Homeowners who work with a housing counselor when seeking a loan modification are proven to have better chances of continued success under their modified loan terms.
Many homeowners who receive a loan modification (typically of the extend-and-pretend variety) re-default on their loan within eight months of receiving the modification. However, a study of homeowners who received a loan modification under the congressionally-mandated National Foreclosure Mitigation Counseling (NFMC) program parses the re-default rate of homeowners who received counseling and those who did not. The study revealed 49% of 150,000 homeowners studied who did not receive counseling re-defaulted on their modified loan within eight months of the modification. This is compared to a re-default rate of 36% among 180,000 homeowners who received loan modification counseling.
The greater success rate of the counseled homeowners can undoubtedly be attributed to the extensive experience many housing counselors have when it comes to dealing with lenders and negotiating concessions from them. Since the NFMC program offers free counseling, there is no reason for struggling homeowners to go without the much-needed guidance and expertise of a qualified housing counselor. [For more information on the free counseling services offered by the NFMC program, as operated by non-profit organization NeighborWorks America, go to www.nw.org; for additional resources regarding the free Department of Housing and Urban Development (HUD)-approved counselors under the federal Making Home Affordable Plan, go to makinghomeaffordable.gov; for more information on the frustrations of loan modifications, see the November 2010 first tuesday article, Mortgage modification showdown: Interest rate reductions v. Principal cramdowns.]
first tuesday take: The pipeline of information to the struggling homeowner begins with the well-informed real estate agent. You are the liaison to the generally ill-equipped and uninformed public.
Protect your client from scammers looking to exploit struggling homeowners by informing them they do not need to pay for loan modification services. While the scammer is interested in making a quick buck, the consummate real estate professional works to develop life-long clients who will depend on them for all their real estate-related needs, in addition to word-of-mouth marketing. [For more information on real estate scams, see the June 2010 first tuesday article, Foreclosure prevention specialists: experts at preying on wounded homeowners.]
Primed with the skill to share these valuable resources, real estate agents can simultaneously achieve their duty of protecting the public interest and creating a loyal client base founded upon a reputation of being a knowledgeable and effective advocate.
Re: “Housing Counselors See Better Results on Loan Modifications” from the Wall Street Journal
We are true advocators of do-it-yourself modification as well as educating and empowering the homeowner with the resources at their disposal, many times free of charge. That being said my experience in the years of working in this tainted industry is that often times you get what you pay for.
Unfortunately, there are many bad and unethical companies and law firms out there that charge upfront fees and/or provide empty promises and guarantees. We have successfully helped thousands of homeowners many of those without charging up front fees. I have heard the horror stories of clients that have paid up front fees with law firms as well as worked with non-profit and government organizations. The latter tend to work like molasses. Why? Simply because there is little to no motivation for them to work on the file, since the moment they touch the file they receive compensation through our tax dollars, whereas through a privately funded organization that gets paid based on performance the results typically come quicker since without success there is no charge, so efficiency is key. As such, results can be expected in as little as days, rather than weeks or months.
My intention is not to bad mouth, but to set the record straight, clarify the many misrepresentations and false expectations that exist, since they appear to be endless, especially through the internet and scammers. We are in the trenches of this industry and have been for years and look forward to helping many thousands of more homeowners across the country.