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 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.

While it may seem only the Wall Street fat cats get a break in this economic crisis, there is one corner of the loan foreclosure situation that actually enables homeowners to get a break as well.

It’s called a home loan modification. These are deals, negotiations with a lender on behalf of the homeowner who is facing possible loss of a home due to foreclosure. A lender will consider a recast of the mortgage to a manageable, affordable set of terms if the borrower can demonstrate some ability to pay, even if compromised from the past.

What’s required is documentation of income. This is looked at in relation to the monthly mortgage payments the individual is making. In many cases, those payments have ballooned due to a bad ARM (often, the borrower was unaware of the ARM terms and possibilities when the mortgage was first contracted).

But what most homeowners don’t understand is how low a bank is willing to go on the terms. Banks are in business to make money, but they also lose in a foreclosure situation because the process is costly. Not only do they have to engage their own lawyers and other staff in the proceedings, but they then are stuck managing a property and its sale. In the current housing crunch, the chances of them selling the property at a profit are slim. So, bottom line, banks don’t want to own the property. But only industry insiders know that point at which a lower-cost mortgage is and is not profitable to them. This is why thousands of homeowners are contracting with loan modification firms to do the negotiations for them. Home modifiers charge about a month’s mortgage payment in a fee (upfront, or in installments). If they are unsuccessful in achieving a loan modification, they then should (should, not all do, only the good ones) refund the fee in full.

It’s the only way to stop foreclosure for millions of homeowners. And, it works.

Alright already. Everyone’s had enough of the doom and gloom of the economy. If you’re a homeowner with a distressed mortgage, perhaps because of a crazy ARM that has increased your monthly payments to an intolerable level, you’re probably sick of hearing about how bad things are.

Here’s the good news that gets little attention in the press: your mortgage terms can be changed. And it doesn’t take super stellar credit, as is required with a loan refinance. Loan modifications are for people who’ve faced difficult circumstances, such as loss of income, divorce, illness and medical bills, or other adverse situations. A loan modification is when a bank looks at an individual situation and decides that it would be worth more to them to NOT foreclose but instead work out a manageable plan with the borrower.

The trouble is most people don’t know about loan modifications. And of those who do, the whole process of approaching and dealing with a bank may be intimidating. Bank officers are harried enough with all that’s going on their industry. Typically, a loan officer has 700 cases to manage, many of whom are emotionally distraught people (and understandably so). They would try to help if they had the time to educate you.

A better path, one taken by thousands already, is to engage a home loan modification specialist firm. These are qualified experts in mortgage law and finance. Typically, a lawyer and a finance person will examine your existing loan and the rest of your situation, then look at who your lender is. They have insider industry information on what a bank may want to do.

When your mortgage is successfully renegotiated, you pay the loan modification firm a fee of about one month’s mortgage payment. If they are not successful, you owe no payment at all (check: only the better firms provide a 100 percent money back guaranty). In the end, it’s a no-lose quest for the homeowner who is worried about keeping their home.

There is a sense of powerlessness to any homeowner who is falling behind in their mortgage payments. It seems that the system and circumstances – big bad banks that want to foreclose on your home, because of a bad economy, ARM increase, job loss, illness or a lousy housing market – are all working against you.

But in fact banks and other lenders don’t want you to lose your house. They don’t want to own it and they don’t want to lose you, their customer. If you were able to keep paying every month, that’s a positive cash flow for them. And when stuck with a foreclosed-upon home in this depressed market, they will likely lose money in selling it.

This is why loan modifications are being worked out for thousands of homeowners. A loan modification is a recast of mortgage terms, generally resulting in a lower monthly payment that allows the borrower to stay in their home and continue holding title. But most borrowers are not familiar with this option, and much less don’t know how to negotiate it.

Home loan modifications help fill this gap. They are professionals – lawyers, accountants, home loan finance experts – who know inside industry information on what a bank will be willing to do. They know that point at which a deal is a winner or a loser for a bank. So their job, working entirely on behalf of the homeowner, is to hit the lowest, most affordable terms possible while still satisfying the lender that this mortgage will be good for them over the long haul.

It’s really rewriting a mortgage, always to the benefit of the homeowner. This is something rarely reported in the media, which tends to focus only on the negative.

