so you saying you’re negotiating is a joke.
Today anybody can call up the bank and say they’ll make payments if they feel like it. The bank’s only recourse is to apply fees, interest, and penalties, or foreclose. The credit score is the other hammer the bank has, but they have already beaten that to death.
Always beware of any one collecting up front fees for doing absolutely nothing for you.
Steve, now that I’m aware of your company I will ask my Congress person how your company can exist. Thank you for pointing out a loop hole that needs to be closed. Any one who has provided you financial information should be protected.
Jillyanne this was a great post, thank you especially.
Steven,
a loan mod salesman is just a salesman. To compare a salesman to that of a professional such as a doctor or lawyer would not be an accurate comparison. It’s like comparing an apple to a chair. Two completely different categories.
A fiduciary such as an attorney would definintely be responsible for making sure the loan modification would be in his/her client’s best interests and would also be held to a much higher standard when compared to a salesman.
A fiduciary would need to look outward at the economy and help the homeowner analyze his/her prospects for present and also future earnings in order to support the modified loan payment.
We could definitely take the doctor analogy and play with it. If a patient needed an invasive procedure and the doctor had knowledge that the patient was going to put himself/herself in a worse off position after the procedure, the doctor would have to stop and consider this fact before moving forward.
I’ve never been a loan originator, Steven and I’m not asking loan mod salesmen to work for free.
By the way, were you and your firm aware that in WA state, loan originators who collect a fee for performing loan mod services owe fiduciary duties to their clients?
Just thought you might want to know.
Well you know Jillayne it’s obvious from your comments that you have never been a loan originator. I beg to differ with you. I have provided loans for people for over 6 years, and in every case I consult with the borrower and obtain all the information I can to insure they are getting a loan that will work for them. Believe me it cost me a lot of money during the “refi boom” but because of my background in finance I refuse to knowingly provide a loan or do anything that is not in the client’s best interest. And as far as you thinking things are better if done through and attorney, you are fooling yourself. I have helped many clients over the past 6 months or so who have paid multiple attorneys for loan modification assistance that produced nothing for the client. I suggest you get a little closer to this business if you intend to write about it.
Steven,
a loan mod salesman is just a salesman. To compare a salesman to that of a professional such as a doctor or lawyer would not be an accurate comparison. It’s like comparing an apple to a chair. Two completely different categories.
A fiduciary such as an attorney would definintely be responsible for making sure the loan modification would be in his/her client’s best interests and would also be held to a much higher standard when compared to a salesman.
A fiduciary would need to look outward at the economy and help the homeowner analyze his/her prospects for present and also future earnings in order to support the modified loan payment.
We could definitely take the doctor analogy and play with it. If a patient needed an invasive procedure and the doctor had knowledge that the patient was going to put himself/herself in a worse off position after the procedure, the doctor would have to stop and consider this fact before moving forward.
I’ve never been a loan originator, Steven and I’m not asking loan mod salesmen to work for free.
By the way, were you and your firm aware that in WA state, loan originators who collect a fee for performing loan mod services owe fiduciary duties to their clients?
Just thought you might want to know.
“If you are so convinced that the industry you represent is so above-board and responsible, why were so many predatory loans originated in the first place?” – Steven
Ask your boss, Steven. He’s Countrywide scum, is he not? I don’t know if the Feds are going deeper down the ranks than the Tan Man, but hopefully you’ll be conducting meetings with your company’s owner at Alcatwaz, and his mansion and his yacht will be liquidated to in some measure make up for the evil his has perpetrated on our country.
Countrywide ruined a lot of lives.
The loan mod industry is a mess. It’s the only thing I’ve ever seen that is worse than the subprime lending of a number of years ago. But the problem is not the upfront fees. This is the typical government solution: some bad actors in a particular industry, let’s not take the time to figure out how regulate it properly, let’s just make it impossible for any of them to do business. So no more loan mods, maybe that’s not such a bad thing. And as far as homeowners doing it themselves, that’s a joke. The lenders are impossible to work with, and the average homeowner has no clue how to make this happen.
Guess you pop up and snipe every so often, eh Cam,
Evidently, you didn’t read one of my earlier posts in which I said, “one of our owners, Jon, is a past Sr VP of Countrywide, who was directly responsible for their entire Loan Workout Division. He directed the establishment of their internal “ratios,
Jillayne,
Well played, and how nice of this guy to show out and slow-pitch some softballs your way, although he should quit with the annoying ALL CAPS (to paraphrase that oft-quoted movie line, it probably does not have the effect on the reader that he thinks it does – nor does invoking “bank hates cancer patients” to deflect their own actions). I trust his boss is not improperly using any confidential information (the “formula”?) of his former employer (however evil said employer may have been).
Is there no honor among thieves?
Jillayne,
Well played, and how nice of this guy to show out and slow-pitch some softballs your way, although he should quit with the annoying ALL CAPS (to paraphrase that oft-quoted movie line, it probably does not have the effect on the reader that he thinks it does – nor does invoking “bank hates cancer patients” to deflect their own actions). I trust his boss is not improperly using any confidential information (the “formula”?) of his former employer (however evil said employer may have been).
Is there no honor among thieves?
Loan mod salesmen for the most part are failed boiler room LOs.
Glad to see the Fed cracking down on these numbnuts.
Jillayne, I will say that most of the places I have seen around my parts are just piggybacking off scumbag attorneys. I would bet a steak dinner that their “clients” hardly every meet or speak to an actual attorney. They are basically associating themselves with an attorney, but no attorney is really involved.
Secondly, any attorney that is doing loan mods probably graduated from a fourth tier toilet law school and is no more knowledgeable than a self educated prisoner reading books in the jail’s law library. I think you are putting a little too much weight on the title “attorney”
Loan mod salesmen for the most part are failed boiler room LOs.
Glad to see the Fed cracking down on these numbnuts.
Jillayne, I will say that most of the places I have seen around my parts are just piggybacking off scumbag attorneys. I would bet a steak dinner that their “clients” hardly every meet or speak to an actual attorney. They are basically associating themselves with an attorney, but no attorney is really involved.
