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.

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.

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.

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.

Just like on “Who Wants to be a Millionaire?”, life sometimes has its lifelines. If you’re in a home loan foreclosure situation – already in process, or close to it – a home loan modification consultant is your lifeline.

Here’s how it works. If you are unable to keep up with your mortgage payments – due to the economy, illness, divorce or other reasons – your lender might be open to reducing your monthly payments by reducing your interest payments, the length of the loan, or by other means. A recast mortgage can mean the difference between keeping and losing your home.

There are several reasons you would hire an intermediary. One is that getting through to the right people at your bank may be a frustrating experience. This makes a little more sense when you realize that the average loan officer has a caseload of 700 homeowner mortgages. They are stressed too. Also, the loan modification specialist has industry knowledge of what a foreclosure would cost a bank.  Keep in mind banks don’t want to own homes — they are far better off with monthly payments and not managing real property, selling at a below-value amount and liability issues. So the loan modifier is essentially finding that point between where the bank loses money and where you can afford to be. Also, a loan modification firm is made up of home mortgage experts and lawyers who can deal without the emotion typically attached to a foreclosure situation. Minus the emotional factor, a rational solution is more likely.

Maybe your home is or is not worth a million dollars. If you can hold on to it, with a monthly payment that you can manage, you will probably get greater value from it in the future.

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.