As a follow up to my discussion “What If You Owe More on Your Property Than it is Worth in Today’s Market?”, a savvy reader wrote regarding loan modification companies.  She had been offered a “negotiated loan modification” with charges such as $3000 & $4000!!!  Be very careful out there.  A lot of those companies are not legitimate and will take your money with no resolution.  I would be VERY reluctant to pay upfront for such services.  You can call your lender and ask for a “loan modification packet” or go to http://www.makinghomeaffordable.gov to see if you will qualify for a modification.  Distressed homeowners will often find that you garner no attention from the lender for a modification until you are already late on payments and you want to proceed carefully so as to not let the non-payment go on so long and risk foreclosure with no chance of trying to negotiate a short-sale! 

Treasury Secretary, Tim Geithner and HUD Secretary, Shaun Donovan gave us the “Making Home Affordable” program (but, they may have been a bit optimistic).  The government promised to pay lenders $1,000 for each loan modified, but that hardly covers the administrative costs, and seems little incentive to a mortgage holder whose potential for loss is many times that.  And, even if you are not a proponent of handouts or bailouts, the federal, state and local governments will lose much more if millions of homes are allowed to suffer foreclosure!

In the first quarter of 2009, less than 200,000 loans were modified, and to date, less than 300,000 homeowners have even been offered a loan modification.  To really make a difference, the banks must be willing to significantly lower the outstanding loan balance; merely extending the terms on a loan that far exceeds the  value of a home won’t work.

Please don’t hesitate to call or write if you have questions.

About the Author | Janeese Jackson

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