It’s funny thing (in a non-laughing kind of way) that it’s homeowners who are saddled with the responsibility of fixing their distressed mortgage situations. The lenders created loan documents that were difficult to understand and often lent to people who would have trouble making terms, particularly when an out-of-control ARM consumes more than 50 percent of the borrowers’ income – and that’s in good times.

Now that there are millions of homeowners with home loans dangerously close to foreclosure, the banks are suffering the fallout. Regardless of who gets blame for the past, the savvy borrower is learning to negotiate with the banks. This wins them better mortgage rates and lower monthly payments to keep the borrower in the house.

It’s actually possible to do this negotiation, called a loan modification, on one’s own. But professional loan modifiers are lawyers and finance people who are likely to do better – in fact, more skilled loan modifiers can predict with 90 percent accuracy in advance if they will be successful. Professional loan modifiers have industry insider information on what a lender will be willing to give in the modification process.

It’s important for any borrower to receive a money back guaranty, a 100 percent refund if the loan modifiers do not achieve favorable terms. Fees charged overall should be approximately one month’s mortgage payment.

When a bank starts sending notices to homeowners that their property is in foreclosure proceedings, it’s not the end of the story. As one single mother, a homeowner, told a financial news show recently, “I thought it was time to give up, that the horses were out of the barn.”

Fact is, those notices are to be taken seriously. But it’s not like there aren’t options available to them. The government bailout plans are being worked out, but the answer now for millions is in a loan modification program. This is when a mortgage, say an ARM, is recast into a better mortgage package. Instead of paying 10 percent interest, the rate might be lowered to seven or six percent or lower.

Why would a bank agree to such terms? They don’t really want to go into foreclosure. They would rather keep you as a customer, paying a profitable amount to them for years into the future. They want YOU to take care of your house, not THEM. It’s expensive for them to go through the process.

But most people don’t know how to get modified loan terms on their own. They are perplexed by banking terminology, and lack industry knowledge on what to negotiate. 

Enter the loan modification specialists. These are lawyers and accountants who know their industry. They can see where a lower interest rate charged to you still is profitable to the lender.

Check loan modification firms for fair fees (about one month’s mortgage payment), success rate with past cases 90+%) and ask for a money back guaranty (the good ones offer it). They can be a lifeline to the distressed homeowner — and they can save before all the horses have left the barn.

No homeowner currently “underwater” with a loan that may be larger than their home’s value, or, who simply has trouble keeping up mortgage payments, should consider what they did a “mistake.”  There has been a flurry of media attention on financial TV programs about the economic crises being the fault of underqualified borrowers. That is flat-out wrong: the message for generations has been that everyone should try to own their property. The banks were more than happy to provide everyone with a loan.

The problem is the turn taken in our economy since 2007. Jobs have been lost, people have gotten sick with inadequate healthcare, and other problems arose. The banks were mismanaged in so many deep, demonstrable ways. To put the blame on anyone with an exploding ARM or simply a mortgage that is no longer affordable is invalid and unproductive.

The individual homeowner facing possible foreclosure has an underreported option. It is to get a loan modification. This essentially is a way to clean up the mess of a mortgage with bad terms, such as a high interest rate. A loan modification company will act as an intermediary or third party, approaching your lender on your behalf. This is key, because a loan modification firm has far more knowledge of how the industry works and what terms are morel likely for the bank to accept.  

Anyone considering the hire of a loan modification firm should check their success rate (more than 90%?), and their money-back guaranty of your fee if they are not successful. If it checks out, go with that firm. For the cost of about one month’s mortgage payment, you may get tens of thousands of dollars in savings over the life of the loan.

At its best, a challenging economic situation such as a home foreclosure is a minute-by-tense-minute adventure in the world of Economics 2009.  When your life is a lot like what’s being reported on the news, you at least know it’s a drama being played out in homes all across America.

Of course, a home mortgage foreclosure can have tragic consequences for anyone who bought a house or condo in good faith that ownership was laudable and affordable. But things changed rapidly in the past two years, such that illness, divorce, income loss or reduction and ARMs blown up out of sight are factors that may seem impossible to overcome today.

