Why Mortgage Servicers Aren’t Telling Homeowners Why Their Loan Modifications Were Denied
Article submitted by: 911 Foreclosure – Loan Modification Advice Read More Articles at: Foreclosure Process and Loan Modification News
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With millions of homeowners either in, or desperately trying to avoid foreclosure, it would seem reasonable that lenders would be eager to modify the loans on their books before they end up with another foreclosure.
You would think.
But on July 28, the Secretary of the U.S. Treasury had a meeting with representatives of the top 25 mortgage servicing companies along with representatives of ACORN -the Association of Community Organizations for Reform Now, Neighborworks, the Neighborhood Assistance Corporation of America and the National Fair Housing Alliance to discuss the abysmal rate at which modifications are taking place.
During the push to resolve the foreclosure epidemic, the Obama administration released in February their foreclosure prevention plan for distressed homeowners.
Since then, about 200,000 have received modifications. Considering over 1 million foreclosures have been filed from January to June and another 1.4 million are expected, 200,000 is just a drop in the bucket.
What they are not explaining in the press is the reason WHY these modifications aren’t going through. Since there isn’t very much information about mortgage modifications details, no one is officially saying a reason. Looking at the thousands of complaints trickling throughout the internet, it is apparent that more homes are being denied rather than modified. Now my next thoughts are based on an educated guess rather than fact.
So why are loan modifications so hard to approve?
The answer lies in a little computation called Net Present Value.
On September 15, 2008, the Mortgage Bankers Association held a regulatory compliance conference. At the conference, a presentation was made to the members of the MBA discussing
Net Present Value analysis and Loan Modifications. The main focus of the conference was to outline out mortgage banks and servicers should employ the Net Present Value results to weigh what is in the best interest of the investor.
Did you catch that? What is in the best interest of investors? They did not say was “what is in the best interest of homeowners”.
Without getting too technical, Net Present Value or NPV compares the value of a dollar today, to the value of that same dollar in the future. NPV is used to determine whether investors in U.S. mortgages would be better off modifying your existing mortgage or foreclosing on your mortgage at some time in the future.
Truth be told, while all the paperwork you need to file with your lender when requesting a modification may be perfectly filled out and you may look ?on paper? like a perfect candidate for a modification, you can still be denied because of an NPV calculation your lender performs. Fair? Probably not. But it is the reality of the game. And unfortunately, there is not all that much you can do about it except for this?
If you are speaking to an attorney or other loan modification expert and they say something like we have handled thousands of loan modifications and we’ll be able to get one for you, run like hell.
Truthfully, no company or attorney has thousands of modification under their belt. If you are seeking “Expert Advice” ask them if they can review your NPV and how it calculates into their modification. 9 out of 10 “experts” won’t have an answer for you. And then you’ll instantly know you’re not dealing with a so called”expert”.
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