Rain City Guide

1. Comment from leanne finlay
Time August 21, 2008 at 8:13 pm

Rhonda, Jillayne that 40% quote of loans that were modified have already defaulted was from 8 months ago. Maybe the stat is still the same, maybe not. However, 60% of modified loans were doing well — which seems to me to be a workable solution to a situation that otherwise had a 100% failure rate.

I do agree tho that consumers needing to do a loan modification are far better off paying a recommended attorney, not some ’service’ that has sprung up in the past year or two. Also, many people in short sales might be far better off doing a loan modification instead, and I wonder if lenders are better/more willing to do modifications instead of short sales anyway? Seems like they are.

2. Comment from Mortgage Samson
Time August 21, 2008 at 8:15 pm

First they sold subprime,

Then they sold the Option ARM,

After that FHA was their god,

Now they’re cashing in on the loan mod.

3. Comment from Jillayne Schlicke
Time August 21, 2008 at 8:44 pm

Hi Leanne,

Here’s an article from July of 2008:

http://www.housingwire.com/2008/07/16/subprime-arm-defaulting-despite-loan-modifications/

“Analysts with Moody’s Investors Service said earlier this week that a whopping 42 percent of subprime adjustable-rate mortgages modified during the first half of 2007 had become 90 or more days delinquent by the end of March 2008. That number goes up over 50 percent when you look at previously-modified loans now 60 or more days delinquent.

In the industry, this is called recidivism; and seeing such high recidivism rates among modified loans is the newest wrinkle for a housing collapse that, so far, has been full of them. After all, what does it mean if those borrowers with renegotiated loan terms end up defaulting on them anyway?

“Defaults like this aren’t the result of borrowers needing a small fix to their loan,” said one source, a loss mitigation executive that asked not to be identified. “They’re the result of borrowers so far in over their collective heads, either on credit or affordability, that there is little that can really be done to save the house”

Yes, 60% are doing well; for now.

However, it takes a bank/servicing company an incredible amount of time, resources and money to process loan modifications. These statistics show us that we still have a wide systemic problem: The industry is handing out loan mods like we handed out subprime loans.

The re-defaulting loan mods at a 40% clip tell us that these loans should not have been modified.

This will lead to higher bank losses/write-downs and will lead to higher interest rates and fees for future homeowners.

If the banks/servicers are freezing teaser rates for another 3 years, then what happens 3 years from now when the homeowner still can’t qualify at the fully amortized rate, can’t refi into a new loan and can’t sell?

4. Comment from Jillayne Schlicke
Time August 21, 2008 at 8:48 pm

Hi Mortgage Samson,

How’s it going down there in Florida? Are the banks starting to write down the sales prices of those REOs yet? What about loan mods…..are you seeing the same problems down there with LOs trying to break into this arena?

5. Comment from Kary L. Krismer
Time August 21, 2008 at 8:58 pm

I think the better argument is you can get the same results for free. Finding an attorney who knew how to do this would be problematic, at best.

BTW, I suspect this service would probably come under the distressed property law quite a bit of the time, depending on the circumstances.

6. Comment from Jillayne Schlicke
Time August 21, 2008 at 9:01 pm

Kary,

Ironically, mortgage brokers are exempt from the DPL.

“Finding an attorney who knew how to do this would be problematic, at best.”

Can you say more about this, please?

The LOs are being told that this company has a “pool of attorneys” that process the loan mods.

7. Comment from Susan Templeton
Time August 21, 2008 at 9:22 pm

Hi Jillayne, Any loan originator who only gathered the papers and tossed them at a processor is long gone. Of we LO’s who are still around (I do call myself a mortgage planner, as a member of NAMF, NAMB, WAMB, etc.) it’s because we have taken on the concept of fiduciary as a real responsibility to deliver what is best for the client to the best of our ability. While it’s hard to draw a line on resonsibility (after all I am in business) one could say the guy I did one loan for instead of two in half the time and half the fee is a decent example of walking that line. As the voice of NAMF, I would hope you communicate that responsible LO’s are not just collecting fat checks for carrying paperwork and looking for easy ways to make a buck. It’s pretty darn tough out here and Realtors are not accumstomed to having their clients turned down since only ‘last year’ their self employed guy got 100%loan. Which begs the question: what ARE realtors doing counseling holmeowners in financial distress…is that their responsibility? Whoa! ?

8. Comment from Jillayne Schlicke
Time August 21, 2008 at 9:58 pm

Hi Susan,

Realtors are sometimes the first person a homeowner calls when they finally come out of denial and decide to do something about their pending foreclosure.

Sometimes homeowners are trying to figure out all their options and selling may be a viable option. At that point, Realtors often counsel the homeowners as to the “sale” option. If the homeowner does not want to sell there are other options.

For example, the homeowner could try to refinance or call their lender and see if they qualify for a loan modification. The homeowner could decide to take on a roommate. I’ve seen this happen lately. The homeowner could decide to move out and live someplace more affordable and put a tenant in the home. There are plenty of options for a homeowner to consider beyond selling.

Not all agents are well versed in all these options which is why it is so important to refer homeowners to a HUD-approved housing counseling agency where a homeowner can receive FREE counseling.

9. Comment from Jillayne Schlicke
Time August 21, 2008 at 10:01 pm

Susan says, “As the voice of NAMF, I would hope you communicate that responsible LO’s are not just collecting fat checks for carrying paperwork and looking for easy ways to make a buck. It’s pretty darn tough out here.”

Susan’s right. There are many, many LOs who I meet every week who are really struggling with trying to figure out how to help homeowners who may want/need to refi but might not qualify under the new tighter underwriting guidelines.

There are also many LOs who would not ever consider take a $2,000 referral fee (or paperwork shuffling fee) from a homeowner in financial distress.

10. Comment from leanne finlay
Time August 21, 2008 at 11:11 pm

sorry Jillayne! The 40% quote tho was from your original post. I realize there will be lots of modifications that don’t work, but given the overwhelming burden on lenders to do “something”, even if many mods don’t work, I think there is a majority (over 50%) that appear to be working, and personally, I’d vote for the mods and keeping people in their homes over the high cost to lenders, society and families of foreclosure.

Even if it’s 50/50 that mods will become foreclosures, it seems to me that they are cheaper than a full foreclosure for the lender, and the risk of the second 50% that may fail possibly will be offset by them failing in a bottomed out or near bottomed market. It’s a risk, but lessoning an onslaught of sheer numbers of foreclosures all at one time seems like a smart plan to me.

We can’t have all the failures all at once. Chaos.

11. Comment from leanne finlay
Time August 21, 2008 at 11:15 pm

Jillayne, you quoted “Analysts with Moody’s Investors Service said earlier this week that a whopping 42 percent of subprime adjustable-rate mortgages modified during the first half of 2007 had become 90 or more days delinquent by the end of March 2008″.

I would think that subprime modifications are far more likely to return to foreclosure than other foreclosures simply because those borrower were marginal in the get-go. However, there are foreclosures happening due to value reductions, job lossess, illness, and such where the borrower always has been stable and qualified until the chaos of todays’ market. I wonder what the modification success stats for this group would be? Much higher would be my guess.

12. Comment from Bankruptcy Attorney
Time August 22, 2008 at 12:06 am

Great post. This is a scam. Any good bankruptcy attorney is capable of doing a loan modification without filing bankruptcy. Some real estate attorneys may do it as well. They will also explore the client’s other legal options.

The scammers sell their services by leveraging off the attorney’s bar license.

