An interesting development in the mortgage crisis is how banks are willing to negotiate with borrowers on the terms of their mortgage. Distressed homeowners are actually getting lower monthly payments, more favorable terms for their situation that enables them to retain ownership of their homes. It’s a situation that challenges the concept of “the big bad bank.”

Why? It’s actually pretty simple. A home loan foreclosure means the bank has to take care of a physical property and resell it. In this housing market they are quite likely to lose money in such a transaction. And that’s after managing it for weeks or months, and after engaging lawyers, accountants and other office support in the foreclosure and resale process.

Bottom line: a bank would much, MUCH rather keep a homeowner paying their monthly mortgages. Even if that is a lower amount.

Loan modification companies are the homeowner’s best friend in this process. Because most borrowers are perplexed, often emotional about their situations. Understandably so. The loan modifiers are finance and legal experts, people who know how to go about the process, and just as important, they have industry information that gives them negotiating power. They know the point at which the banks win or lose, so they shoot for the lowest point that a bank will tolerate. 

What to look for in loan modifiers: A savvy, even if distressed, homeowner considering the loan modification route should check to see if loan modification firms charge about a month’s mortgage payment (no points, no recurring fees), can predict with a high degree of certainty (90%+) if they will be successful, and they should offer a 100% money-back guaranty if they are not successful.