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.

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.

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.

The picture of a distressed mortgage, perhaps due to a bad ARM (adjustable rate mortgage) or loss of income or other factors, is that of a home and family out of control. This is unfortunate, because in fact even a home in foreclosure proceedings is something the homeowner can wrest back to control if they understand the position of the bank.

Banks don’t want to foreclose on properties. It’s bad on their balance sheets and affects the overall value of the bank. It costs them legal fees and staff time to go through foreclosure. And, once foreclosed upon, a property becomes more liability than asset to the bank. They have to manage it physically, and they have to resell it. In the current real estate market, that is a dim proposition.

A homeowner feeling out of control may not know this, and is far less likely to approach the big bad lender about working out a deal. But if the homeowner knows the cost/loss situation on the bank side, that homeowner might be able to negotiate better terms. Yes, a loan in foreclosure can still be recast. For example, back due amounts can be rolled into the principle and the interest rate can be lowered. The bank wins by keeping a customer, continuing to receive monthly payments (albeit, lower), and no property to sell. The homeowner wins by keeping the home at a lower monthly rate.

Home loan modification firms are a smart way for a homeowner to pursue this option. Emotionally detached from the situation, the lawyers and financial experts in loan modification companies know the industry numbers such that they can project in advance the likelihood of a better set of terms for the borrower. A homeowner only needs to pay a one time fee - usually, about one month’s mortgage payment - to the loan modifier. And if the loan modification firm is unsuccessful, they should refund that amount in full.

Control is very important to anyone in financial distress. This is one route that is a lot cheaper than therapy for reducing stress, and, it keeps the homeowner a homeowner.

It’s a fact: loan officers at banks typically deal with 700 borrowers each. This means that they really don’t have a lot of time to deal with anyone facing possible home loan foreclosure or other financial distress due to a bad ARM, income loss, illness, divorce or other such situations.

Which is unfortunate, given the effects of the recession and housing market slump. Because if they had the time to look at each individual case, they may well be able to determine ways for the mortgage to be recast, to settle in at a favorable rate that will enable that homeowner to keep his or her house and continue making payments.

Why would they bother if they had the time? A home loan is recurring, monthly income to a bank. Plus, they like to have loan customers over the long haul because those customers ultimately might do other business with that bank. And when banks take possession of houses, they ultimately lose. The process takes up staff time, and then the maintenance and sale of the house generally drives them into a net loss. Banks don’t want your home.

Loan modification firms are stepping up to the plate on behalf of homeowners. They are independent lawyers and accountants, finance experts who know what terms a bank will still find worthwhile — lower monthly payments don’t necessarily mean a loss to them.

For any homeowner to engage the services of a loan modification firm, it is essential that they check the terms of THAT arrangement. The firm should charge a flat fee – one month’s mortgage, approximately, and no points or recurring fees. They should also provide a money-back guaranty. This is because they usually know with a high degree of confidence that they will succeed on a case before taking it on. Better firms are also offering an installment plan, allowing the homeowner to pay the fee in more than one payment.

With a home loan modification firm working on your behalf, you’ll rise to the top of the loan officer’s 700 cases and get action relatively quickly.

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.

No one ever said life was a bed of roses.  But who knew that the financial crises we’re facing worldwide would be a bed of thorns?

For anyone in a distressed mortgage, possibly facing potential foreclosure on their home loan, life is thorny indeed. It’s bad enough to suffer income loss, possibly illness or divorce – traditionally the primary reasons for bankruptcy and foreclosure – but throw in the difficulty of dealing with harried and distant home loan officers at your mortgage bank and it’s a formula for almost unbearable emotional stress.

The solution for millions is coming in negotiations for better mortgage terms. In fact, banks are not interested in owning anyone’s home. That’s a failure from their perspective as well.  It costs them money to pursue foreclosure through the courts, and when they own a property they are stuck with liabilities associated with it and selling in a difficult market. And you better believe that when a bank owns a house, the garden isn’t getting much attention.

Loan modification firms can handle the paperwork and negotiations for the homeowner.  In fact, many therapists, attorneys and realtors recommend it – by hiring professionals (loan modification firms are staffed by attorneys and home finance people), the outcome is more likely successful. In their industry, they know specific cost structures for the lenders such that they can create the win-win – better loan terms the homeowner can handle, yet still maintain an income to the lender.

Loan modification firms even know upfront what their success rate will be with more than 90 percent accuracy.  When contracting with a firm, ask for a 100 percent money back guaranty to protect yourself in an otherwise thorny situation.

We see a lot in the news about banks working out their own problems while homeowners themselves are stressed by the housing market and mortgage crisis. Foreclosures by lenders on homes almost conjures up images from the 1930s, when the evil banker took away homes and farms with an almost gleeful demeanor.

But when it comes down to it, the banks don’t want to own homes. Nor do they want to go through the foreclosure process.  Why? It’s about the money. They lose in both the legal proceedings of foreclosure and the process of taking possession of a home, managing it and trying to resell it in this very low point of the market.

That’s why loan modification specialists are smart for anyone in a distressed loan or undergoing home loan foreclosure proceedings. To the homeowner, it’s about the place where they live, the emotional attachments and all-important place to sleep at night. A loan modifier – usually staffed by attorneys and mortgage financing experts – knows the financial position of the bank. They know where the lender’s hot spots are, and what lower, recast mortgage terms they might agree to because they’ll save money in the end. Note also that by allowing a homeowner to continue making lower mortgage payments, the lender ultimately keeps a customer for the long term.

Like the line from Cuba Gooding in the modern movie classic Jerry McGuire, it’s all about “show me the money!”  That’s what banks want, what loan modification specialists do – and what benefits the homeowner in the end.

It’s almost impossible to not be emotional when a home loan is based on an ARM schedule that rises out of sight. Add to that the prospect of a loan foreclosure, when the bank says despite your best efforts they’re going to take your home away from you, lock the door and send you away.

Because a house is more than a financial instrument. It’s a home. The place you go to for warmth, protection, security, family. If loss of an income, illness or divorce is part of why you can’t pay your mortgage, it’s no wonder you have a hard time dealing with a faceless bureaucracy that gave you the mortgage in the first place (perhaps with terms that were poorly explained, if at all).

This is why many homeowners in distressed mortgages are turning to loan modification specialists. These specialists are attorneys and mortgage financing experts, able to help you recast your situation to a more workable payment schedule, one that may well enable you to stay in your home.  How do they work?

The loan modification firm will examine your situation and predict with 93% certainty whether you will or will not qualify for a loan modification.

They approach banks with not only your information, but also background knowledge on what modifications the lender will be willing to do. This is because they know that banks lose when the homeowner loses – a foreclosure costs them money in legal fees, they lose a customer and source of cash flow, and they end up owning, managing and marketing a house, not their core business.

They deal with the whole matter dispassionately — which often is more effective with bankers who otherwise deal with distraught and under-prepared people all day long.

Loan modifications not only help solve problems, but can be a good way to manage the stresses of life in this historically troubled economy.