What you are describing is fee spliting which is strictly prohibited by the attorney’s rules of professional conduct. An attorney cannot share fees with a non-attorney or vice-versa. It can also lead to charges of unlawful practice of law against the person doing the modifciations. The bar takes it very seriously. The rule prevents non-attorneys from influencing the attorney’s judgement.

There is also an inherent conflict. Is the attorney loyal to the client or the scammer? What if a dispute arises between the scammer and client or any of the parties. The attorney’s loyalty to the client is compromised. What about confidentiality? Out the window.

This has been seen in the estate planning realm. An organizer sets up a system to sell services. They sell by leveraging off the attorney’s bar license. They do the work and maybe have an attorney review the documents. As a result it is now a violation of he consumer protection act for non-attorneys to advertise estate planning services.

Attorneys have been disciplined for their involvement in these arrangements. My experience is that only inexperienced or desperate attorneys fall for these types of fee generating arrangements.

Do you want someone who is inexperienced or desperate or willing to violate the rules to work your case?

There are very good attorneys out there who can handle modifications. My advice to clients who need a modification would be:

1. Call the mortgage company and see what they will do for you. They don’t want your house. You may not need a professional.

2. Hire a debtor’s attorney to handle the matter.

3. Consider the benefits of filing bankruptcy with a good bankruptcy attorney.

No reason to throw money away on a scam.

13. Comment from Doug Jones
Time August 22, 2008 at 12:56 am

Hey Jillayne - I think you’re throwing the baby out with the bathwater. I have been a mortgage professional for 23 years and
I have seen first-hand the travesty of the sub-prime and 100% financing that created this mess. Our industry has had more than it’s share of bad actors, especially since the banks stopped paying
attention to ‘prudent man’ rules with respect to underwriting. But our industry also has a lot of professionals who have counseled clients against over-financing just because the banks would let them.

Loan modifications as an “industry” is brand new. Until the lenders started choking on their REOs, there were not very open to modifying loans. It IS a difficult process because each situation is unique, and because the servicer is usually the middleman between the homeowner and the owner of the mortgage. And due to securitization, it’s often difficult to know who the owner of an individual mortgage actually is due to those securities being sliced into ‘tranches’ which are sold to different investors.

I am willing to bet a lot of money that most attorneys don’t know
any more about how to determine the Net Present Value to the mortgage holder of Modification vs Short Sale vs Foreclosure than most of the other players jumping on the Loan Mod bandwagon.
Those calculatons depend on a number of variables that change
daily. I am certain that 99% of homeowners don’t know how to
determine that.

So I belive that there is a place and a need for loan modificaiton
professionals who can not only underwrite the borrowers ability
to pay (full documentation only please), but who can also demonstrate to the lender that the proposed modification will result in the least cost outcome to the ultimate investor. And I believe that
knowledgable mortgage professionals are in a better position that most to be able to do that.

The market will take care of finding the right value for that service,
but I am happy to see that loan modifications are being widely promoted because they are BY FAR the best solution to this crisis.
They keep families in homes, they reduce the financial stress on the family, they are the least-cost solution to the lenders, they keep the
home from being added to the inventory of distressed properties for sale thereby reducing downward pressure on home values for everyone, and they don’t cost the taxpayers a dime.

14. Comment from Kary L. Krismer
Time August 22, 2008 at 7:04 am

Jillayne, I forgot that loan officers were exempt. Apparently this was due to the new laws that went into effect covering them about the same time.

As to what I meant by problematic to find an attorney, it’s not really a category of attorneys in the phone book, and even if it was, that wouldn’t help them find a good one. Finding good attorneys is difficult. That’s all I meant by problematic–I wasn’t referencing the pool of attorneys at all.

As to this pool of attorneys, I wouldn’t necessarily assume they’re good at what they do. This type of thing might be something they even pay to join, so that they get the referrals (further eating into the $1,500). But chances are unless you’re their first, they’ve probably some experience doing this. But again, that doesn’t mean they’re good.

I advised debtors for 20 years, and I never did this sort of thing, and I don’t know that I know anyone who did.

15. Comment from shane
Time August 22, 2008 at 7:22 am

Who still uses a phone book?

16. Comment from Michael P Lindekugel
Time August 22, 2008 at 7:23 am

its snoopy Jillayne keepn’ the man down from makn’ a buck. gee whiz.

Bob “Bubba” Johnson
Official Registered Mortgage Planner Specialist
Dewey, Chetham, & Howe Mortgage, Inc.

17. Comment from Kary L. Krismer
Time August 22, 2008 at 7:45 am

Qwest Dex (Dexknows.com), whatever. The point is finding a good attorney is tough. Probably particularly tough here because whatever work the attorney does is not public, so the quality isn’t known even by other attorneys.

I really wonder how these workouts work. Do they require the person to file bankruptcy if they have significant other debt? Seemingly they would, or at least have the change be reassessed if they do file bankruptcy.

18. Comment from Jillayne Schlicke
Time August 22, 2008 at 9:46 am

Kary this is an excellent question:

“Do they require the person to file bankruptcy if they have significant other debt?”

I will ask this question next week when I attend one of their local “sales” presentations. It’s free by the way. If anyone wants to go, next Wednesday’s presentation is especially for Realtors. Then there’s another on on Sept 26 especially for Mortgage Brokers. Let me know and I’ll email the link.

If the borrower has significant other debt and does not qualify for the loan mod because their overall debt to income ratio does not meet loan mod guidelines, I’d imagine that filing bankruptcy would only mean more write-offs for banks.

I can’t imagine that the banks would encourage that.

19. Comment from Susan Templeton
Time August 22, 2008 at 11:44 am

Hi Jillayne, I still say that realtors have no business counselling homeowners under duress unless they intend to become licensed mortgage ficudiaries. Of course, I refer homeowners to realtors to asses their current home’s salability if that is an option to get a fuller picture of the options. Realtors should never be discussing a client’s financial situation unless they want a big fat law suit later for their trouble!

Which begs the question: Why are you running down LO’s in the realtor world anyway? Lost of decent LO’s are learning the ever- evolving new ropes daily in an effort to better serve our stressed clients and to help preven such tragedies in the future. I thought your organization was developed to promote best practices not bemoan stupid ones? Do you run down realtors for “tossing a bunch of papers …and collecting a fat check” in LO circles? I hope not!

20. Comment from Jillayne Schlicke
Time August 22, 2008 at 11:56 am

Hi Susan,

Realtors absolutley must understand what’s going on with their clients finances. For example, if a homeowner is considering a short sale, it’s imperative that the homeowner understand that short sales are reserved for people in financial distress; for people with no money. Homeowners need to hear that up front so they can make an informed decision.

21. Comment from Jillayne Schlicke
Time August 22, 2008 at 12:02 pm

Hi Susan,

The “best practice” that I am promoting in regards to this article is for LOs and Realtors to refer homeowners in financial distress to:

1) their own local, legal counsel; and,

2) FREE HUD-approved housing counseling where loan modification assistance is done at no charge to the homeowner.

and for LOs and Realtors to avoid becoming victims themselves of companies who are asking LOs and Realtors to pay a hefty fee in order to have the “opportunity” to get involved in secret fee-splitting arrangments that might not pass the smell test with state regulators.

22. Comment from Susan Templeton
Time August 22, 2008 at 12:04 pm

Since when are realtors experienced or trained in assessing a client’s financial situation? I should think at the very least the realtor would be advised to rely on the client’s accountant for that persepective, appropriately edited! Who the hell would consider a short sale unless they were in dire straights? It is NOT a realtor’s job to assess this!!!!!
Realtors are are highly trained in the contractual and sales process and legalities of those transactions.