There are solutions, however, but they’re probably too boring to make the news. Certainly, the solutions wouldn’t make it into a screenplay. These solutions come in the form of loan modifications – a recast of the loan terms that help homeowners keep their properties at lower monthly payments.

To engineer a loan modification is daunting for most individuals who are not real estate lawyers or mortgage experts themselves. Bank loan officers are busy handling hundreds of cases and thus don’t have a lot of time to talk to individuals to explain the process for them. But a loan modification firm handles it for them. For the price of about a month’s payment, a loan modification company can use industry insider information to know what new mortgage terms the lender would agree to.

If considering working with a loan modification firm, check their policies, features and success rates – all usually published on their websites.  Look to see if they provide a money back guaranty if they are not successful. I particular, see if they offer an installment payment plan for their services. This is crucial to any financially strapped homeowner.

There’s a new wind blowing in the economy. No one is calling the recession over yet, by any stretch of the imagination. But as vulture funds buy up “toxic” bank assets – showing that there is value in everything once everyone agrees to a price – homeowners themselves are learning to take control of their situation and their homes.

The tool emerging for homeowners in distressed mortgage situations is loan modifications. These are not loan refinancings, although they are similar. Few people in distressed situations, with loss of income or illness or divorce challenging their credit rating, are eligible for refinancing. But if the homeowner can prove some ability to pay monthly on a mortgage at a reduced rate, the bank will consider a recast of the mortgage terms.

That’s right, banks will negotiate. The problem is most homeowners don’t have the savvy to negotiate better terms on their own, if they know the option even exists. They don’t know how low a mortgage lender is willing to go to keep a customer and avoid taking possession of a home (banks don’t like owning residential property – it’s not what they are good at and they usually lose money in the process).

Enter the loan modification consultants, specialists in real estate law and lending. For an affordable fee, about one month’s mortgage payment, the loan modifiers will approach the lender with industry knowledge of what deal will work for both the borrower and the lender. Loan modification companies that know their stuff will not take a case without 90 percent certainty they will succeed in the effort. And if they fail, they should return 100% of the borrower’s fee. This makes it a no-lose proposition for the homeowner.

It’s not like it’s 2005 all over again. But it’s one of several hopeful signs that there are solutions in this economic crisis. The homeowner needs to take action by finding a loan modification specialist to do the work for them.

For anyone with an out of control ARM, perhaps in danger of losing their home to a home loan foreclosure, the quest for better loan terms is like a page out of Goldilocks and the Three Bears. The trick is to get the new loan terms just right.

But first some background: Banks don’t like foreclosing on home loans. They would rather keep a homeowner paying off the mortgage for the full term, usually 30 years. That’s a lot of time to not only receive a monthly flow of funds, but also to sell that customer on other financial products. Foreclosures cost money to execute, cut off that income flow and then saddle the bank with tainted property that’s harder to sell in any market, particularly the current housing meltdown.

Consequently, mortgage lenders are amenable to adjusting terms of the mortgage lower if they can still make a profit. But how low is too low? And at what rate is the borrower still spending too much?  Too little, too much, searching for “just right” is a Goldilocks’ journey.

This is where loan modification companies help holders of distressed home loans. The average borrower doesn’t know enough about the industry and specific lenders to negotiate to this point of “just right.” Most borrowers are so distraught they are lucky if they can manage the process of cutting through lender bureaucracy to even get a bank officer’s attention.

Loan modification companies operate on a fee charged to the homeowner, such that their only objective is to get the best deal for that borrower. They can examine a case before taking it on, such that they can predict a favorable outcome with high (90%) accuracy. Better firms offer a money back guaranty if they fail to deliver as promised.

To be clear, this is no children’s tale. Loan terms can be modified, but a professional is likely to achieve the best success for borrowers.

This economy is definitely in a rough patch. But it doesn’t have to be the end of the road for homeowners currently facing unmanageable home loan mortgages due to loss of income, divorce, illness, ARMs out of sight or other difficulties. There is a way to get better terms on a mortgage if the borrower is savvy enough to deal with their lender.

