Las Vegas, NV – September 1, 2011 – (RealEstateRama) — Many Nevada homeowners have tried loan modification; however, loan modifications just don’t work. Remember that until you have equity in your house, all you are doing is renting. That’s correct! You are renting from the bank! There is no reason to pay off $300,000 in debt when the home you bought is now worth $150,000 or less. Most experts predict that it will take 10-20 years or more for the Las Vegas housing market to rebound. It makes rational sense to walk away and get a fresh start. Surrendering a home worth half of what you owe is not a failure, it’s a business decision. Why would anyone want to modify a loan and wait twenty years (or more) to have equity? For the few who actually qualify for loan modification, they become “renters for life.” Too many people refuse to recog nize a mistake, and then they compound the mistake over and over by spending their entire life savings, 401(k)’s, retirement savings, and even borrow money from family to avoid accepting the reality of the situation. So, the question which needs to be asked is, “Is loan modification the right decision for you and your family?”
30% of people who fall behind on their mortgages catch back up. This means that if the banks wait long enough, they know that you will borrow money from your 401(k), your credit cards, your family, or wherever else you can find it so that you catch back up on your mortgage. This is precisely why banks will not work with you until you are months behind on your house payments, after which, your credit has already been damaged. Additionally, almost half of the people who do receive modifications fall behind again within 6 months. The banks know there is a good chance that any effort it puts forth to modify your loan may result in a failure. This is why banks offer “trial modifications.” The trial modification is just another tactic which banks use to trick you into paying additional mortgage payments (up to six months worth) before they deny your loan modification, or foreclose.
We have all heard the same story over and over. It’s the story about a family who gets behind on their mortgage payment, and applies for a loan modification to try and save their home. After waiting many months, the loan modification is denied, and the bank recommends that the homeowner do a short sale. While this story may sound familiar, there is another story, which is much more frightening that is not being told.
Has anyone noticed that banks require homeowners to prove they have the ability to make their mortgage payment as criteria to qualify for a loan modification? Excited homeowners, eager to cooperate and do whatever it takes to qualify, submit their tax returns, pay stubs, bank statements, 401K’s, IRA’s etc., to the bank hoping that their loan will be modified.
After submiting your financial information in good faith, the majority of loan modification requests get denied, at which point banks typically recommend doing a short sale. Now, here’s the frightening part. To qualify for a short sale, you must prove to the bank that you are experiencing financial hardship, and cannot afford to make your payment. Does anybody see the irony (and danger) of the above situation?
Moral of the story: Do not trust your bank. Have you noticed that each time you call your bank; the pre-recorded voice says, “Please be advised that the bank is a debt collector attempting to collect a debt?” This is because the bank does not represent you. Bankers are not your friends and they have no interest in helping you to modify your mortgage.
So why do some homeowners still think loan modification is something worth trying? According to Lois Lee Greer, Nevada Short Sale Expert with Caliber Realty Group, “Many homeowners still fear short sales, because they’ve been told that banks can come after you down the road for a deficiency judgement lawsuit. What homeowners do not realize is that most banks now include verbiage in their short sale approval letters waiving the right to pursue legal action against the homeowner.” Greer adds, “Even Bank of America, who used to have the worst approval letter in the industry, now includes verbiage which states that they will not come after a homeowner upon sucessful completion of a short sale.” According to Greer, “There has never been a better time to do a short sale.”
Some banks require that homeowners pay a promissory note as a contingency of obtaining short sale approval. A promissory note is a note requesting that a homeowner re-pay (over time) all or a portion of the deficiency (the difference between what is owed on the mortgage versus what the home is currently worth.) According to Greer, “The majority of our clients have NOT been asked to pay any promissory note amount; however, the clients who have been requested to pay are usually the people who applied for loan modification. This is due to the fact that clients who applied for a mortgage modification went to great lengths to prove their ability to pay, thereby dimishing their hardship in the eyes of the bank. What homeowners don’t realize is that applying for a loan modification may put you in a position where you are more likely to be sued by your bank. The less the bank determines your hardship to be, the greater chance that they will request a promissory note.”
To add to the confusion, the Federal Trade Commission recently announced that effective January 31, 2011, Nevada loan modification companies are banned from charging up-front fees for negotiating modifications of residential loans. According Greer, “The loan modification industry has been very misleading for homeowners. Government assistance programs such as HAFA, HAMP, HOPE NOW, and the Making Homes Affordable Program have been failures due to the fact that bank participation is voluntary.” According to the Las Vegas Review Journal, “Most homeowners in Las Vegas are so far upside down on their homes, (owing significantly more than their home is worth) that they don’t qualify for the government’s $75 billion Home Affordable Mortgage Plan.” According to Eric Witksoki, Chief of the Attorney General’s Bureau of Consumer Protection, and the state consumer advocate, “Money spent on mortgage modification consultants is a bad bet for consumers.” Additionally, Witkoski commented that spending money on loan modification is “worse than some of the odds at the casino tables.”
“Homeowners should think twice, before considering loan modification,” said Greer. “If applying for a loan modification is going to place a homeowner in a worse position than doing a short sale, then homeowners need to make the right decision for their families. This is why the FTC has stepped in and cracked down on the loan modification industry.”
In 2010, The Myers Team with Caliber Realty Group was ranked the #1 Short Sale Team in Nevada. The Myers Team has successfully closed more short sale transactions and negotiated more short sale approvals than any Realtor or Broker in our state.
For Non-Short Sale listings visit http://www.LasVegasList4Less.com
About Lois Lee Gree
REALTOR, The Myers Team
I am both a Listing Agent and a Buyer’s Representative for The Myers Team. Born and raised in Texas, I have called Las Vegas home since 2003. “I love Las Vegas. It’s like living in a big city with a little town feel.” I have been in sales for over 20 years, and became a Certified Distressed Property Expert (CDPE) in 2009. Before selling Real Estate, I was a salesperson for several luxury companies including Mercedes Benz, Lexus, and Neiman Marcus. Additionally, I have owned and ran my own business for over 11 years.