Can You Get Your Loan Modified Yourself?

By Joel Persinger
YourRealEstateDude.com

Loan Modification is a hot topic among folks who are struggling financially and hoping to find some way to afford rising house payments. Not surprisingly, a cottage industry has come to life for the purpose of negotiating loan modifications for those who need them. But, what exactly is a loan modification and why would you need someone else to get it done for you?

When lenders are faced with situations in which borrowers are either unable to make their payments or soon will be, only three choices present themselves: foreclose on the property, allow the homeowner to sell the property for less that what is owed (a short sale) or modify the terms of the loan so that the homeowner can make the payments. In both a foreclosure and a short sale it is a certainty that the lender will take a significant loss. However, by modifying the terms of the loan, the lender can preserve the amount of principle owed by altering terms such as the interest rate charged or the length of the loan. The lender wins by minimizing losses and the homeowner wins by avoiding the loss of the home and the financial devastation resulting from a foreclosure.

Over the past week I have been asked about loan modifications by a number of people. Each one told me that such things were not possible. When asked how they came to such conclusions, each one said, “I’ve already tried to get my lender to do that and they won’t help me.” The point they were missing is that some things simply do not lend themselves to the idea of doing them yourself and negotiating a loan modification is among them.

Approaching a lender to modify the terms of a loan is like standing in line at the airport to board a flight. Homeowners fly coach and must wait in long lines and deal with grumpy airline employees when they finally reach the service counter. Real estate and mortgage brokers fly business class. The lines are shorter and the airline employees are nicer, but the service is still marginal, at best. Attorneys, on the other hand, fly first class. They await their flight in the first class lounge, board the plain first and sit in the cushy seats being served by their own personal flight attendants.

As the analogy above illustrates, attorneys enter the negotiation with your lender through a completely different door and deal with completely different people than you do. This is because lenders are afraid of attorneys and you don’t frighten the lender at all. When you call asking lenders to modify your terms, they feel like you’re asking for a favor that they don’t owe you. An attorney approaches the problem differently. The attorney reviews your entire file looking for any mistakes the lender made in the process of selling you the loan. Then the mistakes are bundled into a legal club, which the attorney begins beating the lender over the head with until the lender finally says, “Uncle” and agrees to the modification. This is why my office employs attorneys to negotiate loan modifications for our clients.

So, can you get your loan modified successfully by yourself? Probably not, and if you do manage it, you will likely have gotten less of a modification than you might have gotten if you had used a qualified attorney. Remember, the lender’s employees are looking after the lender, not you. You will need someone who is trained and knowledgeable in your corner if you are going to have any chance of winning.