The business of mortgage banking and the home loan foreclosure crisis is brutally cold and impersonal. As families are turned out from their homes, it’s a clear sign that our financial system can sometimes be very heartless.

Which doesn’t fully make sense. The banks lose also in a loan foreclosure. They spend resources on legal fees and administrative tasks in the foreclosure process. Then they are stuck with a property that requires maintenance and security and insurance, then it needs to be resold. In this market, they’re losing $50,000 per property, on average.

So why don’t they try to work out something with borrowers? Some borrowers simply can’t pay anything. But many are still working, perhaps earning less than before or they are paying on an ARM that has increased significantly.

Banks truly will renegotiate terms of a mortgage, but you have to know how much to ask for. This is better handled by loan modification specialists who know the industry. They are lawyers and financial professionals who work on behalf, exclusively, for the borrower. They charge about a month’s mortgage payment, and often achieve a payment recast that will earn that fee back in three or four months, and again many times over the life of the loan.

Loan modifications return the “people factor” to the equation – instead of it all being a financial instrument, the home remains in the ownership of the homeowner, more affordably.

It’s not too mysterious as to why there are so many people in trouble with their home loans. Sure, the recession and the high rate of unemployment is a main reason why people are falling behind in mortgages. But it is also a matter of loan language, for example the deception of ARM loans that blew out of sight for millions. Had the loan contracts been better explained, many people would have demanded better terms.

But given the situation we are in now, banks are singing a new tune — in language that means something. The fact is that banks lose in a foreclosure. Between their own legal fees, time receiving no payments, and reselling homes in a depressed market, the banks can lose $50,000 or more on a foreclosure.

Loan modification firms are stepping in to help – and everybody wins. They are lawyers and financial professionals who figure out recast mortgage terms that enable a homeowner to keep his or her home, even while the bank can still make money (albeit, less) on that home.

The key tool the loan modification firms have is they can cut through legal papers and case law in ways that most homeowners can’t. Just as important, they know the numbers — what a bank is facing, what they can afford, and how important it is to them to keep a customer.

Loan modifiers charge about a month’s mortgage payment upfront (some with installment plans), and provide a money back guaranty if they fail to achieve favorable terms. Their success rate is very high – more than 90% – so that’s a promise they can easily keep.

The oversupply of housing is affecting distressed homeowners in a multitude of ways. For many who can’t keep up with their mortgage payments, they are in an “underwater” situation – the sale price of the home would be less than the amount owed. To walk away from their home, they still would owe the bank money. Further, the neighborhood overall sees a drop in their prices with each foreclosure, and the problem multiplies with other people living nearby.

It benefits everyone if a foreclosure can be stopped. Especially the banks, the lenders. They stand to lose about $50,000 per foreclosure in legal fees and the business of owning and reselling the property.

This is why banks are willing to cut better deals with homeowners who otherwise face a loan foreclosure. The bank is willing to settle for less money that is still better than that $50,000 loss they would experience. But most homeowners do not understand how to go about a loan modification – it gets little attention in the media, so most people don’t even know about them.

Enter the loan modification professionals. These are lawyers and home finance people who know the industry very well. They can efficiently examine a case, look at it in comparison to the bank’s position, then negotiate the solution to the homeowner’s favor. Reputable loan modification companies will charge a fee of around a month’s mortgage payment, and provide a money back guaranty if they are not successful.

It’s a solution to the housing crisis for millions of homeowner, their neighbors and their banks.

It’s bad enough for a family in distress facing a possible home loan foreclosure. But what compounds the misery is how it affects a neighborhood.

When a home is foreclosed upon, the value of other homes in the neighborhood drop. Which may not seem fair, but it’s just the way the system works.

Banks lose too in a foreclosure. Because of costs associated with those legal proceedings, a bank will lose on average $50,000 per property. This number is higher in recent months because of the strong drop in home prices overall. If the loan was for $300,000 and the resale on the house ends up around $260,000, there’s $40,000 in a loss right there.