Secondly, any attorney that is doing loan mods probably graduated from a fourth tier toilet law school and is no more knowledgeable than a self educated prisoner reading books in the jail’s law library. I think you are putting a little too much weight on the title “attorney”
Yeah, you’re probably right Russ. I have been told that on many occasions but I’ve also been told that doing business in Chicago means something completely different than doing business in Seattle.
BTW, I received an email forward today with this message: “Make Six Figures Doing Loan Mods”
Yeah, you’re probably right Russ. I have been told that on many occasions but I’ve also been told that doing business in Chicago means something completely different than doing business in Seattle.
BTW, I received an email forward today with this message: “Make Six Figures Doing Loan Mods”
There are currently about 16 “law firms” under investigation by the California State Bar Association for acting unscrupulously with regard to loan modifications. This problem is not limited to loan modification companies, but relates in unscrupulous predators period. Our company doesn’t charge up front fees, and that’s the way it should be done. We also don’t over charge for our service, our typical fee is $1,000. There are still companies out there that offer a legitimate service and abide by the laws, without taking advantage of people. We advise clients that their lender will work with them directly, and provide the information for local HUD offices to them before they sign up for our service. Our clients have generally tried and failed to get a loan modification on their own. This “new law” really isn’t so new, as most states already enforce the collection of fees before a loan modification. Here’s to hoping that more homeowner’s get the help they really need and deserve, and less get taken advantage of.
This feedback on this post is in my opinion why there is so much room for fraud in modifications.
Each of you have valid points…
In CA, you need to be licensed to do mods. If you charge an upfront fee, you need to have your agreement reviewed by the department of real estate. Within that agreement, you must outline what the fee is and what work will be performed, and within what time frame. The fee is placed into a trust account and according to the work performed, document processing, submission of package, etc…a fee for that phase of work can be withdrawn upon completion. We’re talking somewhere between $500-$1000 which would reasonably cover the expenses of a staff, business costs, etc. to perform these services. The remainder cannot be drawn unless the modification is complete. If not completed, the remaining fee is returned. The trust account is managed according to our states trust accounting rules which are pretty extensive and specific.
IF A HOMEOWNER HAS RECEIVED A NOTICE OF DEFAULT YOU CANNOT COLLECT A FEE OF ANY KIND UPFRONT.
The problem with not asking for a fee up front for this service compared to a loan is that there is no contract or third party process to ensure payment. On a loan, you are paid through escrow. THere is no escrow in a modification or forbearance process. Realistically, by the time these individuals need to begin or continue making their payments, they may or may not want to pay you. In addition, it may be hard for them to pay for the services rendered (still not sure how I feel as a whole on this – I think it’s a case by case basis).
Any individual can go directly to their lender to request a modification but the reality is that they are dealing with collection departments who are well skilled at acting with the servicer/Investor’s best interest in mind. They have no obligation to the homeowner. A lot of the stories I hear from clients of what the servicer tell them are actually lies, misleading, and in some cases illegal. Whether an individual chooses to use a licensed broker who has no objection to collecting upfrotn fees with their state or an attorney (not an attorney backed firm a real live attorney)…I think they are better represented than on their own. It is not fair but it is the current reality due to non-regulation of this process.
It’s not practical to blanketly harass all businesses who are offering a service that a consumer is willing to pay for. Those who are breaking the law should be prosecuted. Problem is the people who are hurting people are more often not licensed so they do not fall under any rules. The people that are licensed and trying to help people are easy to identify and go after…seems like dejavu with the subprime predatory lending. They need to get some jurisdiction over these people that are not licensed as well and the consumer has to do their part and complain!
Those modification statistics we are referring to are when modifications were first given but didn’t make any sense. Sometimes, the payments even went up! There was not a plan in place even though still not perfect today, there is now a guide or starting point. The modifications today will be more sustainable. There is much more at stake for all involved. I believe those guidelines didn’t get implemented into the servicers until June ’09.
My advice to clients if they have failed on their own or just don’t have the time/emotional output is to go with a personal referral. Someone referred that has helped someone else with success. Check the firm or broker out online. Know that every modification is different and people’s circumstances are different so any claims for an individual can only be 50/50. I would always recommend they choose what is right for their family in the long run and to seek all options before making a decision. Included in these options are recommendation to refer to their CPA and a bankruptcy attorney to discuss any reprocussions of their choices. Then, have a family meeting and base the decision on what is sustainable.
Why modification is ideal in the meantime is to allow stabilization to the real estate market. Some individuals have legitimate hardships. Some are professionals that may have had their business hit hard but have the ability to recapture their typical income over time. The current modifications are being awarded when it makes sense. Someone that has had the same job for 30 yrs and will most likely maintain that income until retirement and after would need a modification to keep them in their home for 30 years. If it’s someone who had their income dropped by 50% but has the potential to double or triple that income in the next 5-10 years, a graduated plan would be appropriate. If someone got behind due to medical issues which are now remedied, they could begin making payments again but cannot pay the arrears. This would be a different type of modification.
In these cases modification causes less loss to its investors than foreclosure. Protecting the homeowner and Investor.
What would happen to our market if no one could get a modification and they all short saled at once? That would be economically catastrophic. Maybe we’re prolonging the inevitable but for now it has given some relief and allows time for people to either recapture their income while the economy mends or allows them to list and sell in a year or two. It buys time to make sound decisions. It keeps families in a home. Do you think they’ll be able to easily rent somewhere? School district changes, shame, guilt…this is shaping our future generations. Not everyone is taking advantage of the system. There are a lot of deserving families who are in trouble and will do everything they can to make good on their promises if given the chance.
Who cares at this point who is to blame. We are all in this boat together. We need to steer through the ice the best we can and once we get back to land, figure out how we avoid this in the future.
This feedback on this post is in my opinion why there is so much room for fraud in modifications.