It is my understanding an appropriate distance from a client’s financial state is a matter of law and would otherwise be toeing the Privacy Act line rather closely…i.e., putting a realtor at disadvantage in negotiating failry on their behalf for knowing ‘too much’. I had one client in distress who was very emotionally unwell…and if his realtor had known to what extent he was in the hole it was rather likely they would have swept in like wolves for the kill to underbid his home.

23. Comment from Jillayne Schlicke
Time August 22, 2008 at 12:29 pm

“Who the hell would consider a short sale unless they were in dire straights?”

You’d be surprised.

http://www.raincityguide.com/2008/03/20/question-from-todays-short-sale-class/

Susan, Realtors must disclosed short sales in their multiple listing system so other members of the MLS know whether or not the home sale must be approved by the lender.

If the seller cannot perform on the sale without the approval of a third party, most people would consider that a material fact that must be disclosed to all parties.

Therefore the real estate agent must help the seller make an informed decision about short-selling BEFORE the home is liste. This includes having a heart-to-heart discussion/reality check about the lender’s requirements: The seller must prove they are in financial distress.

24. Comment from Susan Templeton
Time August 22, 2008 at 4:21 pm

Aren’t short sales homes that are legally in iminent state of seizure posted at the county courthouse as a matter or record? I attended a certified short sale class and heard a noted WA attorney expound on the new Distressed Homeowner Law recently– both of which should put anyone off the idea of ‘counseling’ for life.

25. Comment from Jillayne Schlicke
Time August 22, 2008 at 5:09 pm

Not necessarily. Sometimes the homeowner might not be in default….yet.

26. Comment from Kary L. Krismer
Time August 22, 2008 at 5:59 pm

Susan wrote: “Since when are realtors experienced or trained in assessing a client’s financial situation?”

When they were a bankruptcy attorney 20 years prior to becoming a real estate agent!

Seriously, prior to the distressed property law going into effect, if someone want to sell, but was also in financial distress, I’d list their property but also get them to see a bankruptcy attorney, preferably early on. There are things people should be doing months before filing bankruptcy, and with the new bankruptcy law attorneys are less willing (and in some cases unable) to file a bankruptcy if the client comes in at the last minute.

27. Comment from Kary L. Krismer
Time August 22, 2008 at 6:01 pm

Susan wrote: “Who the hell would consider a short sale unless they were in dire straights? It is NOT a realtor’s job to assess this!!!!!”

Agents need to do that do know whether they can do a short sale. A lot of people want to do short sales that can’t because they don’t want to pay the difference between what they owe and what the property will net. The agent needs to be able to understand their financial situation enough to be able to determine that, and later to sell the bank on the short sale process. That’s why only agents that specialize in short sales should do them (and I say that not being such an agent).

28. Comment from Kary L. Krismer
Time August 22, 2008 at 6:05 pm

Susan wrote: “I had one client in distress who was very emotionally unwell…and if his realtor had known to what extent he was in the hole it was rather likely they would have swept in like wolves for the kill to underbid his home.”

If by “in the hole” you mean how much was owed compared to value, chances are the agent(s) already knew that. It’s not a secret in most cases. I always look that up before writing an offer for a buyer.

If you mean instead how dire their financial situation was, then perhaps the agent would avoid taking the listing due to the distressed property law.

29. Comment from Susan Templeton
Time August 22, 2008 at 6:06 pm

Agreed, Kary assessing the financial state of the property transaction is one thing…assessing the financial state of the seller is a very specialized skill and legal resonsibility. One wonders if havng the guts to list a property after counselling the client is such a hot idea and could be construed a conflict of interest.

30. Comment from Susan Templeton
Time August 22, 2008 at 6:08 pm

My ‘in the hole’ client had yet to default on his home but was not meeting other obligations. Dicey territory.

31. Comment from Kary L. Krismer
Time August 22, 2008 at 6:43 pm

That’s where the distressed property law could kick in. So “dicey” is an understatement.

32. Comment from Rhonda Porter
Time August 22, 2008 at 8:51 pm

Jillayne, I’m so glad you wrote this. I did participate in a national conference call about loan modifications where I was hoping to learn how to properly “point” consumers in trouble in the right direction. I honestly do not have enough time to be a counselor nor do I wish to be compensated for this type of transaction–it’s not part of my mortgage practice. However, when consumers contact me, I’d like to have some good advice to send them in the right direction… just over halfway through the call, it turned into a sales pitch much as you’ve described here. I was angered and sick. I hung up…I wish I would have stayed on to learn the nitty gritty–but I really couldn’t stomach it.

Thanks for this post.

33. Comment from Bankruptcy Attorney
Time August 22, 2008 at 9:43 pm

“Do they require the person to file bankruptcy if they have significant other debt?”

You cannot modify the loan on a residence you occupy in a bankruptcy. The idea of giving bankruptcy judges the ability to modify loans has been floated and shot down by the bankruptcy reform folks.

You can sell a house free and clear of all liens (short sale) in a chapter 13 bankruptcy in about 30 days. Much faster than any lenders will approve a short sale in my experience.

34. Comment from Kary L. Krismer
Time August 22, 2008 at 11:22 pm

That’s not what I’m talking about. I’m well familiar with the laws of bankruptcy, having practiced for 20 years.

What I’m talking about is will they allow you to continue to pay $500 a month towards other unsecured debt, and still modify the loan. Assuming they would modify the loan with that other debt in place, how would they deal with that if you then later filed bankruptcy and wiped out that $500 a month payment? Seemingly they’d require you to file bankruptcy so as to maximize the payments you could make on the mortgage, but I could see the politics of this calling for a different result. Maybe that’s not such a concern with the means testing of the new law (something I’m not familiar with). But seemingly it could allow the debtor quite a windfall if they could modify their secured debt and then wipe out their unsecured debt.

Excellent point on the bankruptcy option to short sale, however. I used to think of the bankruptcy process as rather cumbersome, but compared to a short sale it’s much closer to a normal sale (subject to some other concerns).

35. Comment from leanne finlay
Time August 22, 2008 at 11:39 pm

I believe Doug Jones has the best point:

I am happy to see that loan modifications are being widely promoted because they are BY FAR the best solution to this crisis.
They keep families in homes, they reduce the financial stress on the family, they are the least-cost solution to the lenders, they keep the
home from being added to the inventory of distressed properties for sale thereby reducing downward pressure on home values for everyone, and they don’t cost the taxpayers a dime.
—————

I believe that homeowners can get their lenders to do loan modifcations if they are persistent, live in the property, and have convincing reasons as to why a modification is in the mutual best interest of the investor and homeowner. Homeowners - if you don’t feel confident you can do this yourself, find 2 or 3 real estate attorneys, talk to them, and pick one to work with. Keep up with what your attorney does, and learn as you go. You can definitely get extensions on foreclosure dates, and keep negotiations moving along.

36. Comment from Rhonda Porter
Time August 23, 2008 at 8:15 am

leanne, I hope home owners in need aggressively try to have their loans modified as well…and that they’re aware that predators are waiting for them…as they do prey on the weak and fragile.

On the call I was on, a LO asked: what if the home owner doesn’t have $3500? The answer? Family is happy to help and/or they’ll eagerly use their credit cards.

