Numbers Game

In the view of some loan-modification specialists, halting as many foreclosures as possible is the best way to address the slide in real estate prices, and collateral damage such as reduced property-tax rolls, underfunded schools and destroyed neighborhoods.

Rice, for instance, says when an investor loses a home to foreclosure it hurts two parties — the renter who gets evicted from it and the investor.

He suggests that lenders temporarily reduce installment amounts investor-owners pay. "A permanent change isn't deserved, but a three- to five-year plan would make sense to get payments down to a break-even level (with rents) while we get through this crisis," he said.
Sometimes, getting borrowers to come forward and seek a loan modification can be a problem because they don't want to admit they're in trouble, says Salvatore Buscemi, managing director of Dandrew Capital Partners, a distressed-real-estate investment fund in New York.
Treading Water

Buscemi buys defaulted paper and repossessed properties from lenders. He says he'll negotiate with any owner on a mortgage he holds — an investor or primary resident. But he says investors walk away more often than owner-occupants, as "it doesn't hurt them emotionally."

And now other investors can use the 1% funding provided by the Home Seller Assist program created by John Alexander to purchase these properties and flip them immediately.

Bedard, who has many investor clients, calls aid bias toward owner-occupants unfair. Many investors "just want to work it out to where they're not underwater," he said.
An investor might hold five or 50 homes, he says, so saving those can have more market impact than saving one primary residence.

Investor Jae Kim, with four Arizona homes, is working with Bedard's firm to seek aid. Four months into negotiating with his lenders, he still can't tell if his loans will be modified.
"I think every borrower should be treated the same," he said. "They've all put their hard-earned money in, whether it's for a retirement home, investment or primary home."

Loan Modifications Are a Mixed Benefit For Lenders

Looking for a solution to the mortgage crisis and the disaster that was caused by the subprime mortgage blowup, governmental agencies as well as lenders have discovered that loan modifications are perhaps offering the best possible solution for the bank as well as the consumer. For lenders, however, loan mods are a mixed benefit.

The guidelines set forth are fuzzy and even though there are few hard and fast requirements, by and large it is left up to the individual mortgage lender to define the scope of their programs. Training bank agents to deal with modifications is not easy since each case is entirely different, and the fact that the entire process is extremely time consuming lends to the headaches experiences by the mortgage industry.

On the other hand, the fact that instead of showing bad debts on their books the lender will have active and paying loans is good news, especially in light of recent FDIC investigations. Investors prefer to do business with banks not weighed down with bad debts and pending foreclosures, and thus it is in the best interest of any bank to work with consumers whenever possible to keep their records showing profits rather than loan failures.

The problems arise when consumers seek to negotiate loan modifications on their own. Not knowing the ins and outs of loan negotiations and not truly understanding the process, they often slow down the entire procedure unnecessarily. In addition, at times there has not been any financial counseling and a modification that is negotiated today might fall flat and become ineffectual within a few short months, in which case the homeowner is once again in the same situation but no longer eligible to modify their loan.

Usually lenders find that negotiating with a professional negotiator makes the process easier, streamlines business, and of course sets up the majority of consumers for the best possible loans, since most professionals are open and up front about the feasibility of the modification the borrower is about to undergo.

Upsetting the industry and the entire process are those negotiators who operate fly by night enterprises and fail to understand RESPA, TILA, or the banking regulations that govern the modifications of existing home loans. Consumers are urged to be careful and exercise due diligence when interviewing potential loan to act on their behalves. You can find out more about loan modifications on the site that we recommend: loan-modification411.com.

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