Each of you have valid points…
In CA, you need to be licensed to do mods. If you charge an upfront fee, you need to have your agreement reviewed by the department of real estate. Within that agreement, you must outline what the fee is and what work will be performed, and within what time frame. The fee is placed into a trust account and according to the work performed, document processing, submission of package, etc…a fee for that phase of work can be withdrawn upon completion. We’re talking somewhere between $500-$1000 which would reasonably cover the expenses of a staff, business costs, etc. to perform these services. The remainder cannot be drawn unless the modification is complete. If not completed, the remaining fee is returned. The trust account is managed according to our states trust accounting rules which are pretty extensive and specific.
IF A HOMEOWNER HAS RECEIVED A NOTICE OF DEFAULT YOU CANNOT COLLECT A FEE OF ANY KIND UPFRONT.
The problem with not asking for a fee up front for this service compared to a loan is that there is no contract or third party process to ensure payment. On a loan, you are paid through escrow. THere is no escrow in a modification or forbearance process. Realistically, by the time these individuals need to begin or continue making their payments, they may or may not want to pay you. In addition, it may be hard for them to pay for the services rendered (still not sure how I feel as a whole on this – I think it’s a case by case basis).
Any individual can go directly to their lender to request a modification but the reality is that they are dealing with collection departments who are well skilled at acting with the servicer/Investor’s best interest in mind. They have no obligation to the homeowner. A lot of the stories I hear from clients of what the servicer tell them are actually lies, misleading, and in some cases illegal. Whether an individual chooses to use a licensed broker who has no objection to collecting upfrotn fees with their state or an attorney (not an attorney backed firm a real live attorney)…I think they are better represented than on their own. It is not fair but it is the current reality due to non-regulation of this process.
It’s not practical to blanketly harass all businesses who are offering a service that a consumer is willing to pay for. Those who are breaking the law should be prosecuted. Problem is the people who are hurting people are more often not licensed so they do not fall under any rules. The people that are licensed and trying to help people are easy to identify and go after…seems like dejavu with the subprime predatory lending. They need to get some jurisdiction over these people that are not licensed as well and the consumer has to do their part and complain!
Those modification statistics we are referring to are when modifications were first given but didn’t make any sense. Sometimes, the payments even went up! There was not a plan in place even though still not perfect today, there is now a guide or starting point. The modifications today will be more sustainable. There is much more at stake for all involved. I believe those guidelines didn’t get implemented into the servicers until June ’09.
My advice to clients if they have failed on their own or just don’t have the time/emotional output is to go with a personal referral. Someone referred that has helped someone else with success. Check the firm or broker out online. Know that every modification is different and people’s circumstances are different so any claims for an individual can only be 50/50. I would always recommend they choose what is right for their family in the long run and to seek all options before making a decision. Included in these options are recommendation to refer to their CPA and a bankruptcy attorney to discuss any reprocussions of their choices. Then, have a family meeting and base the decision on what is sustainable.
Why modification is ideal in the meantime is to allow stabilization to the real estate market. Some individuals have legitimate hardships. Some are professionals that may have had their business hit hard but have the ability to recapture their typical income over time. The current modifications are being awarded when it makes sense. Someone that has had the same job for 30 yrs and will most likely maintain that income until retirement and after would need a modification to keep them in their home for 30 years. If it’s someone who had their income dropped by 50% but has the potential to double or triple that income in the next 5-10 years, a graduated plan would be appropriate. If someone got behind due to medical issues which are now remedied, they could begin making payments again but cannot pay the arrears. This would be a different type of modification.
In these cases modification causes less loss to its investors than foreclosure. Protecting the homeowner and Investor.
What would happen to our market if no one could get a modification and they all short saled at once? That would be economically catastrophic. Maybe we’re prolonging the inevitable but for now it has given some relief and allows time for people to either recapture their income while the economy mends or allows them to list and sell in a year or two. It buys time to make sound decisions. It keeps families in a home. Do you think they’ll be able to easily rent somewhere? School district changes, shame, guilt…this is shaping our future generations. Not everyone is taking advantage of the system. There are a lot of deserving families who are in trouble and will do everything they can to make good on their promises if given the chance.
Who cares at this point who is to blame. We are all in this boat together. We need to steer through the ice the best we can and once we get back to land, figure out how we avoid this in the future.
“Problem is the people who are hurting people are more often not licensed so they do not fall under any rules.”
Nice try. Incorrect. Do some research on the loan mod companies….in California….who were licensed and what they did to consumers.
Further, companies that are un-licensed DO fall under state and federal consumer protection laws.
A retail loan originator waits until the close of escrow to be paid on a refi or purchase.
A loan mod salesman can wait until the close of the loan mod to be paid….and in my opinion, it would be far better to hold back payment until 6 monthly ontime payments have been made.
at a 50% re-default rate, sometimes loan mods are not the most compassionate answer. Sometimes the home owner is better off selling the home and re-entering the housing market as a renter. There is no shame in renting.
“Problem is the people who are hurting people are more often not licensed so they do not fall under any rules.”
Nice try. Incorrect. Do some research on the loan mod companies….in California….who were licensed and what they did to consumers.
Further, companies that are un-licensed DO fall under state and federal consumer protection laws.
A retail loan originator waits until the close of escrow to be paid on a refi or purchase.
A loan mod salesman can wait until the close of the loan mod to be paid….and in my opinion, it would be far better to hold back payment until 6 monthly ontime payments have been made.
at a 50% re-default rate, sometimes loan mods are not the most compassionate answer. Sometimes the home owner is better off selling the home and re-entering the housing market as a renter. There is no shame in renting.
What time I spend in my car stuck in traffic, I tend to listen to sports talk radio. (Old habit, what can i say? …) From as far back as (at least) 2004(?) until sometime last year, I suffered through endless mortgage broker ads (“And, we’re nice people , too!”). They must have single-handedly kept the sports talk station in business.
Nowadays, it’s non-stop “get out of debt”, “get out of credit card debt” or “get your mortgage payment reduced” ads. The worst ones are these “we will take on the evil banks who were stupid enough to loan you deadbeats money” ads. I think it’s the same people who ran the mortgage broker ads; they just switched sides on the banks. Preying on the weak on the way up, and the way back down…
…followed by a commercial stating banks were friends of the family….