Off point here, but credit cards are the next big mess. Banks are/will be be jacking those rates like crazy and EVERYONE (home owners and renters alike) will feel the pain if they carry balances.

37. Comment from Kary L. Krismer
Time August 23, 2008 at 8:29 am

Credit cards are what caused me to ask the bankruptcy question above. In my experience there are very few people who get into trouble on a home loan that don’t also have significant credit card debt. I don’t see how you deal with one and ignore the other.

In the past one of my suggestions was amending Chapter 13 to allow a home loan to be modified (both amount and interest rate) under a 5 year plan. That would allow all the debt to be dealt with, and only give the debtor relief if they completed a long term plan. It would also eliminate the issue of obtaining bank approval, especially on assigned loans.

38. Comment from Ken Crotts
Time August 23, 2008 at 9:28 am

“Since when are realtors experienced or trained in assessing a client’s financial situation? I should think at the very least the realtor would be advised to rely on the client’s accountant for that perspective, appropriately edited!”

You are right Susan, Realtors are not trained in assessing their client’s financial well being. In fact it is rare that a loan officer will discuss the buyer’s true qualifications with the agent involved in the transaction leaving Realtors to rely on the lenders representations. However the current market is evidence of how well LO have done at honestly assessing the borrower’s ability. By the way, can you enlighten us to the education and licensing requirements for loan officers that qualified them to be financial consultants? Fogging a mirror doesn’t count.

“and if his realtor had known to what extent he was in the hole it was rather likely they would have swept in like wolves for the kill to underbid his home.”

WOW! Wolves? Realtors are required to look out for their clients best interest. Your client should be honest with his agent about his motivation in order to get the best representation possible. The listing agent would not disclose this information any other agent as it would violate their obligation to look out for the clients best interest. I know the “fiduciary” aspect of the lending industry is new, as is continuing education, but agents have always had a fiduciary obligation to their clients, and a code of ethics. Clarification…our obligation to the client was fiduciary until the late 90’s when the laws changed due to the desire to implement better representation for buyers, i.e. buyers’ agents, and the standard became an agency duty to the seller.

As a short sale specialist I do talk to my prospective clients about their financial situation. If they feel they have the income to support their monthly payment over a long period I refer them to free credit counseling like Acorn. I also refer them to a bankruptcy attorney as a routine part of our first meeting. Many are buried in mortgage payments and have tapped savings, retirement, and credit cards to try to keep their home and are out of options. Short sales are just one of many potential solutions for homeowners. The available solutions depend primarily on those homeowners particular circumstances.

Lenders are getting better at loan modifications. 6 months ago the standard reply to a borrower asking for loan modification was to require half of the arrears up front and then pay the remaining balance, in addition to their regular mortgage payment, over 12 to 24 months. This was typically an unworkable situation since the borrower could not make the original mortgage payment in the first place. Those that accepted this type of deal usually tapped their savings or retirement for the upfront payment and then ended up defaulting anyways. Now they are offering to lower interest rates, put the arrears and penalties on the back end of the loan or try to refinance through the new FHA guidelines for defaulting borrowers.

39. Comment from Jillayne Schlicke
Time August 23, 2008 at 9:29 am

Many people have said that the slow market will help get the bad apples out of the industry.

While that may be true to some extent, those that remain still need help/guidance on what to do in these situations.

It’s easy to point out what we can’t do (law.)

It’s more difficult to help people understand what they should do.

For example, this new “get rich quick” scam for LOs where the LO hardly does any work and collects $2K sounds too good to be true.

Imagine if you’re a struggling LO whose income has dropped dramatically over the past year. You may think your only option here is to go for the $2K or refer them directly to their lender and get nothing.

You have a family to feed, your own bills to pay.

Sometimes it’s not that black and white of a decision for some LOs.

It only becomes black and white when regulators say that this is not allowed.

Until then, without a set ethical guidelines, each LO makes that decision on their own. (A mortgage broker could have policies and procedures set up at his or her own company.)

Bankruptcy Attorney says that lawyers have a lengthy code of ethics that’s vigorously enforced. Even Realtors created a Code of Ethics over 100 years ago. (Enforcement of the Realtor Code varies from area to area, which is problematic but we’ll save that topic for another day.)

40. Comment from Jillayne Schlicke
Time August 23, 2008 at 9:36 am

Ken asks,

“By the way, can you enlighten us to the education and licensing requirements for loan officers that qualified them to be financial consultants?”

Sure.

In WA State:

LOs who work for a mortgage broker must simply pass a competency test. No pre-licensing education required. Fingerprints and a background check as well.

LOs who work for a bank, credit union, or consumer loan lender have no such requirement. However, most banks do run a background check. Most all federally chartered banks offer ongoing training. With all other entities, education is voluntary. The duration and quality vary from company to company.

Same could be said for mortgage brokers. It’s all subjective depending on the company.

This will change, though I do not have an effective date for you.

All LOs are going to have to pass a competency test and a background check as well as take a 20 hour pre-licensing class. All LOs, no matter where the work.

HOWEVER, it’s important to point out that none of that education contains a requirement to assess a client’s financial situation. It’s all education in state and federal law.

41. Comment from Susan Templeton
Time August 23, 2008 at 3:34 pm

Jillayne, I think it worth pointing out that unless you have studied pretty thoroughtly or have reasonable experience an LO would not pass the comptency test. In addition we have continuining education credits required every year and oversight by Brokers for Loan Originators working under their licenses, which you yourself participate in. At the moment, we are witnessing a trend of Brokers becoming “CLA Bankers” (brokers moving to Consumer Loan Act status) who are advertising the move to LO’s as ‘no more licensing!’ and ‘no more ysp disclosure’. This has attracted a certain element of folks who have been investigated for violations. The reason they get the same bank status for LO’s is because they hold funds from transactions for an hour or so before reselling the notes. A new loophole soon to be closed? Any insight on this?

I also disagree that LO’s don’t have to be familiar with assessing a client’s financial situation: the very fact all lending (Fannie, Freddie, specific Lenbders) guidelines dictate what are acceptable debt to income ratios and credit scores for a given loan product put us in the position of assessing their ability to repay a mortgage…requiring a very thouorugh analysis of their assets and liablities in context. Our loan analysis software is pretty thourough on these points as are the underwritng systems. Most lenders and brokers are requiring a Net Tangible Benefit discussion with a client about their full understanding of their ability to repay the mortgage for the forseeable future or at least three years.

Any licensed LO in the state of WA is pretty well versed or they wouldn’t be able to get a loan underwritten…much less have their files clear their Broker compliance and get paid!

42. Comment from Susan Templeton
Time August 23, 2008 at 3:55 pm

Ken, Regarding my incendiary ‘wolves’ comment above: the client I was assisting was elderly, legally blind, emotionally unstable, dealing with the loss of a close family member and had already been taken advantage of by a realtor who helped get him into a very high interest rate baloon note held privately by a friend who wanted his home. I had another elderly client with a 300 ft beachfront property and modest home nearly taken down by a lawyer who held his note and wanted to develop his property. Another angel investor, also an attorney, told me he would ‘definately foreclose if given the opportunity’. So yes, unfortunately not all of your compatriots or mine have the right attitude toward treating our clients with repect and fairness.

43. Comment from Rhonda Porter
Time August 23, 2008 at 6:20 pm

Susan, re: brokers moving to become CLA lenders…it’s not all about “no more licensing”. Our company has been licensed under the MBPA and was quite happy being so…the recent passage of laws that were passed at the end of this past session (which there were many doosies) forced lenders (such as correspondent lenders regardless of whether or not they were all ready complying with the state licensing) to become CLA lenders.

