What is the deal with mortgage loan modification schemes?

Shanelle Missy · Joined: 29 Sep 2009 Posts: 11

I heard on NPR that mortgage brokers who made a lot of money during the housing boom are now making a lot of money doing loan modifications. How is loan modification lucrative? How do people get paid to do loan modifications?

m2c · Joined: 03 Aug 2005 Posts: 937

Very easily – you pitch the “impossible dream” and hope the mark goes for the brass ring. Charge heavy upfront fee – usually in the $3K range – to perform a “service” which nonprofits will do for free. Problem is the nonprofits will give you a realistic view of your chances; the “mod mill” pitches optimism. The salesman rakes off his/her commission and flips to a lawyer, perhaps a predatory law shop. The “money backed guarantee” hook may be thrown out but the omitted word is “full” money backed guarantee. Those within the industry typically receive 5 or 10 emails a week touting the “little work; big commission” line to entice them to mod mills.

Many, many mortgages do not fall under the government’s mod net. Of those even fewer qualify based on the individual circumstances. Why not get unbiased, free advice from a nonprofit? Could even come with a grant or forgivable loan depending on the nonprofit and your circumstances. But then again, why not throw your money away?

There are probably some really altruistic modification companies out there that are truly trying to “right wrongs” and charge a reasonable fee – just hard to find and they usually don’t mail solicitations or send emails. Most of my sympathy goes to the option ARM “suckers” – not a bad loan for the “correct” borrower but sold to a lot of straight salary and blue collar types and/or those you wanted instant gratification of a house they couldn’t afford. A number of years ago you used to run into them when they did rate checking. Usually bragged about their offer of a “1.25% fixed” rate. Do you know why they showed a payment graph for exactly 5 years? OK, read the documents you signed and are in your possession. When you pointed out the terms, their high spirits usually crashed and they backed out of the “no lose” deal. Fool and his money are soon parted but they truly didn’t understand the mortgage and I feel sorry for those folks whose greed got them to sign these mortgages. Less sympathy for most of the mod mill fools. With either of these programs, in most cases the salesman was selling the impossible dream and the borrowers let their greed foster “suspension of disbelief”.

Elmira Nancy · Joined: 13 Nov 2009 Posts: 28

Do it yourself. Most of the companies are scammers, take money and don't achieve anything you couldn't achieve yourself, and frequently achieve nothing at all. The companies collect up front money from the borrowers.

Call you lender and keep calling and asking about loan modification. Ask about how they are implementing Help for Homeowners. Persist.

Most loan modifications are only a reduction of interest rates or a change from ARM to Fixed rate loan.

almsloanmod · Posted: Sat Dec 05, 2009 4:34 pm Post subject:

It is tough making any money in the loan modification business and it depends on what your role is. If the loan officer is negotiating modifications, it is a ton of work and little money, they have DRE and DOJ issues to deal with and a major pain.