What time I spend in my car stuck in traffic, I tend to listen to sports talk radio. (Old habit, what can i say? …) From as far back as (at least) 2004(?) until sometime last year, I suffered through endless mortgage broker ads (“And, we’re nice people , too!”). They must have single-handedly kept the sports talk station in business.
Nowadays, it’s non-stop “get out of debt”, “get out of credit card debt” or “get your mortgage payment reduced” ads. The worst ones are these “we will take on the evil banks who were stupid enough to loan you deadbeats money” ads. I think it’s the same people who ran the mortgage broker ads; they just switched sides on the banks. Preying on the weak on the way up, and the way back down…
Jillayne:
“Problem is the people who are hurting people are more often not licensed so they do not fall under any rules.
Jillayne:
“Problem is the people who are hurting people are more often not licensed so they do not fall under any rules.
Patient GUy: I would bet they are the same. I know of some in our region that have some interesting scams going on…”save your home” type things. They were the same unlicensed people that made $20,000-30,000 a loan. Having people buying houses for eachother sometimes multiples at a time and promising them the get rich quick scheme. Consumers have to really investigate these companies. And many do need to take responsiblity if they took advantage. It’s not hard to find out the truth…and if its too good to be true, probably is.
“You need to take a solution oriented approach to all this and educate consumers”
Lisa I’ve been doing this for over a year.
http://raincityguide.com/2008/08/21/predatory-upfront-loan-modification-fees/
If it is true in your state that the licensing agency refuses to go after UNlicensed people who are doing the work of the licensed, then your state’s regulatory system is not doing its job.
They need to vastly increase the licensing fees so they can police the unlicensed.
This is the way things work in other states. Without enforcement, then all licensed doing a specific set of work, get lumped in with the unlicensed and the consumer is not protected.
California is such a mess right now that ANY company out of California pushing loan mods in other states is immediately suspect with good reason.
If the so-called legitimate loan mod firms want to stop the unlicensed, then those legitimate firms are the ones who have to work WITH the regulators.
An industry can’t just expect government to do all the work without contributing to the outcome because that means the industry is expecting the taxpayer to make their industry better. This is unfair because the legitimate firms would then benefit GREATLY.
Push the barrier to entry up really high and jack up the licensing fees. Give the government regulators the money they need.
Here’s a solution: The federal government should step in and shut all of you down, licensed or otherwise. I have been predicting for many months now that this is going to turn into a national crisis. The states don’t have the resources to protect the consumers.
It’s beyond obvious that the vast majority of loan mod firms are just scams.
“You need to take a solution oriented approach to all this and educate consumers”
Lisa I’ve been doing this for over a year.
http://raincityguide.com/2008/08/21/predatory-upfront-loan-modification-fees/
If it is true in your state that the licensing agency refuses to go after UNlicensed people who are doing the work of the licensed, then your state’s regulatory system is not doing its job.
They need to vastly increase the licensing fees so they can police the unlicensed.
This is the way things work in other states. Without enforcement, then all licensed doing a specific set of work, get lumped in with the unlicensed and the consumer is not protected.
California is such a mess right now that ANY company out of California pushing loan mods in other states is immediately suspect with good reason.
If the so-called legitimate loan mod firms want to stop the unlicensed, then those legitimate firms are the ones who have to work WITH the regulators.
An industry can’t just expect government to do all the work without contributing to the outcome because that means the industry is expecting the taxpayer to make their industry better. This is unfair because the legitimate firms would then benefit GREATLY.
Push the barrier to entry up really high and jack up the licensing fees. Give the government regulators the money they need.
Here’s a solution: The federal government should step in and shut all of you down, licensed or otherwise. I have been predicting for many months now that this is going to turn into a national crisis. The states don’t have the resources to protect the consumers.
It’s beyond obvious that the vast majority of loan mod firms are just scams.
Hell has no fury like a woman scorned. Someone must have really screwed you over. I’m sorry for that. There are organizations lobbying and working with legislation to make changes. Your solution is an option but not realistic. Even though there are unscrupulous operations, the authorities know the consumers do need help because they’re being taken advantage of AGAIN. that problem is much larger and will take time to solve with big banking.
You seem to have all the answers yet havent’ showed up for grass roots efforts. BTW, you’re contradicting your original posts. This has been fun (well about as much as a reality TV show) but unproductive.
Get involved, write your legislators and donate to those causes if anyone out there wants to make a difference.
Hell has no fury like a woman scorned. Someone must have really screwed you over. I’m sorry for that. There are organizations lobbying and working with legislation to make changes. Your solution is an option but not realistic. Even though there are unscrupulous operations, the authorities know the consumers do need help because they’re being taken advantage of AGAIN. that problem is much larger and will take time to solve with big banking.
You seem to have all the answers yet havent’ showed up for grass roots efforts. BTW, you’re contradicting your original posts. This has been fun (well about as much as a reality TV show) but unproductive.
Get involved, write your legislators and donate to those causes if anyone out there wants to make a difference.
Hi Lisa,
Nobody screwed me over. Fake sympathy is so disingenuous.
So who are these grass roots organizations that you claim exist? Please post the link here.
I have actually been directly involved in exposing predatory lending behavior since 2001 and wrote the industry’s first comprehensive code of ethics in 2005. Do your homework.
The loan mod industry is on track to never be taken seriously especially anyone operating in California. The only people who can change that are the practitioners.
Hi Lisa,
Nobody screwed me over. Fake sympathy is so disingenuous.
So who are these grass roots organizations that you claim exist? Please post the link here.
I have actually been directly involved in exposing predatory lending behavior since 2001 and wrote the industry’s first comprehensive code of ethics in 2005. Do your homework.
The loan mod industry is on track to never be taken seriously especially anyone operating in California. The only people who can change that are the practitioners.
I agree this is a federal matter and that banks should be held accountable for the loans they have made. All loans should be converted to a set standard and become fully assumable. I suggest 6%, thirty year fixed, and fully assumable. All loans currently outstanding should make that option available, no doc, no refi, no fees, just a conversion.
