Mortgage-Mod-Monster

Clarification and corrections on KDVR Fox 31’s post

This post clarifies a few misleading statements on the KDVR Fox 31 post linked below. The press does the best it can, but no reporter is going to be flawless in outlining a mortgage loan modification unless they’re actually negotiating them. It’s OK. That’s where I come in.

Your personal banker is not going to modify your mortgage. Some underwriter in a dark hole under the stairs is going to modify your mortgage. Maybe the underwriter has the rule book. As the KDVR article correctly points out, even some underwriters don’t know all the guidelines. The lenders are swamped with requests. No institution can be perfect under those conditions. After this article, you’re going to know more than your personal banker.

Every lender has an ‘Approved Advocate’ in the underwriter’s closet. Modification attorneys are assigned to that advocate. Why? Because they have a whole slew of mortgage modification files under their arm, and they are well versed in the way that lender/advocate wants the file organized. More importantly, if the underwriter/advocate happens to have missed a certain item in the rulebook, they’ll be more than happy to bring it to the underwriter’s attention. The property owner can’t possibly know that stuff. Put yourself in the shoes of the underwriter: where is your priority? Ten files that are organized the way you want them? By an officer of the court that has the same rule book? (and you make $1300 for each well-organized file) Or the poor homeowner who knows little more than the personal banker that mistakenly steered them wrong in the first place? (By the way, being required to be behind in payments is an individual lender’s requirement, not the federal government. Who did I say had the rule book?) Would you hazard a guess as to any possibility the individual homeowner, or a well-intentioned investor/ex-mortgage originator, gets the Advocate on the phone?

Lowering the homeowner’s interest rate is just the first step in negotiating a mortgage modification. There are several other possible steps available.

The lender is only concerned with getting the homeowner to make the minimum adjustments. An attorney is going to focus on making the lender meet the maximum allowable conditions. If the homeowner can make payments of say, $2000 per month; that’s what the lender is going to offer, right? But if the guidelines call for the homeowner being eligible for $1700 per month payments, what do you suppose the attorney is going to insist on?

If the homeowner makes his new payments on time for a year, the federal government pays the lender $1000 towards the principal of the mortgage. That’s money in the homwowner’s pocket, not the lender. (per year for a total of five years/$5000)

The interest rate can climb to a Maximum of 1 per cent per year for three years.

Investment property mortgages can also be modified – as long as the principal residence mortgage is in good standing. So? Modify your first mortgage and then go after your investments.

Read the original here.