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.

The oversupply of housing is affecting distressed homeowners in a multitude of ways. For many who can’t keep up with their mortgage payments, they are in an “underwater” situation – the sale price of the home would be less than the amount owed. To walk away from their home, they still would owe the bank money. Further, the neighborhood overall sees a drop in their prices with each foreclosure, and the problem multiplies with other people living nearby.

It benefits everyone if a foreclosure can be stopped. Especially the banks, the lenders. They stand to lose about $50,000 per foreclosure in legal fees and the business of owning and reselling the property.

This is why banks are willing to cut better deals with homeowners who otherwise face a loan foreclosure. The bank is willing to settle for less money that is still better than that $50,000 loss they would experience. But most homeowners do not understand how to go about a loan modification – it gets little attention in the media, so most people don’t even know about them.

Enter the loan modification professionals. These are lawyers and home finance people who know the industry very well. They can efficiently examine a case, look at it in comparison to the bank’s position, then negotiate the solution to the homeowner’s favor. Reputable loan modification companies will charge a fee of around a month’s mortgage payment, and provide a money back guaranty if they are not successful.

It’s a solution to the housing crisis for millions of homeowner, their neighbors and their banks.

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.