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Much recent attention has been given to homeowners who are dealing with the extreme difficulties of impending or current foreclosure. News outlets from the Wall Street Journal to the local network news have almost daily stories about families dealing with the pain of such experiences. The problem has gotten so bad now that even the highest echelons of government have begun weighing-in on the growing crisis, evident in the recent comments of FDIC Chairman Sheila C. Blair who advocated “a systematic and streamlined approach to loan modifications to put borrowers into long-term, sustainable mortgages."
Yet, despite all this coverage, many homeowners experiencing hardship are at a loss as to how to even begin the process of exploring loan modification. Part of this difficulty is due to the fact that banks and lenders are reluctant to even admit the existence of loan modification, let alone publicize how a homeowner might go about obtaining one, because it simply isn’t in their best interest. The reason for this is that each loan modification, even of the horrendous subprime loans which so hurt consumers, further erodes the already shaky financial positions in which the banks currently find themselves after the recent mortgage meltdown and credit crisis.

Moreover, a homeowner attempting to call a lender directly can often times find themselves lost trying to navigate their way through the bank's myriad of questions, forms and processes, often failing to even contact a person capable or willing to help them. This problem is exacerbated by the fact that banks simply aren’t equipped with the adequate staff to deal with the volume of inquiries that have been flooding in since the crisis began.

In fact, a study by Valparaiso University law professor Alan M. White; a member of the Federal Reserve Board's consumer advisory council, found that banks working directly with distressed homeowners to modify their mortgages had failed to reduce the principal balance in 98% of the 4,300 cases studied. Nearly, half of the loan modifications did not even reduce the monthly payment amount.

Oddly enough, when a homeowner finally does succeed in contacting someone, they can often times find themselves in a poorer position than when they began, because loan officers, rather than seeking to help homeowners out of their predicament, often attempt to refinance their already troubled mortgages into actually worse situations.

For these reasons, experts will tell you, that the majority of people attempting a loan modification on their own fail, either because they couldn’t figure a way through the institutional maze of the banking system or because they simply ran out of time.

With that in mind, it is often best for homeowners, especially those facing significant interest rate or payment adjustments, to approach attorneys who are experts in mediating the loan modification process between the lender and borrower. Their knowledge of the law, coupled with their expertise in negotiating with large financial institutions, can make a significant difference in the end result. Indeed, such expert mediation can often yield a dramatic restructuring of loan terms, including the possible lowering of payments, lowering of interest rates, and, in some cases, even a reduction in the principal balance, thereby eliminating the need for a refinance.

With the pressure on so many homeowners mounting daily as they stare down the barrel of likely foreclosure, the use of an expert can often be the difference between a gut wrenching experience of wading through weeks of frustrating red tape only to yield no result, and a quick loan modification that keeps a them in the home they fought so hard to acquire.

(This article is for informational purposes and does not contain or convey legal advice. The information herein should not be used or relied upon in regard to any particular facts or circumstances without first consulting a lawyer.  If you have any questions about this Article, please call or e-mail N. Stephen Vokshori, Esq. (213.785.5366/stephen@voklaw.com) or any other member of Vokshori Law Group.)