Want to Hire Professional Mortgage Help?
You may feel most comfortable hiring a professional foreclosure specialist who will negotiate with the lender through out the loss mitigation process. In theory having your own loss mitigation specialist, just as the bank hires to negotiate for them, would be a definite plus. This allows a homeowner to have someone experienced in these matters on their side watching out for their interests.
Benefits of Hiring a Foreclosure Specialist
- Avoid Simple Mistakes – The specialist would be able to easily protect the homeowner from simple mistakes that would otherwise go unnoticed.
- Familiar with Loss Mitigation and Foreclosure Process – Almost all homeowners run into moments of need less anxiety, anger, and or fear when dealing with the loss mitigation department. These false alarms come in many different shapes and forms. The root cause though is that the homeowner is in a alarmingly stressful situation and have no idea what to expect. The most common homeowner break down stems from a sudden fear that something is wrong because of how long the process is taking. Many homeowners left to their own thought processes think that a loan modification should only take a few days to a few weeks to work out. The homeowner eventually gets too anxious to wait and call s in. But depending on what level of absolute clueless the customer service agent is they will typically drive the homeowner into a full fledge panic. This all boils down to confusion, misunderstanding, the stress of financial default, and the stress caused by having a job where you must deal with such homeowners when they are at their worst. All of this can be avoided by the experience of a foreclosure specialist who deals with this process every day.
- Potential Contact Relationships – I can tell you with 100% confidence that the best tool a foreclosure specialist can have is a solid loss mitigation contact at the lender’s office. This drastically makes the entire process smoother and the outcome that much in more favor with the homeowner.
- Past Situational and Lender Experiences – All lenders are a little different and every homeowner’s situation will have major points and events that are solely unique to their mortgage hardship. Having said that if you hang around a negotiation office long enough you will start to run into a few situations regularly. As a specialist you can learn from past homeowner cases and lender antics.
Now before you go running to hire a professional foreclosure prevention specialist you need to be aware of some real problems the foreclosure help specialist and the loan modification industries had with scams running rampant during the housing bust.
Before the Plague
Before 2008 there were a handful of foreclosure rescue or foreclosure specialist companies. There were basically three business models. One of which was thought of as a dishonest homeowner trap by many. There were some that said they all were a waste. But overall authorities were neutral to the industry (which was rather small) but publicly weary of “foreclosure rescue investors” who manipulated homeowners.
The Pre-Scam Era – 3 Types of Pre Housing Bust Foreclosure Help Companies
- Passive Foreclosure Counseling (often Nonprofit) – These companies were rooms full of housing counselors that would help homeowners think out their situation and prepare for attempting to get a solution from the lenders. These companies often collected up front fees, or ongoing membership fees. Also some were funded by outside parties and were free or had small fees. These groups could try and provide some clarity and rarely got involved in any of the solution workouts. Overall not very effective. Mortgage lenders found they liked them though because they kept the troubled borrowers occupied which greatly reduced costs during this process.
- Foreclosure Prevention Specialist (Sometimes Nonprofit) – These companies are simply specialized negotiators. It is a homeowner’s best choice for help in my eyes. These companies typically collected up front fees. Often these services were guaranteed in some respect. This is also the type of company I referenced for the Benefit section above. I am a believer in this particular type of model. I think there are a few identifiable characteristics that make them effective. Having said that I must say I have seen the sales approach get out of hand. A service such as this will not be able to win every time. But a good negotiator will put a homeowner in a better position then a homeowner would do themselves under typical circumstances. The Obama loan modification does narrow that gap considerably. I believe a homeowner in foreclosure can get the same deal through that program despite the one applying in more than half of all circumstances. However, if that program is out of play I think it is best to have a experienced, non emotional, expert third party (who is at least compensated but preferably incentivised to represent the homeowner’s best interest) present the request for help to the lender.
- Foreclosure Rescue Specialist (Accused of being Dishonest Scammers) – (Always For Profit) – These companies were always getting bad mouthed by the previous two types of companies untill they started funding their own housing counselors to recommend the scammers (then only the negotiators took up arms). Classic. These businesses found properties that were in foreclosure and that had suitable amounts of equity. Meaning that the property value was considerably more valuable than the balance left on the mortgage. Once such a property was identified these guys offered to pay off the remaining portion of the mortgage and maybe even some cash back in the form of a hard money loan. These loans had outrageous payment terms. If the owners somehow managed to keep up with payments then great. If they were unable to meet the ridiculous payment terms like the hard money lender expected, even better! the so called foreclosure investor foreclosed on the home and didn’t give a soul a chance to buy it in a auction. they kick the old homeowner out and flip the house for a fat and fast profit. Rinse and repeat.
