Now More Than Ever: Homeowners Need ‘Mod’ Help

The world of home mortgages is not a pretty one. It is filled with uncertainty, frustration and fear. And it is particularly uncertain, frustrating and fearful – not to mention exasperating, nerve-wracking and painful - for those enduring a hardship and seeking relief through a mortgage “modification.” Often, such a modification is necessary to stave off foreclosure.

The Obama administration has launched a $75 billion taxpayer-financed effort to encourage the banks to loosen up and start helping these homeowners, many of whom are in dire straits because they lost their jobs.

But evidence mounts that this program is foundering.

“The banks aren’t doing a good enough job,” Michael S. Barr, assistant secretary of the Treasury, told the New York Times. “Some of these firms ought to be embarrassed - - and they will be.”

The Obama administration has used threats like this – along with the specter of bankruptcy judges writing down outstanding balances to match the current value of homes – to get the banks “off the dime,” But so far, it’s not working. Private lenders aren’t modifying any more loans than they were before the government got involved.

Of the 759,000 struggling borrowers who have received temporary mortgage payment relief under the White House’s loan modification effort, just $31,400 – or a paltry 4% -- have landed permanent changes.

While administration officials coerce and vow to shame the banks, some basic flaws in the Obama program are becoming evident.

• Bank participation is voluntary. There is no penalty for not modifying a loan.

• The program pays the banks $1,000 for each loan they modify and another $1,000 per year for three more years if the borrower avoids foreclosure. But at the same time, the government “compensates” lenders for up to 95% of their losses on foreclosed homes. Add this to the late and legal fees on overdue mortgage payments, and it often becomes more profitable for the banks to foreclose than to modify.

Even with all this, there are many homeowners getting “mods.” For the most part, they appear to be those who don’t go-it-alone, but have been guided to the right legal specialist, often by a financial advisor.

“Homeowners who try to deal with banks on their own fail 8 out of 10 times and wind up spinning their wheels while their hardship continues and late fees mount up,” said David M. Green, a Melville (LI) attorney who has mortgage modification clients throughout the NY metropolitan region.

“A borrower could be seeking a modification with one department of a bank even while another department is preparing a foreclosure summons,” Green explained. “This is because different departments don’t always talk to each other. A borrower seeking a mortgage mod needs an experienced ally who has a good relationship with the banks and knows where to go for the desired results,” said Green. He added:

“Borrowers need to understand that doing a modification is the same as obtaining a brand new loan,” said Green. “It’s a time-consuming process made even more laborious by lenders paying more attention to their underwriting homework and the mountains of paperwork which is sometimes lost or misplaced.”

With the sour economy and rising unemployment, Green sees no slowdown in home foreclosures in 2010. He estimates that more than a quarter of the homeowners in the New York metropolitan area are in trouble.

Even in this environment, Green’s firm is successful in getting loan modifications in 9 out of every 10 cases his firm accepts.

“Typically, a homeowner cuts his or her monthly payments by 30 to 50%. It’s really life-changing,” he said.

Green’s fee for a typical mortgage modification is between $,2,000 and $3,000. Financial advisors who refer homeowners to him get a finder’s fee, “but the real value to them,” Green said, “is the good will they build by helping clients and potential clients stay in their homes.

Green can be reached at (631) 389-3860 or emailed at david@bankattorney.us. For more information, go online to www.bankattorney.us FA

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