The bonding required to be a CLA lender is enormous. We were told by the state they wanted us to have bonds under both MBPA and CLA if we wanted to retain “active” licenses.

We are now CLA lenders–not by choice. We have chosen to retain or MBPA licenses as “inactive” and are told by DFI that when the national licensing goes into effect, this will allow us to easily convert to that.

We are a direct endorsed HUD lender–we’re not hiring convicts to be LO’s. But because we’re large enough to have our own credit lines and our own in-house underwriting–we’ve fallen into this trap.

I can’t wait for national licensing which will include every one who takes a residential loan application: broker, banker and correspondent lender. It’s about time…but it’s my understanding this may take up to 2 years? (Jillayne have more scoop on this).

National licensing will get rid of any remaining fringe and scum that has no business originating loans…if the current market doesn’t weed them out first.

44. Comment from Rhonda Porter
Time August 23, 2008 at 6:22 pm

Ken, re: “the current market is evidence of how well LO have done at honestly assessing the borrower’s ability”

the current market is also evidence of how many real estate agents pushed buyers who could barely fog a mirror to their LO’s…with comments such as “can’t they afford more?” or “well if you can’t approve them, so and so can”.

I’m not saying that this made it okay for the loans to be made or pushed…I’m just saying for every LO that was unethical or not considering a buyers ability–there’s probably a real estate agent out there to match.

45. Comment from Ken Crotts
Time August 24, 2008 at 8:57 am

Rhonda,
You’re right… everyone had a hand in this. LO’s like yourself and the one I use are at the top of the list for ethics, integrity and ability. The 80/20 rule where 20% are doing the business right and the rest fall into another category applies to all of our related industries. I don’t know how many agents act in the way you refer to in your comments but I would likely see a different scenario. Agent fails to get a good pre-approval before showing the customer. They see a house $50,000 more than they can afford, oops, and all the rest in their price range just won’t do. Buyer wants to get that house and either the agent and loan officer do whatever they can to make it happen of the buyer disappears and ends up with someone who can.

46. Comment from Angie
Time August 24, 2008 at 10:41 am

Jillayne, thanks for another terrific post. The ensuing discussion has been fascinating as well.

I am not in the industry–just a person who’s bought two homes and refinanced a few times. We bought our first house in 1998, before financing went completely haywire. I’m something of a numbers geek and watching lending standards completely leave the realm of reality was baffling (as a number-cruncher) and frustrating (as a borrower).
Watching the situation come back to earth is painful, too, even as we are thankfully pretty far from short sales and bankruptcy–knock wood.

I’m prompted to jump into the conversation by Susan’s comment at #41:

I also disagree that LO’s don’t have to be familiar with assessing a client’s financial situation: the very fact all lending (Fannie, Freddie, specific Lenbders) guidelines dictate what are acceptable debt to income ratios and credit scores for a given loan product put us in the position of assessing their ability to repay a mortgage…requiring a very thouorugh analysis of their assets and liablities in context.

Lending guidelines that focus on debt-to-income ratios are missing a big part of any household’s financial picture. In my experience, LOs paid not one whit of attention to other financial commitments that don’t register as formal debt. I can’t help but wonder if this has been part of the “willful ignorance” in the past few years and a big contributor to financial failure among borrowers.

As a large example, childcare. In our family, we have two working parents and children younger than school age. Of course we have a major monthly outlay for day care, which is not exactly negotiable; the income that we use to pay the mortgage wouldn’t be obtainable without child care and its expense. Over the course of several transactions (purchases and refinancing), this was *never* explicitly considered in the analysis of how much we could borrow. Not by our stodgy old credit union, not by the slick-and-sleazy LO from, well, elsewhere.

Of course childcare and other kid-related expenses are common. I’m sure there are many other examples of non-negotiable expenses that simply don’t register in cut-and-dried, computerized credit assessment. But those bills do come due. If folks take on a mortgage with a payment that “the experts” say they can afford, based only on loan-to-debt ratios…leads to some tough choices.

I mean, kids just don’t have a lot of trade-in value these days. Or maybe that’s just *my* kids…

47. Comment from Ken Crotts
Time August 24, 2008 at 11:28 am

The genesis of this market started in the mid 90’s when source lenders (not loan officers or mortgage brokers) came up with the theory that they could provide a loan to every American. Based upon underwriting guidelines and risk profiles a lending product could be produced that, in theory, would provide an acceptable return based upon the associated risk profile. The only question therefore was A. what is the risk associated with a particular underwriting profile and B. what was the required rate of return required in order to offset the risk.

Every loan product has an expected default rate for which the associated cost is spread out over number of loans in total for that product. The cost is expressed as an increase in interest rate above the nominal return required for profit and overhead. The number crunchers who create the loan products and underwriting guidelines thought their computer models had figured the X factor for every type of borrower. That is why a borrower who walked out of the court house with a bankruptcy discharge in hand could get a stated income, zero down loan from the mortgage broker across the street. To them it was simply a matter of charging an appropriate rate of return to cover the expected default costs, overhead and required profit margin. In theory it should have worked. Of course history has proven otherwise. If all of the guidelines had been strictly adhered to, appraisals had been accurate, borrowers had truly stated their real income, and had all of the other moving pieces in the transaction adhered to the profile I’m sure it would have worked, but life just doesn’t work that way.

I’m sure they are back at their computers, at least those still employed, factoring in the new variables to come up with more reliable products. The one thing you can absolutely count on is this; as long as there are consumers with money to spend there will be bankers who will lend them money. For now they have to work out the bugs in the system so the flow of money, for which their existence relies on, will continue.

48. Comment from Rhonda Porter
Time August 24, 2008 at 3:42 pm

Angie, it’s not for LO’s to determine the entire financial picture with items such as childcare as you’ve referenced above. Underwriting guidelines dictate what debts are factored.

Bottom line, it’s for the consumer to determine what their financial picture is. Even if a LO can approve a borrower for a payment of $x and a 40 debt-to-income ratio, doesn’t mean that the borrower should seek out that payment and suck up their mortgage payment. If a credit card sends you a card with a $20k limit–is it your job to max out the card?

Consumers need to be more responsible and accountable for their personal finances. A question I ask my clients is “what payment would you be comfortable with for your total (PITI) mortgage payment?”

49. Comment from Angie
Time August 24, 2008 at 5:04 pm

Rhonda, absolutely. At the end of the day the borrower is the one who signs on the bottom line and takes responsibility for the incurring that debt and for paying it back.

But if people in the lending field now have fiduciary responsibility to their clients; and if, as Susan says, part of that job is ensuring that the borrower is able to repay; then presumably that means taking into account the whole picture, not just what ends up in a credit reporting agency’s database.

In our case we wouldn’t have ever dreamt of taking on anywhere near the maximum loans–or monthly payments–that were “on the table” when we were buying houses. Just didn’t make sense in our budget. Likewise, I would say, it doesn’t make sense that those astronomical numbers were even ever offered at all, since there was no way in the real world we could have actually afforded them…

Well, I guess that’s been the story of the last few years!

Along those lines–Rhonda, I do appreciate your updates about how lending guidelines are changing. We’re hoping to move on to house #3 (converting house #2 to a rental) in the next few years. Some of your recent posts have been very helpful as we’ve been mapping out our strategy.

