Article submitted by: 911 Foreclosure – Loan Modification Advice
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With millions of homeowners either in, or desperately trying to avoid foreclosure, it would seem reasonable that lenders would be eager to modify the loans on their books before they end up with another foreclosure.
You would think.
But on July 28, the Secretary of the U.S. Treasury had a meeting with representatives of the top 25 mortgage servicing companies along with representatives of ACORN -the Association of Community Organizations for Reform Now, Neighborworks, the Neighborhood Assistance Corporation of America and the National Fair Housing Alliance to discuss the abysmal rate at which modifications are taking place.
Earlier this year, the Obama administration disclosed their foreclosure prevention plan for troubled homeowners. It was estimated that 4 million homeowners could be assisted through this program.
Since then, about 200,000 have received modifications. Considering over 1 million foreclosures have been filed from January to June and another 1.4 million are expected, 200,000 is just a drop in the bucket.
What they are not explaining in the press is the reason WHY these modifications aren’t going through. Since there isn’t very much information about mortgage modifications details, no one is officially saying a reason. Looking at the thousands of complaints trickling throughout the internet, it is apparent that more homes are being denied rather than modified. Now my next thoughts are based on a educated guess rather than fact.
What is the hard part about getting a modification?
The answer lies in a little computation called Net Present Value.
The Mortgage Bankers association held a regulatory compliance conference last September 15 to discuss Net Present Value. A presentation was made to the members of the MBA at this conference discussing:
Net Present Value analysis and Loan Modifications. The primary focus was onhow mortgage bankers and servicers should use Net Present Value analysis to ascertain what is in the best interest of investors?.
Did you catch that? What is in the best interest of the investors not whats in the best interest of the Home Owners..
Without getting too technical, Net Present Value or NPV compares the value of a dollar today, to the value of that same dollar in the future. NPV is used to determine whether investors in U.S. mortgages would be better off modifying your existing mortgage or foreclosing on your mortgage at some time in the future.
The be honest, while all the forms you need to file with your bank when requesting a loan modification may be perfectly filled out, you may still fail to receive one. While you may look perfect on paper to receive the adjustment, your Net Present Value may be less than the Lender margin.Fair? Probably not. But it is the reality of the game. And unfortunately, there is not all that much you can do about it except for this?
If you are speaking to an attorney or other loan modification expert and they say something like We have handled thousands of loan modifications and we’ll be able to get one for you, run like hell.
The fact is, no company or attorney has gotten thousands of loan modifications for anyone! If you are seeking expert advise or assistance with your modification, simply ask them if Net Present Value calculations will come into play with your modification request. 9 out of 10 experts won’t be able to answer you. And you will immediately know that you are not dealing with an expert.
