Today's Chicago Tribune sheds some light on the much-criticized loan modification industry in Chicago and nationwide. It's a piercing look at the predatory nature of the business, particularly the legal community's involvement.
Loan Modifications in the News
For those who haven't read the piece, it discusses the role of attorneys in the loan modification process, and how often times it leaves homeowners without a desirable outcome (lower monthly mortgage payments) while still costing thousands of dollars in attorney's fees.
Obviously, reading the article as a real estate attorney, certain points could have been better presented. Despite this, an article like this can continue the dialogue on how to repair the loan modification process -- something that is desperately needed.
From a legal standpoint, the main missing point in the article was the role of the lending institution. This blog has previously discussed how many loan modification programs can be a scam, and what to watch out for. However, we have also noted the valuable work of real estate attorneys in securing loan modifications for certain clients who need help in applying for the often-challenging bank modification programs.
What was not mentioned in today's cover story was the fact that banks have the final say in modification, not attorneys. One can walk away from today's article assuming that if only the lawyers had done their job, the client could have stayed in their home. This is not the case.
The current state of the loan modification industry is difficult. It is not easy to obtain a loan modification. It is not a given that one will receive a loan modification. It's not simply a matter of attorneys taking money and not doing the work. And in those cases where attorneys have not even attempted to do the work for which they were paid, legal action against those attorneys or firms is appropriate.
However, the main cause of dissatisfaction in loan modifications is that the majority of applicants are denied. Speaking personally from experience, even homeowners who have been approved for a modification and made a prompt payment at the new amount have found themselves later denied with little or no explanation. There are many examples of banks denying loan modifications for unknown or even prohibited reasons. This makes homeowners extremely frustrated.
Tack on any misleading promises from lawyers or mortgage modification outfits, and you can see why so many people are demanding action.
Until greater efforts are made, though, to streamline the loan modification process at the bank level, these frustration levels will continue to rise.