All parties – the borrower/homeowner, the bank and the neighborhood – benefit when the mortgagee is able to achieve a home loan modification. This is when the bank agrees to recast the mortgage, changing payment and other terms. Generally speaking, the bank sees a drop in income on that particular loan, but it’s less than what a foreclosure would amount to.

Homeowners can attempt to negotiate a loan modification on their own, but third party loan modification specialists are doing most of these transactions today. They charge a single fee, about a month’s mortgage payment, with no points or recurring costs. If they fail, the money is paid back to the borrower in full (from reputable firms, anyway). Experienced modifiers (lawyers, accountants, finance experts) know what they’re doing, and generally can predict with high accuracy if they will be successful.

For all involved, a loan modification can be a means to alleviate the economic pressures of the housing crisis.

A relatively new phenomenon in the home loan foreclosure crisis is the trending toward loan modifications. Not exactly a refinance, loan modifications are when the bank determines they will work with a mortgage holder in distress (usually, in foreclosure proceedings) to find payment terms that are more manageable to the borrower.

The reasons for the borrower being in distress can be many: ARM adjustment that goes beyond the borrower’s repayment potential, loss or drop in income, illness or divorce are among them. What the bank would prefer to do – as does any neighborhood in the vicinity of the property in foreclosure – is stop the foreclosure. A bank stands to lose as much as $50,000 on average when a homeowner loses their house. Why? Legal fees, staff time spent on property management and reselling the property in a depressed market all add up to costs to the bank. They’d rather keep the customer paying for years into the future. The neighbors don’t want a foreclosed property either because it devalues their home values too.

Home loan modifiers, third party intermediaries, can smooth the process for the homeowner and get them a better deal. They work on a one-time fee basis, generally a month’s home mortgage payment, to review documents and then approach the loan officer with an offer. They have industry insider information that enables them to project with good confidence (90 percent accuracy) if a bank will deal, and at approximately what amount. If the modifier is unsuccessful, that fee should be refunded.

All in all, it’s a win-win-win for homeowners, lenders and neighborhoods.

There is still a little bit of kindness remaining in the distressed world of home mortgages and mortgage banks.

It’s called “recast mortgage” – a process by which a bank will lower the mortgage terms so a borrower can remain in his or her home. This defies the common perception that it’s “tough luck” for homeowners who’ve had exorbitant increases in their ARMs, or income loss, illness or divorce cause their mortgages to go close to or into default. In fact, banks lose too in a loan foreclosure — on average, a bank loses more than $40,000 on when a home is taken back by the bank. They really have a financial incentive to keep owners in their homes.

So why dont’ they offer this to everyone? Implicitly the offer is there. But bank loan officers have 700 cases each, on average. They don’t have time to explain options, nor do they have incentive to seek out ways of earning less on each and every customer. The customer, the borrower, needs to surface on their own to express their interest in keeping a home.

Loan modification firms are running intermediary on behalf of homeowners, effectively bridging the gap between borrowers and lenders in distress. The loan modifiers (lawyers, real estate finance experts) can examine a case and predict with high success (90 percent or higher accuracy) if a loan can be modified. The borrower pays a fee that is approximately equivalent to a single month’s mortgage, not a penny more and no recurring points or percentages. Loan modifiers should also offer a complete, 100 percent money back guaranty if they are not successful.

Banks are more willing to negotiate with homeowners on mortgage terms than most people realize.

This is because a bank will lose about $50,000 in a home loan foreclosure. These costs are from staff time involved, lost income in the foreclosure and resale process, management of a foreclosed-upon property, and the ultimate sale of a property for less than the original loan due to the poor market. Banks do not want to foreclose upon properties — it’s a lose-lose scenario.

They are willing to negotiate, but most bank loan officers are overworked, with about 700 cases to manage. They are far more inclined to deal with professionals, in this case loan modification specialists. Loan modifiers are lawyers and finance people who know the industry, understand how to speak the lender’s language and what numbers (recast mortgage terms) are going to be tolerable on the bank’s balance sheets.