In the coming years you will have a grass roots movement that will address banking, and financing. I originally was upset with the Real Estate industry, but the more I read about Loan Originators, banks, and mortgages I get more upset with the mortgage industry.
If we continue to see prices decline in Real Estate all loans will be toxic. It’s a business decision, for the family, to walk away from a bad loan. That is exactly what will happen. It needs to happen for millions of people. First there are the people who should have never been home owners, then there are the people who over paid, and then there are the people who bought in good faith and are now paying interest on a Note that has lost 20% of face value and probably will lose a lot more.
The mortgage industry is rearranging the deck chairs on the Titanic. No one should be paying a mortgage today until the banking industry comes up with a solution. The funny thing is banks are doing nothing to help themselves or anyone else. This National Crisis has become another banking opportunity to sell more debt. It’s disgraceful.
I agree this is a federal matter and that banks should be held accountable for the loans they have made. All loans should be converted to a set standard and become fully assumable. I suggest 6%, thirty year fixed, and fully assumable. All loans currently outstanding should make that option available, no doc, no refi, no fees, just a conversion.
In the coming years you will have a grass roots movement that will address banking, and financing. I originally was upset with the Real Estate industry, but the more I read about Loan Originators, banks, and mortgages I get more upset with the mortgage industry.
If we continue to see prices decline in Real Estate all loans will be toxic. It’s a business decision, for the family, to walk away from a bad loan. That is exactly what will happen. It needs to happen for millions of people. First there are the people who should have never been home owners, then there are the people who over paid, and then there are the people who bought in good faith and are now paying interest on a Note that has lost 20% of face value and probably will lose a lot more.
The mortgage industry is rearranging the deck chairs on the Titanic. No one should be paying a mortgage today until the banking industry comes up with a solution. The funny thing is banks are doing nothing to help themselves or anyone else. This National Crisis has become another banking opportunity to sell more debt. It’s disgraceful.
“The mortgage industry is rearranging the deck chairs on the Titanic.”
Excellent Quote……..Agree with nearly everything you said!
Ray, a year ago when you first suggested that people would walk away or should walk away I gave you an argument. Today it’s just blantantly obvious that banks are unwilling to do anything but dig the hole deeper for every one.
It’s the banks problem and they should be the ones to fix it. I read a small article this week that banks may need more bailing out. They have had over a year to work something out and they have done nothing but whine.
Ray, a year ago when you first suggested that people would walk away or should walk away I gave you an argument. Today it’s just blantantly obvious that banks are unwilling to do anything but dig the hole deeper for every one.
It’s the banks problem and they should be the ones to fix it. I read a small article this week that banks may need more bailing out. They have had over a year to work something out and they have done nothing but whine.
David, its just blatantly obvious what people SHOULD do and what they WILL do. Its just a matter of time. Sure some will stay in their home another decade + and they will do what is “morally” acceptable but millions will not. Short Sales and Foreclosures for many years ahead. **However, their will be HUGE programs coming (backed by the FED) that will make it very enticing for people to stay in tehir homes and keep paying. Lets watch together in 2010-2011.
This insanity of people who have been acting correctly and not getting any breaks will end. Even in the Cash for Clunkers campaign people were “rewarded” who were driving fuel insufficient cars. What about the masses who have been acting responsible all these years and driving 4 cyl 1991 Civics ,Accords, Camry’s????????
When everyone around me keeps asking how much longer should I keep paying my Mtg you just know the dam is leaking and soon it will break. However, Never count the FED out.
David, its just blatantly obvious what people SHOULD do and what they WILL do. Its just a matter of time. Sure some will stay in their home another decade + and they will do what is “morally” acceptable but millions will not. Short Sales and Foreclosures for many years ahead. **However, their will be HUGE programs coming (backed by the FED) that will make it very enticing for people to stay in tehir homes and keep paying. Lets watch together in 2010-2011.
This insanity of people who have been acting correctly and not getting any breaks will end. Even in the Cash for Clunkers campaign people were “rewarded” who were driving fuel insufficient cars. What about the masses who have been acting responsible all these years and driving 4 cyl 1991 Civics ,Accords, Camry’s????????
When everyone around me keeps asking how much longer should I keep paying my Mtg you just know the dam is leaking and soon it will break. However, Never count the FED out.
I did want to mention I think the quote about the chairs on the Titanic I got from you.
I looked at a big time investors portfolio this morning. He owns hundreds of housing units and owes millions of dollars. He does have cash flow from rentals. The biggest problem he has is his purchasing started in 2003 and he is continuing to purchase this year. In other words any equity he thought he has is gone.
My opinion is the next wave will be rent reductions to get good renters. I can see that with a few more vacancies from what he has already his house of cards will be more shaky. An even bigger problem is the deferred maintenance he has on some units and buildings. In ten years I think some of his stuff needs to go back to the bank.
It isn’t even his fault though it is. The game has changed dramatically from what his father did. It has always been if you hold out long enough things will appreciate. I just don’t see where we can appreciate from this point let alone two years ago.
I did want to mention I think the quote about the chairs on the Titanic I got from you.
I looked at a big time investors portfolio this morning. He owns hundreds of housing units and owes millions of dollars. He does have cash flow from rentals. The biggest problem he has is his purchasing started in 2003 and he is continuing to purchase this year. In other words any equity he thought he has is gone.
My opinion is the next wave will be rent reductions to get good renters. I can see that with a few more vacancies from what he has already his house of cards will be more shaky. An even bigger problem is the deferred maintenance he has on some units and buildings. In ten years I think some of his stuff needs to go back to the bank.
It isn’t even his fault though it is. The game has changed dramatically from what his father did. It has always been if you hold out long enough things will appreciate. I just don’t see where we can appreciate from this point let alone two years ago.
“rearranging deck chairs on the titanic”
http://answers.google.com/answers/threadview/id/220569.html
Yes, the game has changed and I find it fascinating. But, in the end investing in real estate NOW unlike the past should just have 1 simple rule…………”I will not buy anything today that I cannot sell tomorrow for a profit.” The foreclosure auctions have proved to be tremendously profitable for many I know and they just keep turning them along with the Buyers getting their 8k bonus bucks.
