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.

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.

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.

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.

If you are a homeowner facing a possible loan foreclosure because you can’t meet the terms of your mortgage payments, there may be an answer for you in a loan modification. 

A mortgage loan modification is when the bank agrees to lowering monthly payments, a recast of the whole mortgage in terms that are friendlier to a homeowner in a distressed situation. “Distress” can come from a variety of sources: loss of income, illness, divorce and other factors (including an ARM loan that blew up significantly). The borrower who can successfully present his or her case to the lender will get better, more manageable monthly terms.

But bank loan officers are very busy these days; in fact, the average loan officer handles no less than 700 cases at a time. They can’t spend too much time with any single borrower. This is why thousands of homeowners with a mortgage loan foreclosure looming have wisely engaged the services of professionals, namely a loan modification firm. Loan modifiers are lawyers and financial consultants, people who have industry inside information on what a bank will tolerate.

For background, banks lose in foreclosures in a variety of ways, especially when they have to resell a property in this particularly bad housing market. Banks also have to pay staff and even outside lawyers to process a foreclosure, and that’s after several months of receiving no payments on a mortgage. It’s a lose-lose situation all around. 

The loan modification companies know the calculations. They can figure out how low a lender will be willing to go to keep a borrower in their homes. It’s a mathematical equation, in the end, and few homeowners have the numbers or financial analysis tools to determine this.

What to look for in a home loan modification firm: they should charge a one time fee, about a month’s mortgage payment, offer a 100% money-back guaranty if they are not successful, and have a high success track record (90% or higher). The good ones know their numbers and how to put them to work.

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.

A person’s home should not be a point of stress. Home is refuge, a place to escape the other stresses of the world. But when a mortgage is distressed, when a home loan foreclosure is a real possibility, that place one calls home is stressful on a very high level.

So, those are the headlines we see in the news every day. But buried in the news, perhaps because it doesn’t fit the trend of economic chaos and collapse, is that loan modification is possible, even if a borrower is several months behind in their mortgage payments. 

How so? Banks do poorly when they foreclose on properties. It’s not the way for them to make money. When they foreclose on a mortgage, it’s a business loss: the monthly stream of payments is cut off, they have a property to manage and insure, and they then have to resell it, likely at a loss (given current market conditions). They want you to present them with a new plan to keep it.

Loan modification firms are now able to help homeowners in distress. When an ARM or drop in income or illness or divorce or any other stressful events reduce a homeowner’s ability to keep up with monthly payments, there may be a way to still make smaller payments. The loan modification firm knows how low a bank will be willing to go – in fact, they can predict success in a loan modification negotiation in advance, based on clear, objective data. A loan modification firm will ideally charge about one month’s mortgage payment from the borrower to pursue the modification (perhaps on an installment plan). If they are surprised and fail to achieve a favorable outcome, the fee should be refunded (reputable firms offer this).

It’s about reducing stress in a significantly meaningful way. Because it’s about preserving one’s home, perhaps the most de-stressing place a person should have in their life.