The Truth about Loan Modifications

By Joel Persinger
YourRealEstateDude.com

Loan modifications are a relatively new bread of animal. They popped up as a cottage industry in response to the troubled housing market. Real estate companies, having suffered as a result of the slowdown, and attorneys, looking for a quick way to make a buck, began positioning themselves as “Loan Modification Experts.” Not being loan modification experts ourselves, my staff and I embarked on a search for a reputable loan modification provider, to which we could refer our clients. What we found was less than encouraging.

After having interviewed dozens of self-proclaimed “Loan Modification Experts”, we came to discover that no such thing really existed. When asked how many loan modifications they had done, most “experts” were deliberately vague in their responses. Some gave us numbers that meant nothing and some refused to give us numbers at all. Most gave us answers that went sort of like this, “Oh… ah… we’ve signed up 300 clients so far!” To which I would ask, “But, how many loan modifications have you actually completed?” The answers I received ranged from, “Well, that’s hard to say…ah… you know… ah… we’re just getting started” to “Ah… I don’t really track those numbers… but, I can check around and get back to you.” They never got back to me.

The truth is that loan modifications are in their infancy and the landscape is constantly changing. As a result, no-one is an expert and no-one really knows how to get them done consistently. The proof of this statement can be found in an email exchange I had with a young “Loan Modification Expert” who was referred to me about two weeks ago. Following a lengthy discussion on the phone and some emails back and forth, I was finally able to clarify my desires by asking, “What I need to know is, what percentage of the time are you successful in negotiating a loan modification with the banks that is acceptable to the homeowners and is successful in keeping the homeowners in their homes?” It took two days to get the response. But it was quite an eye opener when it arrived. The young man came strait to the point in telling me that their success rate was somewhere around 40%. That means that far less than half of all the loan modifications they attempt are successful.

Many companies will tell you that they are successful in negotiating a loan modification 90 percent of the time or more. What they aren’t telling you is the fine detail associated with that percentage. For example; one company we spoke to was successful in getting lenders to make a loan modification offer 90 percent of the time. However, the overwhelming majority of those offers were so bad that the homeowners did not accept the offers, because the modifications that the lenders offered would not have helped them at all. Actually, you can probably call your bank and get them to offer you the same bad offers 90 percent of the time all by yourself and you won’t have to shell out $3,500 to a “Loan Modification Expert” to accomplish it.

All that having been said, for those who actually have succeeded in getting their loans modified through such service providers, the money spent may have been well worth it. The important thing is to understand the genuine odds of success. From this real estate broker’s experience, the chances of success in a loan modification are a crap-shoot at best. Still, there is a chance and if you’re willing to take the gamble, perhaps a loan modification is for you.