How to Avoid Mortgage Modification Fraud

Back in 2004 I worked in a busy mortgage banking office that was overwhelmed by the volume of business coming in due to the extremely low interest rates available and the boom in real estate sales. We had a backlog of refinance files pushing closings out past the 90 day mark. Many of the files were simple no cash out refi's for borrowers who just wanted to take advantage of the low rates. When the funding delays reached critical mass we started losing the business of some very good customers. Lucky for us our primary investor Fannie Mae took action and implemented the Mortgage Modification to streamline the refi process for those who just wanted to save some money.

Things were more simple then and our modifications required far less work and decisions than modifications to avoid foreclosure. Borrowers seeking rate and term refinances were given a choice of a full refi with customary fees at closing or a modification for a flat fee of about $400. Full refi closed in approx. 60-90 days, modification in 15-30 days. Everything was done in-house and we offered the service to eligible borrowers as they contacted us to inquire about refinancing. There were no middle men, no negotiations, and no reason for arbitrary denials. A lot has changed since the boom days and none more than mortgage modifications.  

Simplicity is an elusive concept lately, however I will keep this as simple as possible. If you apply for a modification of your mortgage loan, always deal directly with your lender or mortgage loan servicer. That's it, follow that one rule and you will avoid Mortgage Modification fraud. There is of course more you need to know to be successful. The lure of modification companies is their claim they will properly create, package, and negotiate a successful modification proposal with your lender completely taking the task out of your hands. If you are going direct you must create a proposal yourself based on guidelines for the governments "Home Affordable Modification Program (HAMP)" to have a reasonable chance of success. The HAMP guidelines are currently available at efanniemae.com as well as several other places on the web, some are more concise and readable than others.  

Why not just call your lender and get an application for a loan mod going over the phone? Mortgage loan servicers are swamped with requests for modifications and they are not set up to handle the processing, or the work load. They would prefer not to process modifications. Sending in a complete proposal has a number of advantages for example; calculations are completed and known by you, most of the work is done eliminating the common excuses used by servicers to give borrowers the run around, and you will have a copy of the complete proposal and all supporting documents in case your servicer conveniently "loses" your package. Once you begin the process you should keep a call log of your communication, date and time, to whom you spoke with, and what was said. Be persistent and make scheduled follow up calls.  

It would be great if you could trust that you were getting an honest and professional effort from a company or individual advertising a modification service. The simple fact of the matter is you can't. That doesn't mean you can't get a favorable deal on a modification. It does mean you will have to do some work. There are resources available to help you with preparation and organization.

Why the Need For Mortgage Modification?

With the rapidly going down hill economy and ever lowering real estate rates, a large number of people who have mortgaged houses have become familiar with the idea of "mortgage modification". But even if you have heard the term, it does not necessarily mean that you understand all the dynamics involved in it.

In order to make the mortgage modification work for you, you first have to have a deep insight into it. Mortgage modification is a form of rescue from home foreclosures when the home owner is having trouble making the full mortgage payment on the house. A mortgage modification is commonly confused with the concept of taking another loan; it is not a refinance, but simply a modification of your mortgage terms. This is done to reduce your mortgage payments so that they become easily affordable for you.

Mortgage modification is a concept that wasn't very familiar to the masses until the recent economic recession. As more and more people find themselves at the risk of losing their homes to foreclosures, the idea of mortgage modification is gaining popularity and is giving hope to those who have nothing else to turn to. The rate at which homes foreclosures are being done in America has become alarmingly high recently, as even those home owners are going down who thought their financial situation was strong until the recession hit and affected everyone.

An ever declining economy and increasing interest rates has put many a home owners at the brink of losing their homes as they can no longer afford it. Houses being the most expensive asset that a majority of common people invest in, it is very important for them to hold on to it, and in most cases, mortgage modification is their only hope.

You qualify for mortgage modification if you fulfill the following criteria:

• You are having difficulty coming up with the funds to make your complete mortgage payment
• You have run into sudden and unexpected financial problems that have rendered you unable to make the payment
• You have missed a few mortgage payments, or fear that you are going to miss it in the coming months
• You are living in your mortgaged property
• You haven't filed for bankruptcy
• You still make and have enough to make the mortgage payments when they have been lowered

The toughest part of mortgage modification process is convincing your lending bank that you need it. It can be a tiring and overwhelming process for the user. Honesty and being proactive are the two key factors that will help your cause. When considering you for mortgage modification, following are the thing that almost all banks will take into account:

• The date when the mortgage was started
• The principal amount you still owe the bank
• Your mortgage payment in terms of a percentage of your monthly income

Once you have convinced your bank with proper financial evidence the bank can provide you mortgage payment relief in the following ways:

• The bank can temporarily lower the rate of interest they are charging you
• The bank can permanently lower the rate of interest they are charging you
• The bank can let you miss the mortgage payments for a few months, and continue later
• The bank can extend the total time period you have to return the mortgage loan as much as by 10 years, hence lowering your monthly mortgage payment
• The bank can defer some of your principal amount

Negotiating mortgage modification with your bank can become an arduous task, and you might want to hire professional help or a lawyer to help you through it.