Despite a lot of bad press lately, loan modifications do seem to be on the rise. In the past few months I've witnessed a few offers to my clients and I had my buyers lose a home that they had an accepted offer on cause the sellers received a modification. Just today a client called and they had Green Credit Solutions negotiate a modification with Indy Mac Federal.
The terms of this offer were 3% for the next 5 years interest only. After 5 years the rate would be capped at 4.875% and the payment would include principal. The $7500 she owed in arrears is put on the back end. This client had an option arm and was paying the negative amortization payment. This offer is a great deal for my client. I told her to take it and apply as much as possible to the principal so that when the 5 years is up she has paid down her balance significantly. I would like to tell you that I know she'll have equity in 5 years but my crystal ball's batteries just died. The key is that she is able to stay in her home with a payment that allows her to have peace of mind.
I am sure Green Credit Solutions charged her an upfront fee. I am also sure that they earned their money. There are a lot of good companies out there that deserve to get paid for their services and a lot of fraudulent companies that deserve to go to jail for defrauding people. How do you know which ones are legitimate? That is the problem. Loan modification seems to be a growing business in these tough times and because of that we have very little oversight.
I have always said that one of our government's duties is to protect us against fraud. The problem with our government is they react and are never proactive. The con artist are usually one step ahead in the beginning and only get caught because of their greed. Here in California anyone that negotiates anything that has to do with real estate has to be licensed. Yes this does include mortgages unless they are hiding under an institution's California Finance Lender license. An attorney is also exempt from having to be a real estate licensee. The first thing I would do is go to
http://www.hud.gov/ and click on the link for the administrations "make my home affordable" plan. This is the free help that they are talking about. Not really free cause it is subsidized by our taxes but that's another conversation. If you do not feel like the counselors can help you or if they tell you they can not then do your research before paying someone upfront. Most people I have talked to felt like they needed to hire someone because the administration's plan only allows for the loan to be 105% over the current value of the home. A lot of people that I have come across are at least 20% over their current value. When you research a company get referrals, make sure you are hiring a company with attorneys or an attorney directly. If you hire a company that says they are attorney based, then check with your department of real estate to see if that company is licensed. In California the site is
http://www.dre.ca.gov/.
Keep this in mind, if more home mortgages are being modified and avoiding short sale or even foreclosure, we will have less homes on the market. This will help stabilize home prices and eventually get to a normal market. Home prices will begin to appreciate in a normal market as they historically have. If you are someone thinking about walking away from your home just because you are upside down, be patient the housing market always appreciates in the long run.
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