50. Comment from Jillayne Schlicke
Time August 24, 2008 at 7:44 pm

This dialogue about underwriting guidelines is good.
Now let’s apply those same ideas to loan modifications.

If we did a lousy job of underwriting the loan the first time (and not charging enough money for the risk) then at this juncture, if we hand out loan modifications to everyone…the default rate on loan mods will continue to be high.

Leanne says it’s better than a huge wave of foreclosures.

But this also means the entire mess will be drawn out years and years into the future. Most of the loan mods being offered are at the 3 and 5 year juncture, for example: Teaser rate fixed for an additional 3 years.

51. Comment from Jillayne Schlicke
Time August 24, 2008 at 7:48 pm

Angie I can remember when my both my children were in daycare at the same time. Those days, my mortgage payment was less than the cost of daycare. That was over 10 years ago. I’m sure full time daycare costs are even higher now.

Angie says, “But if people in the lending field now have fiduciary responsibility to their clients; and if, as Susan says, part of that job is ensuring that the borrower is able to repay; then presumably that means taking into account the whole picture, not just what ends up in a credit reporting agency’s database.”

This is correct. This is what concerns me about mortgage brokers/LOs jumping into the loan mod business.

Fiduciary duties means much, much more than just helping a client delay a rising mortgage payment for 3 years.

52. Comment from leanne finlay
Time August 24, 2008 at 10:31 pm

JIllayne, I believe the lenders want this to be drawn out over years, and so does the Fed.

We can’t have it all “work out” all at once, or we face collapse. For those who are in loans they can’t pay, either due to intensly bad terms in the first place, or for those who are down on their luck, health, or job income … let’s allow the lenders work out their modifications with buyers, and let this mess gradually unwind.

I have never heard that the word “gradual” is a negative word. Hurry up, is usually bad. Let’s allow some grace here, and some cures, and see how that goes.

Fiduciary or punishment? I personally think let’s figure out how many of these loans will find their way to success with some hand holding, rather than just put cement boots on them and sink ‘em now.

Some will still lose their homes, and others will find ways to stay in them. 50/50 odds perhaps, but for the good of the whole, let’s allow some grace.

I am not the only one who believes this is the most prudent course of action on the part of lenders. There are many economists above my skill level that want this course to be able to play out.

I’m not sure that “years and years” will be the course either. When things are falling apart for individuals, it doesn’t take years.

In my view, a slow work out won’t forestall everything, not even close. But, it will help many who are wobbly, and allow many to regain their footing. 3 years to 5 years can make a world of difference.

And, if in 3 to 5 years, we’re still hurting, well then, how really did it hurt? Do you want a fire sale today, or the long, slow train of a leaky air mattress? I like the leaky air mattress myself. I hate fire sales, and disasters.

My bet is on the realities of life — we have needs to move during our lives, as well as desire. We’ve all been in this odd waiting game in the last year or two, and I don’t think the waiting is going to want to continue. Just my hunch.

The majority of homeowners have no credit problems, nor did they do sub prime loans. We are a nation of “fence-sitters” right now — so many too worried to move. When we all get sick of waiting for “permission to move”, things will unplug, and we’ll see a decent market, not this current market of doom & gloom.

A confused mind takes no action.

At some point, that confused mind, says ” I have a need, and I’m solving it. “

53. Comment from Roger Ingalls
Time August 24, 2008 at 10:40 pm

Jillayne:

Fascinating post, thanks for taking up the subject! Sorry to show up at the party so late…

1. Unless there is a NEED for bankruptcy, I cannot see where LO’s or attorneys are needed for loan modifications. I know of someone who successfully modified his 1st, 2nd and 3rd loans (3 different lenders), despite not being all that fluent in English or finance. That tells me there is not a lot of “value added” to the proposition by the presence of a loan mod specialist or an attorney. All that should be needed is a decent call center at the lender, with an escalation department prepared to interview the borrower and take in the new information and documents, and an underwriter to assess the risks associated with the modification (and if these do NOT exist, how does having an attorney or a motivated LO help?). It’s not like the borrower can benefit from “shopping around”, or is insufficiently motivated to get the modification done!

Are these loan mod specialists advertising that they can negotiate better terms than the borrower is capable of? If so, I would expect the banks to quickly discourage such costly intermediaries, and refuse to deal with them!

2. It would seem that banks are ramping up production in loan modification, and will soon be able to more of them, perhaps to better effect.

3. As for the discussion of LO’s being financial advisors (Susan T) that are vastly superior to REs….well, I think that’s a bit of a stretch (oh, I’d like it to be true!). We should be specialists in finding the best mortgage solution for the client, then matching a willing borrower to a willing lender, using the available guidelines. We are not responsible for telling people how to allocate their grocery or child care budget, nor should we pretend to be. However, as decent human beings, we should be willing to discuss with the borrower all aspects of a borrowers ability to handle a mortgage, along with their other obligations, and help them find a comfort zone.

4. Whether you are regulated under MBPA or CLA, whether by active choice, or inactive choice, is not the best determinate of who will do the job best for the consumer. I preferred the MBPA, for many reasons, but the broker I work under chose CLA, again for many reasons. I chose to stay at the broker I am at now because of their commitment to rigorous compliance and ethical behavior. I cannot see that my behavior has changed at all under either, and I doubt that Rhonda or Susan’s has either.

5. Jillayne, I think the banks MUST kick this problem down the road (offering shaky loan mods instead of foreclosures), until some semblance of stability and predictability returns to the market. The risks of correcting it all at once are huge, and painful, both for the banks, and the rest of us. I know there is lots of blog support (CR) for the “take your medicine all at once solution”, but I think that is an “Ivory Tower” position, not “down in the 9th Ward of NOLA” position. There will be pain, either way, but I’d prefer to see it gradually, so that the greatest number of people can make the necessary adjustments.

In the meantime, let’s keep hoping for a better tomorrow.

54. Comment from Roger Ingalls
Time August 24, 2008 at 10:50 pm

Ken Crotts

re #47.

Nicely put.

55. Comment from Kary L. Krismer
Time August 25, 2008 at 6:38 am

Regarding #47, specifically the second paragraph, I attribute what happened to the lenders trying to apply the credit card model to home loans. With credit cards they eagerly make loans to unqualified borrowers because the overall default rate is low enough that they still make a profit. And they still make that profit largely because people in trouble will struggle to make the payments far longer than they should–well beyond the point in time that they should have realized they dug a hole too deep to get out of.

The problem with house loans was that they discounted the risk due to the loans being “secured.” Thus, where X% would be an acceptable default rate with credit cards, they thought that (X + Y)% would be an acceptable default rate with home loans, because they could always fall back on the security (and because people would tend to pay home loans before credit cards, and because there were restrictions on what could be done with home loans in bankruptcy, etc.). But the whole analysis falls apart when you throw in the possibility of prices declining, sort of like how California energy deregulation fell apart when prices increased. Add on top of that some companies focusing on short term results, and you have a really nasty combination.

56. Comment from Kary L. Krismer
Time August 25, 2008 at 6:53 am

As to the topic of stretching out the pain, or getting it over with fast (like pulling off a bandage), the only real choice it to stretch is out.

News flash: Bill Gates never was the richest man in the world. If he’d ever needed to liquidate his holdings, the value of MSFT stock would have fallen significantly. That’s because you don’t really need that large of a percentage of a company’s stock to be sold over a short time to destroy the value. The same is true for houses.

