Homeowners are the Losers in the Bailout

With foreclosures increasing and short sales increasingly difficult to get approved by the banks, many homeowners are at a loss given the dwindling options to save their homes.

Sure, you can get a loan modification from your lender and reduce your payments by $300, but you’re going to be in debt for another ten years. That means your total loan term is forty years.

Think about that for a second. Forty years? Is this really in the homeowner’s best interest?

I don’t think so.

Most people need a principal reduction to make staying in their homes a good financial decision. However, most lenders will not voluntarily give you a principal reduction.

What really angers me about the mortgage mess is that the lenders in this country screwed homeowners when they wrote these loans. Then the real estate bubble burst and the United States government wrote them a big check from the taxpayers to shore up their balance sheets.

And what happened? They stopped working to help homeowners! That’s right America, your taxpayer dollars gave the lenders enough money that they don’t need to work with you to keep you in your home.

You see, with your taxpayer dollars, they don’t need to negotiate to save themselves from implosion because your money is keeping them afloat. They have no incentive to work with you.

Even worse, lenders will profit again by handing out bad loan modifications like candy to homeowners who don’t realize they are getting a bad deal. Usually, they include dropping the interest rate to somewhere around 3.5%, extending the terms to forty years, and adding on all undisputed late charges, missed payments, fees and anything else they decide to add on because you won’t know the difference.

Think about how much money the lender is going to make on your loan, even at 3.5% for forty years. A lot!

So how can you make sure you’re not being taken advantage of?

First, get a loan audit.

Yes, they’re several hundred dollars. But wouldn’t you rather know if you were the victim of predatory lending before you accept the lender’s boilerplate loan modification agreement? Sign it and you waive all your rights to sue the lender for predatory lending.

You won’t know if you were the victim of predatory lending until you get an audit.

You have more leverage against the lender if there are violations of TILA/RESPA than you do if you’re begging for their help under a hardship situation. A loan audit and a lawyer in your back pocket will force the lender to deal with you or they know you’re going to sue them.

Second, hire competent legal counsel to review any loan modification agreement you receive from the lender. Part of the problem with the mortgage mess is that the documents that are standard at closing are too complicated for the average person to understand.

Spend the money for an hour with an attorney and make sure you understand what you’re signing before you sign it.

Helped a Friend With A Short Sale

A friend of mine called me yesterday and asked if I knew of anyone who could help him with a Short Sale. That must have been a hard call for him to make. It was akward for the both of us, but I am glad he called because I was able to set him up with a Short Sale specialist.

I hope it works out for him and his family.

These are hard times and they are only going to get worse for everyone.