The path thousands are pursuing is through loan modification firms. These are experts in law, financing and specifically mortgages, specialists who take on cases they know they can win.  Underpinning this is the fact that banks don’t want to own houses. They are most interested in keeping mortgage payments coming in. When they foreclose on a property, they lose because they then must maintain it, suffer its liabilities, and then sell it – likely, at a loss in this historically down market.

A homeowner could negotiate this themselves, but few non-specialists have the inside industry knowledge to pick the terms that will be satisfying to the bank. It’s about knowing that point between the costs of foreclosure and the possibility of keeping a profitable client. Loan modification specialists have the necessary information and calculations for doing this. They charge about a month’s mortgage payment and provide a 100% money back guaranty, so it’s basically a no-lose proposition for the homeowner  – a rough, rocky road made smooth for the duration of the trip for anyone who wants to keep owning their home.

It’s pretty frustrating to see billions of dollars going to fat cats on Wall Street despite all their blunders and the effects their mistakes have had on the worldwide economy. Even more so for people who are facing true hardship, perhaps from an ARM or other difficult mortgage terms, even to the point of home loan foreclosure.

But homeowners can take charge of the situation. It’s possible to renegotiate terms of a mortgage with a lender for one simple reason. In a foreclosure, the bank loses too. They can resell a property, to be sure, but likely at a loss in this housing market. They also have to engage lawyers and other expensive staff in the foreclosure proceedings, a costly exercise as well. 

Of course, dealing with the busy loan officer on this during an emotional time is no easy task. This is why thousands of homeowners have engaged a loan modification firm, a team of specialists with industry insider information on what the lender is likely to agree to. They are skilled at finding the right price point, the monthly mortgage payment where the bank will still make a little money and the homeowner can afford the payments.

A qualified mortgage loan modification company will charge about one month’s payment on their loan as a fee – for example, if you’re currently paying $1000, that would be your fee. If it lowers your monthly payment by $200, you will be ahead overall in five months. Some mortgage loan modification companies are accepting deferred payments to allow the homeowner the ability to suffer no real upfront investment.

Many homeowners in or near foreclosure proceedings are unaware that the terms of their mortgage can be changed, even at a late stage. A bank/mortgage company will do this if they see a lender is able to make payments if the monthly payments are lowered.

Why would a bank do this? This is simple: a bank does not do well owning a house, particularly in this housing market. They are stuck with property maintenance, liability and the process of selling it again. This is not what banks do, and often they lose money in such situations. 

The question is where does a lower monthly payment and other mortgage terms, for example going with a fixed rate in place of an ARM, still beat the lower revenue the bank will get from a recast mortgage? An average homeowner is not usually able to figure this number out on their own. But when a professional mortgage loan modification firm is engaged, they are able to use their experience and industry information to come up with a number that is beneficial to all parties. It’s truly a win-win solution.

The better loan modification firms charge approximately one month’s mortgage payment on a property as their fee for service. And those experienced firms will know with a high degree of certainty – 90 percent, usually – in advance whether they will succeed at renegotiating the mortgage terms to a successful outcome. If not, the homeowner should be provided a 100 percent money back guaranty, thus making it a no-lose proposition for that individual.

A common misperception in the mortgage bailout discussion in the US is how the government is the only route for solving the problem. Truly, for millions of homeowners the Obama administration’s initiatives in this area will be effective at helping homeowners recast their mortgage in terms they can afford.

But for the homeowner who fears the help cannot come soon enough, perhaps because she or he is in a foreclosure proceeding already, a private route may be just as effective. Thousands of homeowners have already recast the terms of their mortgages through the help of a loan modification company. These are firms made up of attorneys and mortgage specialists who understand when and why a bank would agree to adjusted monthly payments favorable to the homeowner.

At its core, this is because mortgage lenders do not want to own houses and condominiums. That is not their core business, and they lose money on it most often. So if the borrower can find terms that allow the bank to make some money, even if less than before, they are more inclined to changing the terms of the mortgage.

The borrower might be able to negotiate this on their own. But with less knowledge and familiarity with banking terms, often the homeowner fails or is less successful. The loan modification firm typically charges a month’s mortgage payment – with a 100 percent money back guaranty – to find the best possible terms for the borrower. Better firms can project with more than 90 percent certainty whether or not they will be successful, even before they approach a bank. The process is that cut-and-dried.