I have no idea how many houses there are in King County, but as of the end of last month there were 12,288 for sale in the NWMLS system. People consider that a high number, but it’s possibly less than 1% of the total inventory, and a large percentage of those merely want to sell, they didn’t have to sell. If you made the percentage that had to sell at any one point a significant number, prices would fall dramatically. And if that happened, I’m fairly certain even the value of performing loans on bank’s books would need to be written down, and the banks would need to record large losses, leading to much worse instability in the financial markets.

If on the other hand you manage to stretch things out, the price declines will not be so great, and it’s even possible that the allowances for losses taken to date will turn out to be excessive. But of course, just stretching things out, by itself, won’t be the complete solution. You also need the economy to do sufficiently well to come close to at least maintaining prices. But absent stretching things out, the economy will not perform well. So that leaves little choice.

57. Comment from Rhonda Porter
Time August 25, 2008 at 8:29 am

Thanks, Angie! I was also coming from a recent conversation w/a buyer in a long contract (new const) who had used the builders lender and no longer wants the property. Their income has changed significantly and there’s decent (non-refundable) earnest money on the line. This person qualified for the home stated income and feels wronged by the lender. (I’m not the lender). I asked this person, “what made you think you could afford this mortgage payment?” which was 2/3 of their gross monthly income (not only insane–it’s impossible)…their response was “I was young and wanted the house”.

Who’s fault is this? The niave buyer? The builder’s LO who would do anything (including stated income) to shove more buyers to the builder? It’s sick no matter which way you look at it.

58. Comment from Rhonda Porter
Time August 25, 2008 at 11:42 am

Jillayne, would you mind “bolding” the paragraph that reads:

“Consumers reading this blog: Loan modifications are performed by a lender with no fee to the homeowner. HUD-approved Housing Counseling Agencies perform loss mitigation/loan modification services for free. These agencies are supported by our tax dollars.”

I just received a call from a consumer who needs help w/a modficiation.

59. Comment from Jillayne Schlicke
Time August 25, 2008 at 12:22 pm

Sure thing, Rhonda. Done.

60. Comment from Thomas Hargreaves
Time August 25, 2008 at 5:24 pm

I agree with $ 3500.00 being too much of a fee, but the L.O. is gathering all the information, finding the client, speaking to the client about ALL of thier income and assets to determine if a Loan Modification is actually a choice. And if not if you are with a good company, they can help put together a short sale. However the client should never be charged any more than one months payment for this work. Yes it can be done for free. Will the client do it, most of the time they will not as they are easily intimidated. An outside party will look for the best deal they can get for the client and understand what the lender is looking for. The company doing seminars for L.O. is just cramming their bank account with sign up fees, and then those L.O.s who are all pumped up about making tons of money are going to be in for a big suprise when they find out it is just not there.

61. Comment from Rhonda Porter
Time August 25, 2008 at 6:33 pm

Thomas, instead of collecting a fee, such as one month’s mortgage payment (which the home owner is in dire need of) why not encourage them to contact a HUD approved agency, as Jillayne has recommended? This would be FREE. You could even initiate the call w/a conference call if the borrower is that itimidated to reach out for help.

Who knows, you may wind up with referrals down the road from a kind gesture directing a home owner in need to the right resource without taking money from them (that they obviously don’t have).

62. Comment from Jack
Time August 25, 2008 at 7:30 pm

Almost no one is aware of this law, some states, CA, CO, MD to name a few have had this law on the books prohibiting this business.

Prohibiting “Foreclosure Consultants”
Those Who Say They Can Get Your Loan Modified, Prevent, Postpone, Or Reverse The Effect Of Such Foreclosure With Your Lender For A Fee.

On July 23, 2008 the U.S. House of Representatives passed the most comprehensive response yet to the American mortgage crisis by a vote of 272-152. The American Housing Rescue & Foreclosure Prevention Act, H.R. 3221, is intended to help families facing foreclosure keep their homes, help other families avoid foreclosures in the future, and help the recovery of communities harmed by empty homes caught in the foreclosure process.
The bill would prohibit non-HUD approved agencies from providing ANY foreclosure assistance. The bill defines “FORECLOSURE CONSULTANT” as:meaning a person who makes any solicitation, representation, or offer to a homeowner facing foreclosure on residential real property to perform, for gain, or who performs, for gain, any service that such person represents will prevent, postpone, or reverse the effect of such foreclosure;
While the bill presents great opportunities and resources for HUD approved counseling agencies, the legislation limits the participation of all agencies in the foreclosure counseling process (even those that are tax-exempt). It is interesting to note that enforcement authority over “foreclosure consultants” is granted to the FTC, but the FTC does not have direct enforcement authority or oversight of tax-exempt organizations. There is, however, a private right of action.
The bill does not include
(i) an attorney licensed to practice law in the State in which the property is located who has established an attorney-client relationship with the homeowner;
(ii) a person licensed as a real estate broker or salesperson in the State where the property is located, and such person engages in acts permitted under the licensed laws of such State;
(iii) a housing counseling agency approved by the Secretary;
(iv) a depository institution (as defined in section 3 of the Federal Deposit Insurance Act (12 U.S.C. 1813));
(v) a Federal credit union or a State credit union (as defined in section 101 of the Federal Credit Union Act (12 U.S.C. 1752)); or
(vi) an insurance company organized under the laws of any State.

63. Comment from Jillayne Schlicke
Time August 25, 2008 at 8:08 pm

“The bill would prohibit non-HUD approved agencies from providing ANY foreclosure assistance.”

So Jack, Thanks for the copy/paste on HR32321. I typically delete copy/paste comments but I have a question for.

The link you provided in your name sends us to your website where you’re selling loan modifications.

Question: Does this new law put you out of the loan mod business or do you have plans to become a HUD-approved counseling agency?

64. Comment from Jillayne Schlicke
Time August 26, 2008 at 9:23 am

FYI:

I just received this in my inbox this morning:

“Earn clients for life.

Foreclosures are at an all time high.

Lenders are motivated to negotiate.

Turn your declines into cold hard cash

Our Rate Modification Services can help you the real estate/mortgage professional triple your income this year and feel good about helping your clients.

Our attorneys and paralegals do all the work.
Our processing center does all the customer service.
95% success rate, money back guarantees.

You just sell the program and make big commissions.
Average commission is $2,000 to $4,000 per deal. You control the money.

Instant cash to keep your doors open!
Referrals unbelievable…

Don’t miss out on this it won’t last forever.

Call us now at….”

65. Comment from Roger Ingalls
Time August 26, 2008 at 9:34 am

Jillayne:

Welcome to MY world of spam!

That, and the “stated income” commercial loan solicitations.

Sheesh….where are the ads telling us LO’s to just hunker down, work hard, and do the right thing, by getting those that qualify into better loans, while they still can?

Thanks for the expose` on this.

PS The punctuation limits on comments are mildly frustrating….but I suppose I should be glad I am only mildly frustrated today!

