Since the turn of the real estate market, we’ve learn new real estate jargon and terms we never heard prior to 2008. “Short sale”, “REO” (Real Estate Owned), “Bank Owned”, Forebearance and Loan Modifications are terms that many home owners or buyers have to familiarize themselves with.
Loan Modifications are becoming one of the hottest topics. Since 2008, many lenders found that it was cheaper and easier to prevent huge foreclosure losses by modifying the terms of the note with the homeowners who were at risk of foreclosure. In January of 2009, President Obama signed the first of a $787 billion dollar stimulus bill that included money for lenders to modify loan terms to help more homeowners against foreclosure.
Since last year, I started hearing of Loan Modification “Experts” who charged for their expertise in helping homeowners against foreclosure. Some claimed to be attorneys or companies that worked with attorneys. At one point, I was receiving a call or email almost once a week soliciting me to send my “turned down” refinance clients to these agencies. Many of them offering kickbacks or commissions for the referrals which is against the law. Most offered a “100% guarantee for results”, but when I asked them what the terms of the guarantee were, nobody could answer. Some said they were in the contracts but I never found anything that was concrete protecting the homeowners. Sure enough, news reports of companies taking clients money and disappearing started to pop up making local and national news (MSNBC ARTICLE ON LOAN MODIFICATIONS).
I soon took a new policy, which was to tell clients to do the best they could on their own. I knew that it wasn’t always the best answer, but it seemed the only positive reivews I received were from a few homeowners who I knew personally who had success modifying their own terms. However, most I talked to had zero response and did not get positive results.
I was happy to hear that the State of Washington adopted some new laws to protect home owners against Loan Modification scams. First, a Loan Modification company must be either a licensed mortgage brokerage or law firm licensed to do business in the state of Washington. Second, the company cannot deposit funds in their own account until the services have been rendered thus giving the client positive results of the negotiations with the lender. The funds collected by the home owners are held in a trust account and are returned if there is no modification done. Here is a link to the Washington State DFI webpage on LOAN MODIFICATIONS.
I spoke in detail about this and received most of my information from Leslie Dempsey of NEST FINANCIAL. Nest Financial is a Washington State Mortgage Brokerage who primarily works with home owners on loan modifications, forebearance agreements and shortsale negotiations. Leslie has been in the mortgage industry for over 30 years and was a top producing House Key loan originator for Eagle Home Mortgage before leaving to help start Nest Financial.
If you are considering a Loan Modification, please do your research and decide first if you wish to take on the endeavor on your own. If you do decide to seek the advice and service of an expert, do your research first.
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