Cash Cash Cash….So many GEMS coming that the ones you decide to buy must be TAKEN at Auction or you will be left just another bagholder.
“rearranging deck chairs on the titanic”
http://answers.google.com/answers/threadview/id/220569.html
Yes, the game has changed and I find it fascinating. But, in the end investing in real estate NOW unlike the past should just have 1 simple rule…………”I will not buy anything today that I cannot sell tomorrow for a profit.” The foreclosure auctions have proved to be tremendously profitable for many I know and they just keep turning them along with the Buyers getting their 8k bonus bucks.
Cash Cash Cash….So many GEMS coming that the ones you decide to buy must be TAKEN at Auction or you will be left just another bagholder.
Which states is it still legal to charge upfront?
I am a mortgage originator full time and do loan mods part time.
I charge 299$ upfront and 199$ when complete.. i think that is pretty fair for up to 6 months of work, right?
I do see a lot of results (85% success rate) and i think im pretty good at it.. im just worried i am going to lose this supplemental income. =(
Hi Nick,
Yes, those fees are quite modest. First thing to do is to check with your broker or manager to make sure that your company knows that you are earning this fee income while being licensed. The broker (if your company is licensed under a mortgage broker) or your manager (if your company is licensed as a consumer loan lender) is directly responsible for your actions. This is why it’s important to work WITH your broker or manager. They probably know the answers to these questions for your state.
You can also check with your state’s regulator to see what kind of rules and provisions have been put in place in your state.
Thanks for stopping by raincityguide!
Hi Nick,
Yes, those fees are quite modest. First thing to do is to check with your broker or manager to make sure that your company knows that you are earning this fee income while being licensed. The broker (if your company is licensed under a mortgage broker) or your manager (if your company is licensed as a consumer loan lender) is directly responsible for your actions. This is why it’s important to work WITH your broker or manager. They probably know the answers to these questions for your state.
You can also check with your state’s regulator to see what kind of rules and provisions have been put in place in your state.
Thanks for stopping by raincityguide!
I firmly believe that something needs to be done to alter the direction of the mortgage industry and I believe that there needs to be some mechanism in place to protect homeowners. However, anyone in this industry knows the cost and time involved to not only perform a forensic audit, but also, getting through the gatekeepers to negotiators. If loan mod companies are not allowed to charge fees, its practically impossible to sustain business during the 90-day black out period (average wait for BofA negotiator). You would have had to be performing these for 90 days before you can ever turn a profit. Now that their are no upfront fees, loan mod companies become creditors, having to solicit payments from someone who couldn’t make their house payment, but now can- how are we suppose to secure our pay, we will be in the same situation as the banks, so is the FTC going to give us a bailout when we go crying to congress…. In my opinion, a portion of the bailout should have gone to homeowners who lost equity in their homes as a result of the amounting foreclosures. They could use their bailout to pay down part of their loans and get themselves back into a semi-equitable situation.
Hi Travis,
The idea of giving bailout money directly to consumer might sound compassionate. However, what about the homeowners who are struggling yet still paying their mortgages as agreed? If we reward failure then we would see a huge number of homeowners choose to default in order to get the government handout. This is called a moral hazard and should be avoided due to huge unintended consequences. The mortgage industry is rebooting right now. Maybe what you meant is we need to alter the direction of the loan modification industry?
Yes. #totalfail. Let’s start with California. Take all the loan mod firms in California and dump them all into the Pacific Ocean. Total failure; start over, reboot. Next, Florida.
Update:
“California has joined nearly two dozen other states in prohibiting foreclosure rescue companies from collecting advance fees for helping homeowners negotiate mortgage loan modifications.
Gov. Arnold Schwarzenegger on Oct. 11 signed into law a bill, SB 94, that prohibits any person from demanding or collecting an advance fee from a consumer for loan modification or mortgage loan forbearance services.”
so what is my option??? be at the mercy of my incompetent lender that is looking after its own pocket, or try my best to get free advice thats just an advice???????? and its free for a reason.
Are u guys on drugs? Just choking average jo and road blocking him from getting a fair loan Mod.
The solution is 3% fixed for 5 years then when hopefully economy picks up 5% fixed for 30 to 40 years, and let the home owner decide the 30 to 40 years so payments will be more affordable.
and if anybody cant afford these options, then they need to be renters and not home owners.
Hi home owner, it sounds like you’re a loan mod salesman and not a homeowner but I suppose you could be both. Thanks for stopping by RCG. Maybe a solution is for this particular homeowner to sell that house right now and begin rebuilding his/her credit today instead of “hoping” that the economy picks up over the next five years. During those 5 years this homeowner can be renting a comparable home for a lot less than the modified payment, and will also be working on re-establishing credit. Comparably, in 5 years this homeowner may still be underwater with negative equity and now their payment is getting ready to go up again.
How many people’s “modified” mortgages are going to explode on them 5 years from now? In 2014 are we going to have another wave of foreclosures?
Probably not since over 50% of all loan mods redefault within the first six months.
In a way, we do agree on one point. Perhaps loan mods help the banks more than they help the homeowner.
hi jillayne
i think you are in the pocket of the Banks and Lenders, to think that i am a Loan Mod company. You have zero sympathy. you only pretend to be on the side of home owners. Your true color just came out. Karma is a bad thing. Good luck
Hi home owner, it sounds like you’re a loan mod salesman and not a homeowner but I suppose you could be both. Thanks for stopping by RCG. Maybe a solution is for this particular homeowner to sell that house right now and begin rebuilding his/her credit today instead of “hoping” that the economy picks up over the next five years. During those 5 years this homeowner can be renting a comparable home for a lot less than the modified payment, and will also be working on re-establishing credit. Comparably, in 5 years this homeowner may still be underwater with negative equity and now their payment is getting ready to go up again.
How many people’s “modified” mortgages are going to explode on them 5 years from now? In 2014 are we going to have another wave of foreclosures?