All of sudden the housing market began to change. As the housing market changed the foreclosure investor scam disappeared quickly because there were no more homes with equity. The other two business models flourished. Then suddenly a new brand of mortgage help started to emerge. Often backed by the claim of a attorney provided service. This was the start of the Loan Modification. This was the start of an outrageously fast growing scam.
The Plague Begins – The Loan Modification Scam
I just want to take a quick timeout… I have to convey an idea and a frustration and my complete surprise of how this all turned out. First let me say that I had a front row seat to it all.
I by that time had started working online. But I very much still had my ear and attention absorbing an insider’s perspective from within several involved businesses and organizations that were actual parts of this fiasco. Both Good, and OK. I was also looking in on the bad.
What perplexes me is that the real story of what it all “was” never came out. I witnessed such a clear clean path to these happenings. But the “paths” were never exposed nor explained. Not once. Until now.
I’ll start by making a few simple claims and accusations. The housing bust was fueled in large part by the origination, funding, and sale of subprime exotic mortgage loans clearly destined to fail. These loans were sold by loan agents who typically were not educated nor knowledgeable about finance related matters. they were prior low income service workers turned into highly motivated sales agents who found unqualified borrowers and convinced them to take really bad loans they would never be able to pay. These new loan agents made tons of money quickly. Once the bust occurred they were all out of a job. They are the salespeople who then started to sell loan modifications. They were the foot soldier. They jumped from one scam to the next.
Once foreclosures started to take off, workers were being laid off, and the once booming business of refinancing, home equity loans, 2nd mortgages, and the new very popular and even more profitable exotic mortgage loans all turned toxic and a army of loan brokers and their offices went away.
I would like to particularly highlight the story of the suddenly almost wealthy and uneducated massive loan agent population that just a few years prior to the bust of 2008 it was about 2003-2004 there was a vast number of poor uneducated GED certified bartenders and Chili Waiters struggling to make over 100$ dollars a day. But in a market far far away something changed.
The Birth of the Loan Modification Scam
New wall street mortgage bond investors that were very different from past bond investors. These folks would margin up their purse 10-1 and buy new mortgage loans yielding 5%. Somehow these folks were able to borrow at short term fed window rates (a few points, today 0.5% annually) which are typically reserved for big bankers funding 20% down, 30 yr fixed rate mortgages, to high income solid credit borrowers.
The new kids on the block ran very private and exclusive hedge funds that the average wealthy Doctor wouldn’t be able to get in on. With the huge cheap leverage power these hedge fund deals were spitting out 50% annual investor returns. Everything was great.
But a small new problem arose. The Extreme significance was overlooked. These private hedge funds Introduced a new and fast growing appetite for mortgage bonds. Wall street was running out of mortgages. Banks and other corporate loan originators were applying massive pressure on their mortgage departments and the mortgage market. Loan originators found a solution.
New more aggressive loan products that promised a higher return that allowed for a riskier buyer.
Let’s sell them new riskier mortgage loans, which won’t matter because its backed by a house that only increases in value. Plus they are backed by mortgage insurance policies. Literally nothing can go but so wrong. Except it did.
Everything they justified the decision with is true except for the claim that housing values only go up. However at that time it was true. This is because housing/land is a kind of fixed resource, so as long as the population increases, and the economy is stable, the real estate values should continue to rise ever so slightly above inflation right alongside the growth of our GDP. But there was a unconsidered factor.
With the new exotic loans, came a new riskier population of buyer, which increased in exact proportion the demand for housing, thus the growth in housing prices was a direct function of the increase in available mortgage borrowers. Which happened over night.
Thus housing prices absloutely skyrocketed past any reasonable measure of where they should have been priced. All was swell for the first 3 years of the teaser rate of the new exotic loans. once the mortgage resets began so to did the reality of eligible mortgage borrowers and feasible populations of homeowners. Anyone who was out of place soon became exposed. This correction became known as the housing bust or the foreclosure crisis.
10’s of millions were out of place and sent back to their rightful position and class of consumer.
pretend loan agents had to find new jobs. As it just so happened there was a new and promising industry that needed the same low caliber sales agent who would sell anything because they didn’t know any better. this industry became known as the loan modification scam.