Well, the real secret to getting a loan modification is, like most thing in life, that there is no secret. 

Yeah, I know, that was a dirty trick, but if you keep reading, you’ll find a great deal of information about getting your loan modified, though I have to say, it will take some work. 

Now I have to say, I’ve been meaning to write about this topic for a while – but Eric Glaser, a fellow agent at Zephyr Real Estate, was kind enough to share the info with not just me, but all of Zephyr! 

This would be a good time to make a little sidenote and throw out some props to the realtor gang at Zephyr.  You see, unlike a lot of other real estate brokerages in San Francisco or anywhere else for that matter, the real estate agents at Zephyr find that sharing information with each other actually helps us get our jobs done.  I know, I know, it’s crazy!    But that’s why I haven’t thought of leaving Zephyr since I started in the biz. 

Anyhow, back to Eric Glaser’s fabulous information on how to get your loan modified.

For what it’s worth, here’s my take on the current situation:

 

Basically, no one knows for sure exactly how things are going to shake out.  Jesse Tannlund [from Integrated Mortgage] equated the current loan modification process to the wild west.  Currently, there is no one formula and it varies from situation to situation and from lender to lender and it even varies depending on who you happen to get on the phone at any given bank.  Modification guidelines are supposed to be instated on March 4, so there may be a hold on loan modifications until then, but that may not necessarily be the case with all lenders.

 

There is definitely a consensus across the board that one does NOT have to miss loan payments to be considered for a loan modification.  In fact, as you probably know, a big part of Obama’s Homeowner Affordability and Stability Plan is being implemented precisely so that homeowners do not miss their payments and start going down the foreclosure road.  In some cases, the banks will modify loans for folks who are current in their payments faster than those that have defaulted.  Again, there seems to be no set formula, but the squeaky wheel seems to work in some instances, I’ve been told. 

 

In order to be considered for a loan modification, one does need to show financial hardship and/or that the property value has fallen below the principal owed (through providing informal comps).  I’m told that most lenders are not verifying property values through BPO’s or appraisals, and as crazy as it may seem, it is my understanding that a good percentage of loan modifications are being pushed through largely on what the homeowners “stated figures” are for debt owed, property value, etc. with minimal financial verification requirements and minimal paperwork. 

 

I know this sounds ironic considering how difficult it is to get a new loan approved and it may even sound too good to be true at first glance.  However, the lenders would rather receive mortgage payments from a homeowner, even if it’s at drastically reduced 30 year fixed rate (I’ve heard they are sometimes going as low as 2% FIXED), than to have to go through the lengthy and costly foreclosure process, where they will undoubtedly lose money.  At least with a loan modification, they will still be making some income from the loan, and the government is also providing financial incentives for the lenders to modify loans vs. foreclosing on properties.

 

Sorry for the lengthy email, but this is an extremely complex issue.  I hope I have been able to inform some of you about the “word on the street” regarding the loan modification process and to provide some good resources for you for further information.  I wish the best for all of us and our clients during these challenging times.

Now, if you find that you’re in a situation where you are facing financial hardship and are struggling to keep your home, start by calling your lender.  If it doesn’t work, try calling your lender again.  And if that doesn’t work, maybe try a dozen more times.  And if you find you get a lender representative that is willing to help you modify your loan and keep your home, let me know if there’s anything I can do to help. 

And if you’re in San Francisco, I’m happy to provide you (at no charge, of course) with recent comparable sales if you need to show any to your lender (or any other info that I can provide) – all you have to do is call me at 415–307–1392, or email me.  I want to help.

Oh, and once again, I’d like to thank Eric for sharing this info with his teammates at Zephyr, and I’d like to thank him for allowing me to post the fruits of his research here on my SF real estate blog.  He rocks!