Probably not since over 50% of all loan mods redefault within the first six months.
In a way, we do agree on one point. Perhaps loan mods help the banks more than they help the homeowner.
loan modifications don’t work when the borrower does it on their own, they don’t get all they can from their lender, they don’t know what to ask for and they don’t know exactly what guidelines the bank is using to qualify them for a modification
I would use a company because they can get results, the fact that there are scammers out there is par for the course.
banning modification companies is not the answer
the reason for the high default rate of modifications done thus far the banks don’t give the borrowers all they can on a loan modification. Lender may lower the rate, but tack on late payments and fees and sometimes the new payment is just as high as the one they have trouble making now.
to charge someone a fee upfront to provide a service for them that could take months is not unreasonable.
The banks need to lower the rate, fix the adjustable rates, modify the principal balance according to market values now, waive late fees, and then put a new loan into place for the borrowers
when someone goes to them on their own, they get one of these things, the bank gets 1,000 bucks from uncle Sam and life goes on, the default rate is due to lenders NOT giving customers all aspects of the loan modification
Hi Susan,
You had me up until charging clients an upfront fee.
I have seen too many loan mod scams that take money and don’t do the work. Even worse I have seen homeowners who have lost their home after paying an upfront fee to a modification company.
Anyone who is actually going to work the file should not have a problem with this.
The way to avoid working on files that don’t get modified (since you know ALL of the programs) would be to do a FREE financial analysis that determines likelihood of success.
I also do not believe that principal reduction is fair to the investor in the loan, like my 401K, and your parents pension fund.
Bottom line is there should be plenty of room to adjust the rate down to the floor of 2% that will allow for capitalization of arrears and a lower payment.
If the borrower can’t afford a payment at 2% they probably shouldn’t be in that home.
The only way capitalizing arrears would cause a problem in the above case is if you have a borrower that hasn’t made payments in years.
You are correct – banks are not providing the assistance they should be, and most homeowners can’t get through the process on their own. The banks are lying to borrowers everyday and denying loan modification to people who actually do qualify.
loan modifications don’t work when the borrower does it on their own, they don’t get all they can from their lender, they don’t know what to ask for and they don’t know exactly what guidelines the bank is using to qualify them for a modification
I would use a company because they can get results, the fact that there are scammers out there is par for the course.
banning modification companies is not the answer
the reason for the high default rate of modifications done thus far the banks don’t give the borrowers all they can on a loan modification. Lender may lower the rate, but tack on late payments and fees and sometimes the new payment is just as high as the one they have trouble making now.
to charge someone a fee upfront to provide a service for them that could take months is not unreasonable.
The banks need to lower the rate, fix the adjustable rates, modify the principal balance according to market values now, waive late fees, and then put a new loan into place for the borrowers
when someone goes to them on their own, they get one of these things, the bank gets 1,000 bucks from uncle Sam and life goes on, the default rate is due to lenders NOT giving customers all aspects of the loan modification
Hi Susan,
You had me up until charging clients an upfront fee.
I have seen too many loan mod scams that take money and don’t do the work. Even worse I have seen homeowners who have lost their home after paying an upfront fee to a modification company.
Anyone who is actually going to work the file should not have a problem with this.
The way to avoid working on files that don’t get modified (since you know ALL of the programs) would be to do a FREE financial analysis that determines likelihood of success.
I also do not believe that principal reduction is fair to the investor in the loan, like my 401K, and your parents pension fund.
Bottom line is there should be plenty of room to adjust the rate down to the floor of 2% that will allow for capitalization of arrears and a lower payment.
If the borrower can’t afford a payment at 2% they probably shouldn’t be in that home.
The only way capitalizing arrears would cause a problem in the above case is if you have a borrower that hasn’t made payments in years.
You are correct – banks are not providing the assistance they should be, and most homeowners can’t get through the process on their own. The banks are lying to borrowers everyday and denying loan modification to people who actually do qualify.
who can sell their home right now??
that funny Jillayne….
Hi Susan,
The government is now giving banks/lenders cash incentives to facilitate a short sale when the homeowner does not qualify for a Home Affordable Refi OR a loan modification.
Short selling is a good option for homeowners who will likely re-default on a loan mod. Why not short sell now, avoid a foreclosure, and begin to rebuild credit today instead of playing extend-pretend only to face foreclosure or selling a year from now when even more inventory will drive prices down further?
Hi Susan,
The government is now giving banks/lenders cash incentives to facilitate a short sale when the homeowner does not qualify for a Home Affordable Refi OR a loan modification.
Short selling is a good option for homeowners who will likely re-default on a loan mod. Why not short sell now, avoid a foreclosure, and begin to rebuild credit today instead of playing extend-pretend only to face foreclosure or selling a year from now when even more inventory will drive prices down further?
Hi Susan,
Today, the government has chosen NOT nationalized the banks. Seeing as how the banks are still in charge, they are not going to slash principal balances on loan mods for fear of investor lawsuits.
You want to force the banks to “give” the homeowner the best modification?
There are many consequences of doing that.
One consequence would be that we will likely see a gi-normous amount of people defaulting so they can get their principal balance slashed.
Another consequences would be that no investor would ever want to buy our mortgages. We return to 1950s style lending. 50% down and rates go up.
Hi Susan,
Today, the government has chosen NOT nationalized the banks. Seeing as how the banks are still in charge, they are not going to slash principal balances on loan mods for fear of investor lawsuits.
You want to force the banks to “give” the homeowner the best modification?
There are many consequences of doing that.
One consequence would be that we will likely see a gi-normous amount of people defaulting so they can get their principal balance slashed.
Another consequences would be that no investor would ever want to buy our mortgages. We return to 1950s style lending. 50% down and rates go up.