Note: working with loan modification companies should carry no risk. The better loan modifiers know with high certainty what success they will find once they examine the specifics of a case. And they should offer a 100 percent money-back guaranty in case they are not successful. Fees generally are around one month’s mortgage payment, not points or a recurring expense. Many firms are allowing fees to be paid in installments.

While your home may be a much bigger asset, the loan on it when in distress is more manageable than most car loans. With a car loan, if you are unable to pay on the terms the car is repossessed rather quickly.  But home loan foreclosure laws require a process that allows the homeowner to work out solutions.

And there are options for managing a home loan, to recast the mortgage terms to a more favorable outcome for the homeowner. If a homeowner can prove an ability to keep up payments, even if less than the original terms, a bank will be amenable to working it out. Why? Banks don’t want to repo your house.  A car can be easily sold again, but houses are far more complicated. Plus, the bank has to spend money in the foreclosure process, only to lose a long term customer in the process.  They want to keep you in your home. Really, they do.

Still, many homeowners are unfamiliar with how to achieve a loan modification. The terminology is unfamiliar, and they don’t know who exactly to talk to at the bank. This is why many thousands of people in danger of home loan foreclosure are turning to professional home loan modification specialists. These are lawyers and mortgage finance experts who know how banks work, and what financial arrangements remain attractive to a bank even if the monthly payments from the homeowner are reduced.

If working with a loan modification firm, check their offerings. Do they have a high success rate, over 90 percent? And if they fail to succeed in negotiating your mortgage to more favorable terms, will they refund your fee? As far as fees go, it should be a set, one-time fee, not points or a recurring expense, perhaps offered on an installment plan. With these factors, the homeowner is in a no-lose situation.

In the past it used to be moral shortcomings that were associated with home loan foreclosures. Drunkenness, drug addiction and a general failure to keep up an income were what led to distressed loss of a home. But this is not your father’s housing crisis and economic meltdown. Today it is job loss, skyrocketing ARMs, illness not covered by insurance, divorce and a housing market where very little sells that leads to mortgages in trouble. The monkey on our backs is circumstance not asked for or deserved.

But it is what it is. The best way to manage the situation is to seek alternatives. The government mortgage plan might work, but might not work in time for millions who are facing foreclosure now. For those homeowners, a loan modification program might work best.

A loan modification program is basically where you approach your lender and say, “Look, I can’t make the payments I’m now stuck with. But I have some income, and can make lower monthly payments under different terms. Let’s make a deal.”

And banks will listen and deal, if approached in the right way with the right information. The problem for most people is they don’t know the financials on the bank’s side, what lower, recast mortgage terms they will agree to. Also, bank loan officers are managing hundreds of cases and thus are not able to help most homeowners with this process.

That’s why thousands of homeowners are using third party intermediaries, home loan modification specialists. These are home financing professionals, lawyers and accountants who work on the homeowner’s behalf. Their one goal is to get a better, manageable mortgage for the borrower. If they’re good, they will know with high certainty (90 percent or higher) whether a case will be successful, and if they still don’t succeed, they will refund the fee to the borrower (fees range from $300 to the monthly mortgage currently paid).

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.

Few people in or near a loan foreclosure are new to their situation. Problems may have begun with an income loss, illness, divorce or an ARM that adjusted upwards. For one or several months, the homeowner tries to find a way to make it work – cut out expenses, find new income, ask friends and family for help. The individual may also go to the source of the mortgage problem, the lender, and tried to find a sympathetic ear, someone who can fix the problem.

But time passes, the homeowner gets further behind in their bills, and the bank officer assigned their case is dealing with 700 or 800 other cases, unable to help the individual work out better terms. Options may appear to be exhausted.

This is why loan modifiers – attorneys and financing experts hired by the homeowner – are not only a last chance for many homeowners.  They are the best chance.  Here’s why:

• Loan modifiers understand how to talk to banks, in their language and with the information that means the most to lenders.
• Loan modification companies understand the economics of banking. They know the bank doesn’t really profit from owning a home - especially in this housing market.
• Loan modifiers are non-emotional in ways that homeowners cannot be. They can better manage the bank representative with a cool demeanor.

Loan modification firms are generally hired at the cost of one month’s mortgage payment, and can predict with high (93% or greater) certainty how successful they will be in the loan modification negotiation.  Without that, they should refund the money to the homeowner. 

The net result is that thousands of families have remained in their homes at better terms because they hired this intermediary.