How do I get a reasonable loan modification?

March 23, 2009 8:14 PM

How do I get a loan modification without ruining my credit? I have heard many conflicting ideas that range from not paying the monthly mortgage to hiring a lawyer to sue.

I personally don't need one, but my friend bought two homes over a five year period and both of them were negative amortization loans, so now he has balloon payments that he cannot afford. I'm trying to help him but have gotten conflicting advice.

One lawyer suggested not paying for two months because then mortgage companies know how seriously in trouble you are. I have also heard that if you have too much OR too little money, companies won't bother trying to help.

Does anyone know of some comprehensive resources that can be understood by someone who has some, but not extensive, financial experience?

posted by ccpearce5 to work & money (3 comments total)

I think your very first step is calling your mortgage company. They may be open to a mod, as they really invested in mitigate their losses should you default. There are also some government programs that will help with this, depending on the type of loan you have.

(I used to be a mortgage loan collector, but not YOUR mortgage loan collector.)
posted by thebrokedown at 9:03 PM on March 23

Or your friend's mortgage loan collector. Sorry, should read the rest of the question first.

When I left my company, we were one of the most on-the-ball groups for coping with the coming melt-down; other companies were still not on board with mods and other workouts. As time has gone on, though, more and more companies are beginning to see the light. The upshot is, the the bank DOES NOT want the home. They want the money. Many of them are beginning to use modifications to keep folks in their homes to avoid costly foreclosures, then upkeep in an empty home, etc. Please tell your friend to call, and then call again of they don't get a sympathetic rep the first time. Now, the fact that the homes were apparently investment properties (?) may be against your friend, but the loan holder is the place to start.
posted by thebrokedown at 9:11 PM on March 23

Probably one good place to start is the loansafe forums. [Note: I have no independent assessment of the loan modification business that hosts them.] They have subfora for each of the major lenders.

Advice differs in part because different lenders have different policies. Some will work with you under any circumstances, others require you to be behind, some won't work with you if you are behind, and still others are simply swamped and need you to kick them repeatedly until they respond.

Note that there are also significant differences in treatment between homeowner-occupants and investors. The same unpredictability applies. Some lenders treat investors like gamblers, others work with them much more readily than with homeowners.

Professional assistance should probably be limited to an attorney, preferably one with training who specializes in mortgage law. There are scammers out there.
posted by dhartung at 10:28 PM on March 23