Hi home owner. I don’t take any money from banks/lender servicers who are doing loan mods. I’ve helped countless of homeowners who call and email me direct with questions regarding loan mods, short sales, and so forth. I typically get at least 2-3 calls/week off of posts like this where the homeowner doesn’t know if a loan mod salesman is legit, or an out of state loan mod salesman took $5000 and did nothing to help the homeowner and they are looking for advice on what to do next. I do not charge for helping homeowners. No hidden agenda here. If anyone is paranoid about my motives, they simply click on my bio or google my name. What I’m about is all over the web. Thanks for stopping by rcg.
Jillayne,
Interesting assignment to give me. I think all your suspects came out in this blog. Bottom line, this industry is not easy to navigate and how do we protect our consumers? Your blog among many provides consumers with different perspectives to help make their decision. Unfortunately, as seen in the discussion of the blog – it really is not easy to navigate despite all the policies that may enter statewide as a protection. As realtors, we are the first point of contact in the professional realm – to help our clients navigate through this ever changing complex system that relies on our economy and just the ways of owning a home through a lifetime loan.
so now the government is telling lawyers not to do loan mods. what else should we do for free after the bank gets threw sucking the people out of tyheir money on high interest rates they are the good guys f you the banks are so crooked people need attorneys
Wow, $950 per hour. That’s more than some of the top trial litigators charge, steve ruza. Thanks for stopping by but your website showing that high hourly rate doesn’t do much to persuade me of your motivations. Seriously. No one is THAT good at loan mods. But maybe you finish up each file in an hour….
Charging for loan mods at the completion of the mod is a good idea. Why? Well, it will motivate folks like yourself as well as the predatory mod companies to qualify a consumer up front.
If chances are high that the mod will be accepted, then you’ll take the client.
If chances are low that the mod will be accepted, then you’ll not take the client’s money.
Today, loan originators earn their fee at the close of escrow. This simple shift to apply the same standards to modification people is not only necessary, but useful.
The predatory mod companies will go do something else, like predatory short sales, (leaving regulators to deal with that mess) and the mod companies who are in it for more than instant money will continue to survive.
Have you tried contacting the lender to get a modifcation? It sounds easy but give it a shot.
If not have you tired working with an 8 dollar an hour HUD agent to get a modification- try to get their their attention as well.
There are plenty of scammers out but also alot of lawyers based groups getting great results- now you want to deny future borrowers access to counsel.
There are plenty of atty’s doing a fine job (NPV analysis, audits, professional underwriting) and putting forth alot of man hours to not get paid.
If the FTC wants to support the banks (like they always have) maybe they should encourage the banks to reach out more rather than taking government bailout money and providing 8% of those qualified for HAMP an additional modification (cough) (cough) predatory loan.
Have you tried contacting the lender to get a modifcation? It sounds easy but give it a shot.
If not have you tired working with an 8 dollar an hour HUD agent to get a modification- try to get their their attention as well.
There are plenty of scammers out but also alot of lawyers based groups getting great results- now you want to deny future borrowers access to counsel.
There are plenty of atty’s doing a fine job (NPV analysis, audits, professional underwriting) and putting forth alot of man hours to not get paid.
If the FTC wants to support the banks (like they always have) maybe they should encourage the banks to reach out more rather than taking government bailout money and providing 8% of those qualified for HAMP an additional modification (cough) (cough) predatory loan.
Jillayne, did you see this article: http://seattletimes.nwsource.com/html/realestate/2012536307_realftc08.html?prmid=related_stories_section : FTC bans 8 marketers from selling mortgage relief
Dear Ray:
I, for one, resent your tone in reference to what you consider the unsavvy (please note the correct spelling) homeowner. Our household income has dropped $5,000 over the past year. We are not unsavvy, we are educated, albeit not lawyers or doctors, and when we bought our home we COULD afford it.
We tried for months to get our mortgage company to work with us, but they simply waited until they could foreclose. Now we have an attorney helping us, and have been offered a modification in the realm of what we can NOW afford.
When the economy is as bad as it is in Michigan, education, experience, know-how, etc. don’t count for much when there aren’t well-paying jobs. If we decided to move, we would have to walk away from our investment totally, let the mortgage company forclose, and ruin what credit rating we do have, but we’re too responsible for that, whether you consider it savvy or not.
The regulation should be on the lenders to force them to work with homeowners that borrowed on the basis of their jacked-up real estate ratings, that are willing and able to abide by a modification (with the actual property value). And, I agree that someone needs to step up to weed out the fly-by-nights. We have been fortunate with our choice of help because we researched them, asked questions, checked them out. We will get through this tough time with some professional legal help and keep our home. It may not take a lawyer to do a modification, but there is some hope of resolution with the bar if things go wrong. It makes things for us “unsavvy” homeowners a little less scary when dealing with lenders that have thus far refused to “deal.”
If you’re not willing to help or see this happen for the homeowner, then shame on you. I wouldn’t wish this situation on anyone, even you. Good for you that you’re so SAVVY. People in duress need knowledgeable professionals to help them get through a very devastating time.
I hope no one intends to hire you for a loan mod.
NOTE:
The above comment has been re-posted by Jillayne as it was posted way up in the thread and I don’t want Sheree’s comment to get lost. Readers please post comments inline!
Hi Sheree,
A $5000/year drop in income isn’t really that much. Maybe you meant to post a higher amount?
There are reasons why the banks can’t be forced to modify anyone’s loan who wants a modification.
Doing so would likely encourage many more people to default on their mortgage in order to get better loan terms. Doing so would have many unintended consequences for the mortgage lending industry as a whole if contracts (note/deed of trust) were just arbitrarily re-written for those mortgage held in pools of collateralized loans. There are investors involved who purchased an interest in those mortgage loans. Forcing servicers to modify would create massive lawsuits by investors.
I suppose loans held in Fannie and Freddie’s portfolio could be modified by government mandate but then we’d have the moral hazard problem.
BTW since this post was written in Sept of 2009 as I predicted, the loan mod scams HAVE turned into a national crisis. The Federal Trade Commission has come out with a ban on upfront loan mod fees. Read more here:
http://ftc.gov/opa/2010/11/mars.shtm
My opinion of loan mod salesmen is unchanged. Avoid all of them unless they are a licensed attorney or a non-profit, HUD Approved Housing Counselor.