Loan Modifications, the New Mortgage Refinance

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Lots of borrowers are in mortgage loans that considering home values, economic conditions, or ignorance is about to run them into a catastrophic personal financial meltdown. This is a market that really needs professional help–this could be your opportunity. And generating loan modification leads may be the marketing plan.FDIC Loan Modification PlanThe FDIC gave the loan modification market a nice marketing boost by sending out loan mod offers to 25,000 borrowers with IndyMac mortgages. That landed a lot of headlines and even more homeowners wondering where their good deal is.Fortunately, this is not an original idea or reserved for banks in receivership. It is simply a negotiation between any borrower, with a hardship, and a lender to modify the terms of their mortgage loan. Pretty simple, right?Not exactly, but the FDIC and the US government seem to be promoting mortgage loan modifications pretty strongly:In a recent statement by FDIC Chairman Sheila C. Bair she advocates “a systematic and streamlined approach to loan modifications to put borrowers into long-term, sustainable mortgages.” The hope, according to FDIC officials is that this program will be come an industry model.Like FHA loans, if the government thinks it is the solution to the mortgage market recovery it may be a good train to hitch to.Understanding Loan ModificationsHowever, before you jump in with your mortgage shop and loan officers in tow make sure you understand the business. It is different.Loan modifications are full of borrower counseling, paperwork and documentation, knowing the right channels to navigate, and patience. If it sounds like a job for a lawyer–you are probably right–most loan modification businesses are swimming with them.Most basically loan modifications are borrower/lender negotiations built on the following foundations:
Original mortgage loan and lender
Documentation of borrower hardship
Correspondence and notifications from lender to borrower
Borrower payment history
From these core documents a deal evolves, if all goes as planned, and the borrower typically gets some variation of more affordable payment, rate, and terms.Do You Need to Be Licensed?This, like mortgage lending, is defined in each state. Many do require an attorney or some form of foreclosure counselor to be involved in the process.Considering there is a lot of sensitivity to the vulnerability of most of these borrowers look for it to be carefully monitored by States and regulators.Loan Modification Marketing StrategyAlthough it is a challenging loan process to perform the need is significant. Foreclosures continue to rise and more ARM resets are pending in bank portfolios. Combine this with declining home equity and tightening credit standards–you have a perfect storm that is trapping borrowers in impossible circumstances.Considering the continued pressure of the government on banks to consider these loan modifications, the early marketing by the FDIC for the process, and discussions of streamlining these modifications–it might be a strategy you consider.My advice: Learn about loan modifications, start segmenting your databases for qualified borrowers, and begin your loan modification education campaigns.


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