The loan modification business is thriving. With 11+ million mortgages currently in delinquency, mortgage loan modifications quadrupled during 2008. Because of the decline in property values, many homes are currently worth less than the mortgages securing them, and lenders are in an unfortunate position. Consequently, homeowners with adjustable rate mortgages are being coerced into steeper monthly payments they cannot manage to pay.
A loan modification broker, acting for a homeowner, bargains with the lender to adjust the terms of the homeowner’s existing mortgage in order to lower monthly payments and obtain a fixed, rather than adjustable, interest rate. A competent broker will also arrange with the lender to fold into the remaining principal balance any delinquent charges, interest, and/or escrow costs to bring the account up to date and avoid further delinquency and foreclosure.
Although a number of homeowners secure loan modifications for themselves, they are likely to make agreements which leave them with increased loan payments in later years. An competent loan modification broker will procure for the homeowner a better loan modification agreement than the homeowner can obtain by himself.
Loan modification brokers can be self employed agents, or employees of attorneys or loan modification companies. The most skillful loan modification brokers are former mortgage, banking, lending and real estate professionals or attorneys. But because no licensing or training is required, brokers may simply be ordinary individuals who are willing, for a significant fee, to negotiate for the homeowner while having no more expertise than the homeowner himself. Some of these agents have been described as predatory and accused of unrealistic claims, exorbitant fees and of exploiting vulnerable homeowners.
The money generated by loan modification brokers depends on whether they are self employed and determining their own fees, or are working for loan modification companies, attorneys, non-profit or government agencies, and receiving salaries and/or commissions. Brokerage fees are usually 1% of the outstanding loan amount and may (or may not) include any attorneys fees.
The goal of a loan modification broker is to help homeowners to keep their homes, and to avoid delinquency and foreclosure. To accomplish this, a successful loan modification broker must find people whose homes are in danger of going into, or are already in, foreclosure. A loan modification broker must then persuade homeowners that he can skillfully negotiate a loan modification on their behalf because he: (1) has a good track record; (2) has insider information about and contacts with lenders; (3) has extensive knowledge of housing, mortgage and foreclosure markets; (4) has had applicable education; and, (5) has professional credentials/licensure.
A competent broker must then show the lender why a loan modification agreement will make or save the lender money. He must also persuade a lender that it is more beneficial to modify a loan than to foreclose a mortgage. To the degree that a loan modification broker can do that, the richer, happier, and more successful he or she will be.
