Jillayne Schlicke

• Manage |RSSRESPA reform

Hi Tara-Nicholle, 1) Why not refer homeowners to an attorney who will likely be able to perform a loan modification at HALF the cost of a loan mod salesman? I've surveyed ten attorneys in my market area and ALL have quoted $1,500 for a loan mod. One quoted $2500 but only if there were multiple liens on title. This is a way better option for a consumer given that they will receive local legal advice for half the cost. 2) Many states now have issued press releases directing consumers to avoid unlicensed loan mod salesmen and to ONLY work with licensed loan originators licensed under a mortgage broker or a consumer loan company. Predatory lenders are now operating in full force doing loan mods. Don't believe me? Do a craigslist search in your city. Jobs...real estate...keywords: "Loan Modifications" and you'll see their ads. It's like it's 2004 all over again: "Make $15,000 per month doing loan mods; no experience necessary." In some states, loan originators owe higher duties to consumers. At least if it's a licensed LO, the consumer has a chance of working with a person who is being regulated by a state agency.

Hey Michael, that was an exceptionally interesting PDF. Thanks for the link. (It's only 2 pages, readers, and provides a good summary.) Question: I'm concerned about this quote from Professor White's article: "The average foreclosure loss on a first mortgage in November 2008 was $145,000 or about 55% of the average amount due." The cost of foreclosure use to average a whole lot less than $145K. I have heard anywhere from $50K to $60K. If this is true, this is a staggering find and suggests that banks and servicers are already insolvent on paper.

58% of Indymac's loan mods are re-defaulting by the 6 month mark. Some would say, "but we're helping 42%." However, this is a dismal failure in any market. I question whether loan modifications are actually helping the homeowner. Perhaps loan modifications help the bank more. The bank gets to put off reporting losses for yet another month, another quarter so their executives can pocket more income and bonuses. Modifying the mortgage payment might only be half the problem. If the consumer is strapped with other unsecured debt like credit cards, we're just setting the consumer up to fail. The consumers TOTAL debt ratio is what I'd like to see for the 58% who are re-defaulting, compared with the total debt ratio of the folks who have not re-defaulted. WHY are we setting homeowners up to fail? Why not help them through the foreclosure process, allowing them to leave homeownership behind, returning to the housing market as renters, in order to begin rebuilding their credit NOW instead of putting off the inevitable? Letting the housing market crash means we reach the bottom sooner and can begin the recovery process sooner rather than dragging this out for years and years. There are thousands of home buyers waiting to buy.....when we reach bottom. What happens when the artificially low interest rate on those 42% resets? Do we then offer another loan mod? I'd like Barney Frank to address that question.