A Loan Modification Story

September 23, 2009
Matt Isleib

 

I have read numerous articles on this very topic “Loan Modifications”. It seems that those two words to the naked eye would seem normal or a good thing. The problem here the majority of articles I read make loan modifications seem like a dirty word. How could that be? President Obama is constantly calling for banks and lenders to do more and get more loans modified. I have read the articles of the fly by night scam companies who are ripping off home owners by taking their money and promising them to help them get their loans modified and never even processes the paperwork.

 

There are bad apples in every industry need we even begin to list the bad apples in the stock market? There are awful Doctors, worthless attorneys, shoddy contractors do we need to continue? The media and the government for some reason have a problem even for the honest Joes out there to get in the loan modification business. So when I had a past client pop in my office and explain her story curiosity killed the cat.

 

In March of 2006 I pre-qualified T.C. she was a first time homebuyer and ecstatic to become a homeowner. She had a good job in the medical field so she qualified for 100 percent financing at the time. She had a great realtor at Re/Max and they found a condo in Connecticut. She purchased her condo in May of 2006. A year later she called me to try and refinance however at this point the mortgage market was deteriorating so there was no better deal for her out there.

 

So fast-forward to the beginning of August 2009 and in my offices pops T.C. and she seemed troubled. She was looking for her realtor who was not in the office; his office is upstairs from mine. I asked her how she was and she said not that good. She had been un-employed for almost a year and wanted to talk about the possibility of renting her condo or selling it.

 

She had exhausted savings, tapped into her 401k and turned to relatives to help her out financially. Even though she had been un-employed almost a year she was still struggling to make her payments on time with family help and un-employment income.

 

I asked her if she had tried to get a loan modification? She was not real sure what that was. So I explained it to her and said I will help you put the paperwork together and submit the request. She was concerned about how much that would cost and assured her it would be nothing, I wrote her mortgage to buy the home and I was curious as to the process so we decided to give it a try. I helped her fill out the paperwork and we submitted her loan modification request to her lender GMAC mortgage. Four weeks later GMAC offered to reduce her payment from $1,250 to $850 for 3 months and they will revisit the loan at the end of three months.

 

In my opinion that was one of the easiest transactions I have had all year even though I made no money doing it. I will tell you it was extremely rewarding to be able to help her out.

 

If Congress really wants to make a push to get more banks and lenders to get loan modifications done I think the approach needs to be different. Had T.C not come in that day she more than likely would have become a foreclosure statistic. At least now her head is above water and hopefully will find work soon to get back on track. I think a lot of home owners fall behind or about to fall behind and really do not know what their options are. If they did I think we could avoid a lot of foreclosures.