A lot of Direct Lenders, Banks, Government Agencies and Non-profit organizations are inundating homeowners with messages that Third Party Loan Modification Companies are "scammers" and that borrowers should use extreme caution when doing business with these companies. They tell homeowners that they will do their loan modification for free. !FREE Loan Mod! That sounds great! I'll take it!
Unfortunately as the old saying goes, there is no free lunch...especially when it comes to loan modifications.
I'll give you an example of what I mean. I just called Chase Bank to check status of a Loan Modification sent in on 5/18/09. The first representative told me I needed to wait 6 weeks before I could confirm receipt of the package. I knew that had to be incorrect but she insisted that due to their overwhelming volume that was the turnaround time. She said their was another department that may be able to tell me now and she would transfer me there. Its been 55 minutes and while I'm writing this blog post I'm still on hold. I called back after 15 minutes on my cell phone to see what the issue was, the rep I spoke to informed me it only took 48 hours for them to be able to confirm that my loan mod was in the system but that if she re-transferred me I'd have to get to the back of the line. I'm willing to put 5 bucks down that says if I call again I'll get a completely different answer. As I sit and wait on hold here I can't help but wonder what happened to this particular lenders desire to help homeowners "Acheive the American Dream"...
So next time you hear that you can get a free loan mod remember that:
- Your time is worth money. The banks have total disregard for your time. Their excuse for this is because they are busy, aren't you busy too?
- They ain't doin' nothin' for free. These institutions received billions of dollars ( think T.A.R.P. bailout - $700 billion) to assist with foreclosure prevention efforts and in certain instances get money from the government for doing modifications. They have Loan Modification departments because they are trying to mitigate their losses and prop up their public image, not because they are nice people that want to do things for homeowners for free.
- What most of these free, non-profit agencies do is collect the homeowners information, counsel them on what the possible outcomes are, and either forward the package to the appropriate party or input the information directly in the case of working with a direct lender. Great...now what? The fundamental problem with these services is that there is 0 follow up, 0 accountability for making sure an end result is obtained for the homeowner. 1-2-3 months later when the struggling homeowner wants to speak to someone regarding the status of their loan there is no one specifically assigned to their case, they get ignored, different answers, given incorrect information etc., etc. Take the "Hope Now Alliance" hotline for example. It is nothing but a bunch of "non-profit" agencies that get flat fee stipends from the government based on taking the application and submitting it to the banks directly. Thats the easy part, homeowners can do that themselves (IMHO this is a waste of tax money). The difficult part of successfully closing loan modifications (& short sales) is staying on top of the file and making sure it doesn't get lost in the system. Unfortunately the loss mitigation departments are so unorganized its pretty much a "squeaky wheel gets the grease" environment out there, you have to constantly moniter the files, take meticulous notes on timeline dates given, record contact info of who you spoke to when and be persistent enough to turn the multiple denials into approvals.
Just like small independent Loan Modification companies, big banks offering free loan modifications are doing so to make sure their bottom lines are as high as possible. If you don't realize this you are being naive, plain and simple. An Independent Loan Modification company's lifeline is referrals, without them they might not survive. For an independent, their reputation (i.e.-referrals) depends on how good of a modification they get for you, if they negotiate a killer modification, client is happy, they refer more clients, loan mod company happy. If bank gives client a lousy modification they save money and win, client loses. Remember, banks don't want loan mod referrals, they want to do less loan mods not more. If you deal with a bank directly, you are dealing with a business that never wants to do business with you again. And trust me, they will absolutely make you feel like that. They will belittle you, they will embarass you, they will question your competence, they will question your work ethic, they will be unresponsive, they will be unaccountable. Do you want to be treated like that or do you have an iota of self-respect?
For the Do-It-Yourselfers out there, yes, you can do your own loan mod. You can also home school your own kids, grow your own crops, raise your own livestock, build your own house, fix your own car, do your own taxes, represent yourself in court and research and self-diagnose 80% of most health related issues on the internet. If you want to risk making a mistake due to your lack of experience dealing with banks, spend hours and hours of your own time on hold and deal with the incredible frusturation of working with Loss Mitigation you should do your own loan mod too.
I'll leave you with these two final thoughts:
- What is a banks motivation to give a client the absolute best modification possible?
- After reading this blog post, who are your best interests most in line with?