GUEST POST: Watch Out for Mortgage Modification Scammers!

Our guest blogger is Jon Wagner, home mortgage loan originator with Wintrust Mortgage in Eagan.  You can find more information about Jon here.

 In the last few years, companies have popped up that offer homeowners "forensic loan audits."  They say they will review the homeowner's mortgage loan documents, establish whether the lender complied with federal and state laws, and speed up the process of requesting a loan modification.

The truth is that even if the audit reveals errors in the loan documents, the process very rarely results in a loan modification or rescind.

Even worse, scammers will often make false promises that they will secure a loan modification, a principal reduction, or have the loan fully rescinded.  They they just the string the homeowner along or simply disappear.

Thankfully there are a few things you can do to best protect yourself:

• Don't trust anyone who guarantees results.
• Don't work with anyone who ask for an upfront fee.
• Don't sign any contracts under time pressure and don't sign any that you don't understand.
• Don't stop paying your mortgage, even if they tell you to.
• Don't give anyone your personal financial information, except an appropriate loan help organization.

Fortunately, free and legitimate help is available from the not-for-profit Homeownership Preservation Foundation.  Call 888-995-HOPE or visit their website for more information.  The U.S. Department of Housing and Urban Development (HUD) also lists by state legitimate housing groups that can help homeowners.  You can view that list here.

And of course, we're always here to answer any questions.

Respectfully,
Jon R. Wagner
NMLS: 331960
Company ID: 1048 

p.s.  Are you thinking of taking advantage of today's affordable home prices and historic-low mortgage rates to upsize, downsize, or refinance?  Please call or e-mail us now to discuss your situation.

To Help or Not to Help?

Via the opinion section of the New York Times:

Tens of millions of Americans are being crushed by the overhang of mortgage debt. And Congress and the White House have yet to figure out that the economy will not recover until housing recovers — and that won’t happen without a robust effort to curb foreclosures by modifying troubled mortgage loans.

There is little doubt that the housing bubble, followed by the housing bust, has left millions of Americans with huge debt on an asset that will never be worth what they paid for it.  As homeowners scrimp every last dollar to pay their mortgage, less money is spent in other areas that boost the economy, such as personal investing or consumer spending.

But I think this situation gets to the heart of the larger debate we are having in this country about the role the government should play during economic recessions.  A stronger effort to reduce mortgage principle balances would undoubtedly give the economy a jolt, but some view any intervention by the government as a distortion in the market and an unscrupulous use of taxpayer dollars.  Others argue that the "free market" got us into this situation, and that we are letting our fellow citizens and the larger economy down by refusing to address the root of our economic woes.

Mortgage Modification Mania

President Obama's chief attempt to quell the housing crisis, HAMP, has been woefully ineffective.  The program began as an attempt to modify 3 to 4 million homeowners, but nearly two years after the program began, it is estimated that only about half a million homeowners continue to make successful HAMP mortgage payments. 

While I applaud the attempt by President Obama to help homeowners modify their loans, the truth is that HAMP has been the definition of failure and has had many unintended consequences along the way. 

I think the biggest problem has clearly been the consequences facing those who entered the program but were either kicked out or stopped making the trial payments.  For many of these homeowners, they saw HAMP as a way to stay in their home.  They expected a reduction in their principal or a lowering of their interest rate.  They expected explicit, clearly defined costs and more affordable monthly payments.

However, the more we learn about HAMP, the more we are finding that these promises were far from reality.  Many homeowners have actually seen their payments increase after their modification.  If they could afford their monthly payments before, how could they possibly make even HIGHER payments?  Others have entered HAMP, qualified and made trial payments, and were promptly kicked out of the program.

With HAMP struggling to help homeowners, we've also seen a steep rise in the amount of private mortgage modifications available.  These are facilitated by the banks alone (WF, Bank of America, Citi), with no government backing or assistance.  In many instances, these private modifications have been even worse than HAMP.  In a particularly egregious example that I recently heard, a homeowner about to face foreclosure was told by their bank that they should simply miss a mortgage payment, allowing them to qualify for the bank's private modification program.  The homeowner followed the bank's instructions and awaited the modification paperwork in the mail.  However, the next week, foreclosure paperwork showed up instead.

At the end of the day, it is easy to get sucked into the hype and hope of the modification plans.  Outwardly they seem designed to help homeowners, perhaps one of the few cases where the government might actually be trying to help homeowners rather than banks.  But two years later, I think we can pretty safely throw cold water over this one.

This is where I come in.  My team specializes in short selling houses.  A short sale is not the perfect solution.  It is not a white knight that will save every homeowner from the aches that ail them.  But a short sale is a process with a defined outcome and clear objectives.  Short sales are done by real estate agents with a presence in the local community.  The goal is to get the homeowner out of the house with their credit intact, their heads held high, and in some cases, with some money in their pockets.

If you or someone you know is having a tough time making mortgage payments, please contact us.  We have the experience, skills, and resources to negotiate with your bank and help you move on.  The day that you stop worrying about your mortgage is the day you can start over fresh.