66. Comment from Kevin
Time August 26, 2008 at 10:33 am

I think it is simple decision to go to an attorney rather than your lender for a loan modification!
Sure the lender will do it for free but is that really going to give you the help that you need.
If you hire your own attorney you get some one that is on your side. you get the ability to negotiate.
Going with the free lender option “its their way or the highway”.
And jumping into this with a mortgage professional may be a good way to get the right attorney. This is because a mortgage pro wants to build long term clients that he can do business with in the future. No one has the option to forgo the fiduciary responsibility to their clients anymore. If you do you die.
So Realtor’s, Mortgage pros, Title Agents, Processors and any one else directly involved in the housing crisis need to make these networks to survive.
Some of the benefits of these networks will include referral fees it is standard for an attorney to pay those type of fees.
I run a network of many professionals and help them learn how to increase their business by meeting their clients needs first. I manage the network and the clients putting the clients in touch with “The Right People” based on their needs! We get paid similar to a lead broker! But we do far more than collect and distribute leads. We have direct involvement with our attorneys, mortgage brokers, Real Estate Agents, CPA’s, Insurance Agents, Credit restoration companies etc… We tell them the standards they must operate by and this ensures the clients get the fiduciary commitment from all the service providers! This must be incorporated into any ones business plan to survive this industry. We are extremely successful with this strategy and we average 1 new referral for every client we help!
I do not want this to be perceived as an ad so I will not leave My URL I just want to make the point of why Mortgage pros, Realtors and any other professional involved in the financial industries should be pursuing these options! The best thing about networking is you can focus on your own profession and still have alternative answers for your clients!

67. Comment from Roger Ingalls
Time August 26, 2008 at 1:58 pm

Jack:

I’ve tried doing word searches of the bill HR3221 for the words “foreclosure consultant” several times, but I cannot find the passages you are quoting from.

I then scanned through it again, old school style, and still did not see it.

I think I have full versions of the bill. But, it could be me….

Secondly, you refer in your web site to a “Federal High Risk Home Loan Act”

At present, I cannot find a federal version of “High Risk Home Loan Act”.

There is an Illinois State version.

I try to keep up on all of the new federal laws, and at least the WA state laws, but if this is for real, I’d like to see a link to a source, other than your own writings, to validate this information.

68. Comment from Jillayne Schlicke
Time August 26, 2008 at 11:03 pm

So Kevin, how much in referrals are you making when you refer clients to attorneys and how is this disclosed to the consumer?

69. Comment from mary
Time August 27, 2008 at 7:58 am

FYI..you do not need to be a attorney or mortgage broker to OPEN a loan modification business..you can however hire attorney a work for you…and the fees vary..so you do not need to be IN FORECLOSURE but can just be behind or even current on your mortgage..

70. Comment from Susan Templeton
Time August 27, 2008 at 9:18 am

Jillayne, There are loads of spam artists promising action for cheap.

If you want to get a $500 referral fee for making a phone call — (those guys may or may not pay you)? How loverly for one’s reputation to be passing our valued clients over to hacks!

71. Comment from Joe Manausa - Tallahassee Real Estate
Time August 28, 2008 at 2:05 pm

Nice article. I would think that “desperate times call for desperate actions” might be applicable here. Most consumers are not capable of working out their own loan modification and the lenders are not staffed to work it out on their own. I think for the next two or more years, this is a service that will assist the market. I know when I am trying to handle a short sale prospect, when they tell me they still want to keep the home, I have nothing that I can do for them. That is where they need this type of specialist, at least from where I see it.

72. Comment from Sierra
Time August 28, 2008 at 2:29 pm

I’m a mortgage pro, w/ 10 years real estate experience, a RE Broker License and am a CMPS and have spent the last month trying to figure this out because people are coming to me who need help.

I have talked to at least 10 firms who do the modifications and am doing the due diligence on them because most people having trouble making payments, well let’s face it,many of them have no business being a homeowner, and do not have the skills to find a company that will not prey upon them.

So to try and help them keep the home they bought, including assessing their situation, giving them the option of FHA Hope or loan mod, deed in lieu or short sale is a valuable service and I see nothing wrong with a mortgage pro getting compensation for that.

In my search for an experienced group who handles loan modification, short sales and recommends other options, I’ve talked to folks who are obviously out of the subprime phone rooms and passed on them.

I do think $2,000 is too much for a L.O to receive and am trying to figure out how to serve people and still make something for my time, research, due diligence and knowledge putting the client first.

73. Comment from Roger Ingalls
Time August 28, 2008 at 4:03 pm

I could not wait any longer for Jack ,#62 to reply, nor for Jill, #1, to research it, for that matter.

Something about a “pail of water”…..?

The language Jack posts appears to be from a PROPOSED bill, and as far as I can tell, is not currently law, nor a part of HR3221, (which has passed).

The proposed bill is called the

Foreclosure Rescue Fraud Act of 2008 (Introduced in Senate) S 2888 IS

Latest Major Action: 4/17/2008 Referred to Senate committee. Status: Read twice and referred to the Committee on Banking, Housing, and Urban Affairs.

http://thomas.loc.gov/home/c110query.html

(paste the bill number or title in the search)

As we have all learned recently, there is a world of difference between a proposed law, and a passed law, and passing off a proposed law, or non-applicable state-specific law as existing federal law is self-serving at best, and benefits no one except the fear mongers.

Nice job of making it look offficial though, if deception is the goal, by leading with the passed bill, and then flowing to the proposed bill.

“The American Housing Rescue & Foreclosure Prevention Act, H.R. 3221, is intended to help families facing foreclosure keep their homes, help other families avoid foreclosures in the future, and help the recovery of communities harmed by empty homes caught in the foreclosure process.

The bill (would) prohibit non-HUD approved agencies from providing ANY foreclosure assistance.”

parentheses mine.

Here’s a nice link with some advice regarding foreclosure consultants.

http://real-estate.lawyers.com/Foreclosure-Consultants-Pros-and-Cons.html

If someone has better (sourced) information, please, re-educate me. I have been humbled before (often in this forum!), and I am now the wiser for it. Wish I had these past few hours back, though, trying to wade through the mis-information.

74. Comment from Rhonda Porter
Time August 28, 2008 at 4:04 pm

Sierra, what do you think is a fair fee for a LO to receive for assisting with a modification if a home owner can contact a HUD counselor and have it done for free?

75. Comment from Jillayne Schlicke
Time August 28, 2008 at 7:53 pm

Joe, so why not refer your clients directly to their lender, to a free, HUD-approved housing counseling agency, or if you’ve determined that they would be better served by an attorney, to an attorney?

76. Comment from Roger Ingalls
Time August 28, 2008 at 11:45 pm

I could not wait any longer for Jack #62 to reply, nor for Jill #1, to research it, for that matter.

I heard something about them “ fetching a pail of water”…..?

The language Jack posts appears to be from a PROPOSED bill, and as far as I can tell, is not currently law, nor a part of HR3221, (which has passed).

The proposed bill is called the

Foreclosure Rescue Fraud Act of 2008 (Introduced in Senate) S 2888 IS

Latest Major Action: 4/17/2008 Referred to Senate committee. Status: Read twice and referred to the Committee on Banking, Housing, and Urban Affairs.

http://thomas.loc.gov/home/c110query.html

(paste the bill number or title in the search to view)

As we have all learned recently, there is a world of difference between a proposed law, and a passed law, and passing off a proposed law, or non-applicable state-specific law as federal law is self-serving at best, and benefits no one except the fear monger.

Nice job of making it look offficial though, if deception is the goal, by leading with the passed bill, and then flowing to the proposed bill, as if they were one and the same.

To quote,

“The American Housing Rescue & Foreclosure Prevention Act, H.R. 3221, is intended to help families facing foreclosure keep their homes, help other families avoid foreclosures in the future, and help the recovery of communities harmed by empty homes caught in the foreclosure process.

The bill (would) prohibit non-HUD approved agencies from providing ANY foreclosure assistance….”

parentheses mine.

If someone has better (sourced) information please, re-educate me. I have been humbled before (often in this public forum!), and I am now the wiser man for it.

Wish I had these past few