What does the homeowner have to do? The homeowner shares financial data with the loan modifiers, at which point the loan modifiers can say whether or not the loan modification will be successful (with about 90 percent confidence). The borrower then pays a one-time fee, about a month’s mortgage payment, which should be refunded by the firm if they fail to find a manageable new mortgage.

This is an untold win-win in the economy and banking system. More people should pursue it to their advantage.

A fact that is not reported very much is how banks stand to lose an average of $50,000 on every property they foreclose upon. In other words, banks have incentive to not foreclose on property, even if it means changing the terms of the mortgage in favor of the homeowner.

In fact, millions of people with distressed mortgages from accelerated ARMs, income loss or other difficulties are having their mortgage recast in their favor. It’s largely a matter of talking to their lender, explaining their circumstances and hitting a number that is easier for the borrower and still profitable for the bank.

Of course, this is not an easy negotiation for anyone who lacks facility with legalese or the mathematics of banks. This is why thousands already have hired a loan modification firm (lawyers, accountants, mortgage industry specialists) to handle this negotiation for them. The loan modifiers look at the facts of the case, at which point they can predict with a high degree (90 percent or higher) of confidence as to what the outcome will be. Homeowners pay an upfront fee equivalent to one month’s mortgage payment, more or less, which is refunded to them if the loan modifiers are unsuccessful in that effort.

Home loan modifications are also an underreported factor in the current housing crisis. Even homes in foreclosure proceedings can halt that process with a loan modification.

There may come a day in the not too distant future when financial intermediaries can be hired to work on all matters for individuals. The reason for this is evident in the home loan mortgage crisis currently threatening the economy overall and millions of Americans who are in danger of losing their homes.

Home loan modification firms are now rising to help persons in distressed mortgages. They are lawyers and finance specialists who understand the position of banks and other mortgage lenders. They know that a bank does not want to lose a customer, nor are they interested in owning individual properties. It consumes staff time, an expense, they are stuck trying to sell homes in an undervalued market, and they lose a customer. Foreclosures are losers for banks, and home loan modification experts understand how to leverage that to the homeowner’s advantage.

Of course what led to this is how many borrowers did not understand the terms of their mortgages. This may be an ARM that increased dramatically over three to five years. But also many households expected to continue employment, that there would not be such a deep recession as we see today.

Loan modifiers work on a fee basis, not tied to “points” or other factors related to the new mortgage terms. They generally charge one month’s mortgage payment — as they recast the mortgage terms for 30 years into the future (a significant savings over time).  If they are not successful – an unusual situation, as loan modifiers usually know with 90+% certainty what their outcome will be – they should refund this fee to an unsuccessful homeowner.

Any home purchased in the past three years, since 2006 or earlier, has likely declined in value anywhere in the U.S.  In some cities, home value drops are greater than others. Add to that home mortgages with ARMs that have adjusted upwards and the dilemma of distressed mortgages is easily understood.

Of course, any homeowner in this situation may well be distressed under otherwise normal circumstances. But now, with massive job losses and cutbacks in hours worked for those who still have their jobs, it is clear that adjustments need to be made. The government is working on bailouts for homeowners, which will apply to some people. But others may not be eligible, or that help will come too late.

But any homeowner in difficult and unmanageable circumstances, even those in the process of a home loan foreclosure, may be able to work their own solutions out through a home loan modification. Either they, or more often their representative in a home loan modification firm, can deal with a bank directly to find a lower interest rate or other terms that bring the mortgage back into affordability once again.

Professional loan modifiers are generally teams of lawyers and finance specialists who understand the mortgage industry enough to predict success at loan modifications before contacting the bank. They charge about a month’s mortgage payment and, if reputable, will provide a 100% money back guaranty if their efforts fail to provide satisfactory modified loan terms.