Loan Modifications Hard to Get- San Diego Business Journal Excerpt
May 5th, 2009 categories: Our Market
As homeowners sink further underwater — meaning they owe more than the falling value of their homes — inquiries about loan modification services are skyrocketing.
“We get 100 calls a week from people who want to do loan modifications,” said Matt Battiata, owner of Battiata Real Estate Group, with 15 real estate agents, who began offering free loan modification services last month. “Out of 100, we’ll probably do 10. The reason is we’re honest and upfront with people about whether they qualify.”
He says many homeowners don’t qualify because they either earn too much or too little.
“There is a strict criterion on who qualifies. If you make too much money, they say, ‘Yeah, you’re upside-down, but it looks to us like you can afford to make pay-ments,’ ” he said.
“If you don’t make enough money, they’ll say, ‘You wouldn’t make payments anyway, so we’re not going to do it.’ ”
Battiata cautions that loan modifications are only for those owners who want to stay in their home.
“If you qualify and the payment is comfortable and want to live there long-term, then you are a perfect candidate. But … the banks are not going to drop your balance.”
Many Default
Of homeowners who seek loan modifications, most end up defaulting anyway, says mortgage broker Mark Goldman, who lectures at San Diego State University.
“Banks aren’t writing down principal,” he said.
In some cases, the banks are just adding the fees to the loan, he says.
Homeowners who couldn’t afford the payment before, won’t be able to afford the modified loan.
“The bank is saying, ‘If I do agree with modification I have to have a high confidence you’ll be able to fulfill the revised conditions,’ ” he said.
Each financial institution has different policies. The willingness to modify loans depends on the institution that owns the note.
“Some companies are more consumer friendly than others,” Goldman said. “But the expectation of a reduced loan balance is unreasonable.”
Legal Ease
Kerry Steigerwalt’s Pacific Law Center, a San Diego firm with 30 attorneys, launched a loan modification department in December and takes 150 cases a month.
“We’re handling 600 cases right now,” said supervising attorney Elmer Heap. The firm has closed only 30 cases.
It charges between $2,200 and $6,000, depending on the complexity of case and mortgage amount.
If the negotiations are not successful, the firm will refund a portion of the fee.
Heap says it’s closed only two cases where the principal was reduced. In both, his clients were living on fixed incomes and his firm convinced the lenders that they should have never been approved for loans.
Most successful cases result in a lower interest rate for a two- to five-year period. The rate then increases before locking in, he says.
In some cases, lenders put the client on lower payments for a three-month trial.
“The lender can see if clients can meet loan obligation, then the loan modification offer will be officially made and put in place.”
He says no one should think that loan modifications are easy to obtain.
“It is a very (difficult) process and it takes time,” he said.
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It’s disheartening to hear that banks who have taken billions of dollars in taxpayer money are unwilling to work with the same people footing the bill for their mistakes. They are not helping to stabilize the housing sector by thwarting the onset of new foreclosures- in fact, I am suspicious that they intend to capitalize on the unfortunate events facing their borrowers.
I’m not usually the ‘Conspiracy Theory’ type but I must admit that I am losing faith rapidly in the ethically bankrupt banking sector. Once again, we the consumer, get stuck both with the effects of poor business decisions and the bill to rectify them and all the talk about lenders reaching out to borrowers to help forestall impending doom is just media fodder with no more reality than your typical urban legend.
Will you write to your lender and your legistlature to complain that you are not getting what you’ve paid for with your billions invested in TARP? I will.
Jennifer Bonasia
you have a very informative blog