No Treat for Modification Tricks

Most of us in this business have been approached by friends, family and even clients about loan modifications. We all know folks who are having a rough go of it and are seeking help from their lender to modify the terms of their loans so they can stay in their homes.


We have all heard them say the same thing; “The people at the bank told me they wouldn’t even talk to me unless I was late on several payments.” In many cases, bank personnel have actually advised people to let their loans go delinquent, so they can “possibly” help them! And, many people take that advice and let their payments lapse, destroying their credit with no real commitment of assistance.

Here is the real horror story – Just this morning I heard from a dear friend asking about getting a loan to buy a smaller place since her expensive house just went into escrow. After talking to her I learned that she had been seeking a modification and had taken the banks advice and let her payments go delinquent for a few months. Then suddenly an offer came through on her home and now she is in escrow. But since she has several late payments, she no longer qualifies for a loan.

It is staggering to me that banks actually allow their people to make such ridiculous recommendations to those looking for a modification. Their rational is if you’re current on payments, you don’t need help and that is plain stupid! There are a large number of people doing their best to hold up their end of the contract and make their payments but are in immediate need of financial relief. These are people trying to do the right thing.

Beware of Loan Modification Scams

Anytime people face adversity there are always those waiting in the wings to exploit them and prey upon their situation to make a buck. One of the most prominent scams that have hit our industry over the last year has been loan modification companies. They target people who are behind in payments, facing foreclosure and offer them hope under the guise of expert advice and the promise to obtain a loan modification that will help them get out of their financial problems with their bank.
On the face of it, this appears to be a laudable goal but the reality is that they require some degree of payment up front, and then fail to provide the sought after modification. In some cases, it has been shown that they take people's money and don't even try to obtain a modification. Basically they take money from people who are already facing financial difficulty and often fail to deliver any relief.

Disputing a Bill: Right or Wrong?

Have you ever disagreed with a bill you received from a cell phone service you discontinued; or a doctor bill you were sure you paid? All of us have had to go toe-to-toe with some company or another over errors in billing and in most cases we usually get the problem cleared up and the issue is taken care of.


Then again……..there are those times that you are sure you’re right but they just won’t see it your way, and they send that $25.00 doctor bill to some nasty collection agency. You try dealing with the collector and after you don’t have any success, you simply ignore him until he goes away. Which, he eventually will do.

However, what doesn’t go away is the negative report that’s been left on your credit.

Your Credit Score - The Basics

These days more than ever your credit score is key to not only having access to better loan programs but the score will determine how much you pay in rate and fees. There have been many changes in recent years and Fannie and Freddie have instituted risk based pricing which may impact you if your score is below 740. So it pays to keep your score in good shape.


So how do you do that and what are some of the tricks that can help you maintain a good score?

Paperwork - Should Borrowers Take a Stance?

So how much paperwork do you need to give a lender these days to get a loan? Not that much really, but many people in the market today appear to be uncomfortable with providing much, if any documentation to a lender that is trying to determine if they can safely lend these folks a couple of hundred thousand bucks. In fact, I have encountered an increasing number that simply draw a line in the sand and dictate what paperwork they are willing to part with.


So how did this situation develop and why are these folks playing hardball? And the better question is; should they?

HUD Keeps FHA Changes Small - Perserves a Great Program

The FHA loan program has been a boon to buyers of all types, from first timers on up. It has been a staple in the current market allowing for small down payments, gift money for the down, lower credit scores and not requiring much money in the bank.

Not long ago it was announced that HUD was tightening up guidelines for the FHA product and they discussed increasing the insurance payment, the down payment, raising credit score requirements and increasing the monthly MI cost to the borrower. This was all because the FHA program has become the defacto sub-prime loan in the industry and HUD was losing lots o’ money in the current economic melt-down.

Well this was big news to all of us and pretty scary since much of the loan activity in the past couple of years have been through FHA. The changes that HUD was hinting at could have been devastating.

The good news is that while HUD did increase the up- front MI premium, from 1.75% to 2.25%, they have decided to leave the rest alone. This is HUGE!

Participate in Your Loan

There was a time not so long ago that the loan process was fast and easy. You met with your loan officer, talked for a few minutes, maybe signed a disclosure or two and the next time you had to be involved with your loan was when you went to the escrow company to sign your loan documents. Yes….…those were the days.

Unfortunately, all of that is behind us now. Massive regulatory changes to the industry have made the process more complex and the tightening of lending guidelines requires borrowers to part with far more information than ever before. Expect to have to provide copies of your tax returns, pay-stubs and bank statements as well as any statements covering your investments.