Why Loan Modifications Don't Work in Nevada

Have you actually met anyone who has had their mortgage modified to reflect actual market value?

While the media promises HELP for struggling Nevada homeowners, the fact remains that banks are not cooperating with the loan modification process nor reducing the mortgage principal to reflect current market value. There are thousands of web sites that explain how the government is going to help, however, banks are simply NOT obligated to modify your mortgage.  Government assistance programs remain 100% voluntary, which means banks are not required to cooperate. 

The loan modification process is confusing and very misleading.  When homeowners call a bank and ask for help, banks are quick to tell you that they DO offer loan modification programs, however, the majority of banks do not own your mortgage.  They are servicing the loan for a third party investor (Benefactor) who actually owns your loan. (i.e. Fannie Mae, Freddy Mac, Ginnie Mae, FHA, VA, etc.)  If your bank is simply servicing your loan, (83% of all residential mortgages are owned by investors and serviced by banks) then the bank has no authority to approve any type of loan modification. 

Many people wonder why banks and bank investors are not motivated to modify loans. The answer is quite simple. When a loan is modified, it is considered a "non-performing asset." Banks don't want to have non-performing assets on their portfolio, due to the negative impact on the stock value. When banks foreclose on homes or approve short sales, they are able to charge off the loss, and obtain a substantial tax credit from the IRS.  Once the mortgage has been charged off, it is no longer considered to be a non-performing asset, and the value of the bank's stock improves.  Basically, our government is allowing banks to reimburse themselves with your tax money for the losses associated with foreclosure. Why would a bank choose to modify your loan, if its easier and more profitable to foreclose and get reimbursed by the Federal Government for their loss?  Additionally, there are no tax incentives for banks to modify your loan. 

Another reason banks are not motivated to modify your loan is because 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. 

In summary, the bank makes more money by foreclosing on your home than by modifying your mortgage. This is why banks prefer short sales over the less desirable (and more expensive) option of foreclosure. A short sale is less expensive for the bank (versus a foreclosure) and still allows the bank to charge off the loss without needing to pay the costs associated with the foreclosure process.

Trial Loan Modifications

Banks may agree to temporarily modify your monthly payment and interest rate: however, banks will NOT reduce your overall loan payoff. When a bank agrees to reduce your monthly mortgage payment, it is typically modified for a 2-5 year term. The difference between your "new payment" and your "old payment" is added to the total payoff of your loan...plus interest. Why would you trade in one bad loan for another? Even if your payment is modified for 2-5 years, the fact remains that you will continue to pay for a home that is depreciating, and worth half of what you paid. Additionally, at the end of the 2-5 year term, you will end up owing the bank MORE than when you started. Loan modification doesn't solve the problem. It simply postpones the foreclosure process. Wouldn't it make more sense to do a short sale today, and then rent a home in your neighborhood for a year or so...until you're able to buy a new home again at today's prices?  This way, you can start building equity again, versus doing a trial modification for 2-5 years, only to wind up with a monthly mortgage payment more expensive than what you are currently paying.

Loan Modification Makes Homeowners "Renters for Life"

Homeowners should 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 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 recognize 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 a loan modification the right decision for you and your family?”

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Loan Modification - Who Can You Trust?

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 Bill Myers, Nevada Short Sale Expert with The Caliber Realty Group, “Many homeowners still fear short sales, because banks can come after you down the road for a deficiency judgement lawsuit. What homeowners do not realize is that many banks now include verbiage in their short sale approval letters waiving the right to pursue legal action against the homeowner. There has never been a better time to do a short sale.”

Some banks require homeowners to 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 Myers, “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 previously 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. 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 announced on January 31, 2011, that Nevada loan modification companies are banned from charging up-front fees for negotiating modifications of residential loans. 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. 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. 

Don't be fooled by banks. It is critical that you have representation, so that you are NOT taken advantage of. If you are trying to decide whether a loan modification or a short sale is the best option for your family, please contact The Myers Team  for a free consultation. If you would like to schedule an appointment with The Myers Team, simply email us at NevadaShortSaleExperts@gmail.com

YOU HAVE OPTIONS

CALL NOW  (702) 677-4343

Call The Myers Team today for a free consultation.  A short sale is NOT the end.  It is a fresh start.  Don't let the bank take away your dignity.  The bank is a debt collector and does not represent you or your family in any capacity.  Let our team of experienced professionals get between you and the bank.  The Myers Team is the most experienced short sale team in Nevada. 

Click here to read an FTC report about loan modification scams

Click here to read a MSNBC report on loan modification scams

Click here to read a CNN report regarding "Questions raised about Obama's loan modification programs"

Click here to read why lenders lack incentive to modify loans. Las Vegas Review Journal Article.

Click here to read a Las Vegas Review Journal article which states, "The LV foreclosure crisis is worsening."

Click here to view the truth about loan modifications

* #1 Status is based on production from January 1, 2007 through December 31, 2011. The information provided is obtained from public records, it is deemed reliable but not guaranteed. The Myers Team does not guarantee that all home owners will be able to purchase a new home in one year or less. This will depend upon many factors, including your credit history before the short sale. Not all clients will qualify for a short sale. Not all clients will be eligible for the advertised services contained in this web site. Not everyone will qualify for Government assistance programs such as HAFA. Banks are not required to participate in the HAFA program. Restrictions apply. Nevada state law (NRS116.4109) requires sellers to provide and pay for a homeowners association resale package. If you live in a home with one or more HOA's, there may be state mandated fees required to comply with Nevada State Law, and homeowners will be required to provide a buyer with all CIC disclosures. The Myers Team are NOT lawyers, nor qualified to give legal advice of any nature. The Myers Team are NOT accountants, CPA's nor qualified to give tax advice. This web site is not intended to offer legal advice and all information contained in this web site is for information purposes only. All Myers Team clients are encouraged to seek the advice of a real estate attorney, and/or a qualified CPA. All of the information contained in this web site is subject to change. All site software, design, text, images, photographs, illustrations, audio clips, video clips, artwork, graphic material, or other copyrightable elements, and the selection and arrangements thereof, and trademarks, service marks and trade names (the "Material") are the property of The Myers Team™ and/or its subsidiaries, affiliates, assigns, licensors or other respective owners and are protected, without limitation, pursuant to U.S. and foreign copyright and trademark laws. The Myers Team™ hereby grants you a personal, non-exclusive, non-assignable and non-transferable license to use and display, for noncommercial and personal use only, one copy of any material and/or software that you may download from this Site, including, without limitation, any files, codes, audio or images incorporated in or generated by the software provided that you maintain all copyright and other notices contained in such Material. You agree not to reproduce, modify, create derivative works from, display, perform, publish, distribute, disseminate, broadcast or circulate any Material to any third party (including, without limitation, the display and distribution of the Material via a third party web site) without the express prior written consent of The Myers Team™. Use of http://www.NevadaShortSaleInfo.com and/or http://www.VegasShortSaleInfo.com and/or http://lasvegaslist4less.com and/or its licensors' Material is only permitted with their express written permission. You further agree that you will not disassemble, decompile, reverse engineer or otherwise modify the Material. Any unauthorized or prohibited use may subject the offender to civil liability and criminal prosecution under applicable federal and state laws.