What’s a struggling homeowner to do in the face of monthly mortgage payments? Many are, unfortunately, being taken in by companies claiming to help with loan modification, mortgage refinancing, or–in the latest twist–a loan audit to get their mortgage lenders to cooperate. Some of these options are legitimately complicated, but they’re made more so by practices that are misleading and, in some cases, outright fraudulent.
What are these options, and how should homeowners evaluate them?
Loan Adjustment
Loan modifications have taken many different forms since the onset of the mortgage crisis. Initially, a flood of borrowers looking for relief from their monthly payments (and ineligible for refinancing) overwhelmed mortgage lenders with requests and files to review. Quickly jumping into the market were companies and individuals making big promises of getting mortgage lenders to modify home loans–for an upfront fee.
Unsurprisingly, many of these companies demanding direct payments are scams. The problem has become so prevalent that almost all states have become active in regulating loan modification companies and pursuing claims against thousands of companies nationwide who have taken upfront fees and failed to perform. The Federal Trade Commission proposed a new rule in early February barring these mortgage relief companies from charging upfront fees. The proposed regulatory change has support from Treasury Secretary Timothy Geithner, who said, “Far too many homeowners have paid direct fees to bad actors who promised loan modifications but never delivered.”
Mortgage Refinance
Many Americans who would otherwise be illegal for a refinance have a shot through the federal government’s Making Home Affordable program. If your home is your primary residence, you have made your mortgage payments on time for the past 12 months, and your loan balance does not exceed 125% of your home’s value, you may be eligible for a mortgage refinance through the Home Affordable Refinance Program (HARP). You could lower your monthly mortgage payment, lower your mortgage interest rate, keep your home, and keep your credit rating in good standing.
Making Home Affordable’s Web site has data that may help you with your decision making process as you seek some relief on your monthly mortgage payments. Use this information in speaking to your mortgage broker or lender about your options and a possible mortgage refinance.
Loan Audit
The latest angle many loan adjustment companies are taking is to charge an upfront fee from clients to “audit” home loan documents. The stated purpose of the loan audits is to find flaws where the lender failed to meet disclosure requirements, then leverage those faults in state or federal compliance guidelines to pressure the lender to forgive principal, reduce interest rates, or cancel a foreclosure. The sudden growth of the loan audit industry, and the corresponding increase of consumer complaints against it, has caught the attention of regulators. In California, Attorney General Jerry Brown and the State Bar Association have warned consumers to avoid forensic loan audits, calling them the latest “phony foreclosure-relief service.” Brown went on to say, “The foreclosure-relief industry continues to be long on promises, but short on results.”
As you work through your information gathering and consultations with your mortgage professional, keep making your monthly mortgage payments so you remain eligible for a possible mortgage refinance or some of the modification programs available through your lender.
For many Americans, the hoped-for economic recovery is still far from daily reality. Depressed home values are still common, and recent data from research firm First American CoreLogic suggests that about half of residential mortgages in the worst-hit states–Nevada, Arizona, and Florida–are still underwater. The US Bureau of Labor Statistics’ release of January unemployment figures was grim, with 9.7% of the national manpower still unable to find a job.
What’s a struggling homeowner to do in the face of monthly mortgage payments? Many are, unfortunately, being taken in by companies claiming to help with loan modification, mortgage refinancing, or–in the latest twist–a loan audit to get their mortgage lenders to cooperate. Some of these options are legitimately complicated, but they’re made more so by practices that are misleading and, in some cases, outright fraudulent.
What are these options, and how should homeowners evaluate them?
Loan Adjustment
Loan modifications have taken many different forms since the onset of the mortgage crisis. Initially, a flood of borrowers looking for relief from their monthly payments (and ineligible for refinancing) overwhelmed mortgage lenders with requests and files to review. Quickly jumping into the market were companies and individuals making big promises of getting mortgage lenders to modify home loans–for an upfront fee.
Unsurprisingly, many of these companies demanding direct payments are scams. The problem has become so prevalent that almost all states have become active in regulating loan modification companies and pursuing claims against thousands of companies nationwide who have taken upfront fees and failed to perform. The Federal Trade Commission proposed a new rule in early February barring these mortgage relief companies from charging upfront fees. The proposed regulatory change has support from Treasury Secretary Timothy Geithner, who said, “Far too many homeowners have paid direct fees to bad actors who promised loan modifications but never delivered.”
Mortgage Refinance
Many Americans who would otherwise be illegal for a refinance have a shot through the federal government’s Making Home Affordable program. If your home is your primary residence, you have made your mortgage payments on time for the past 12 months, and your loan balance does not exceed 125% of your home’s value, you may be eligible for a mortgage refinance through the Home Affordable Refinance Program (HARP). You could lower your monthly mortgage payment, lower your mortgage interest rate, keep your home, and keep your credit rating in good standing.
Making Home Affordable’s Web site has data that may help you with your decision making process as you seek some relief on your monthly mortgage payments. Use this information in speaking to your mortgage broker or lender about your options and a possible mortgage refinance.
Loan Audit
The latest angle many loan adjustment companies are taking is to charge an upfront fee from clients to “audit” home loan documents. The stated purpose of the loan audits is to find flaws where the lender failed to meet disclosure requirements, then leverage those faults in state or federal compliance guidelines to pressure the lender to forgive principal, reduce interest rates, or cancel a foreclosure. The sudden growth of the loan audit industry, and the corresponding increase of consumer complaints against it, has caught the attention of regulators. In California, Attorney General Jerry Brown and the State Bar Association have warned consumers to avoid forensic loan audits, calling them the latest “phony foreclosure-relief service.” Brown went on to say, “The foreclosure-relief industry continues to be long on promises, but short on results.”
As you work through your information gathering and consultations with your mortgage professional, keep making your monthly mortgage payments so you remain eligible for a possible mortgage refinance or some of the modification programs available through your lender.
