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Loan Refinancing is becoming more and more popular as interest rates drop and governments worldwide make it more and more accessible. This has caused an avalanche of applications and a whole new finance industry sector seems to have appeared overnight offering all kinds of guarantees on your loan refinancing application.

How should you feel about loan refinancing and what dangers should you avoid? Loan refinancing can be a solution for people in the early years of a mortgage that negotiated a high interest (compared to the current low interest rates) and has a low prepayment penalty on their current mortgage. If you have the right circumstances you could make substantial savings on your current mortgage. You must understand however that it will take a little while for you to start saving money on your loan modification because you will need to pay for the loan modification costs. It is therefore not a good idea to take on a loan modification if you are planning to sell your house in the short term as you will probably sell the property before you have broken even on your loan modification expenses.

Beware of high loan modification fees.
Because loan modifications prey on the desperate and have become so popular in today’s crippled economy many unscrupulous characters and companies are taking advantage of people by charging outrageous fees without being able to guarantee any savings. These application fees can range anywhere between $100 to $1,000 and are non-refundable. In the best situations the companies really feel they cannot lose because they have been successful so often in the past, in the worst cases these fees are part of a scam as nobody can guarantee a loan modification will be successful.
The other type of fees we must keep an eye on are the fees banks and lending companies charge to modify your loan. There is no end of fees that can be charged, inspection fees, survey fees, application fees, title search fees and the list goes on and on. It is vital then that you do your homework and check the total cost of your loan modification. Lenders are required by law to detail all the costs in a good faith estimate, ask for it and study it carefully. It is important that you compare the costs of the loan modification against the savings you will make with a lower interest rate or other benefits the loan mod offers you.

Probably the most expensive fee you will have to pay and that you must pay special attention to is the prepayment penalty of your current loan.
This penalty is a clause lenders include in the loan contract that many of us borrowers are not even aware of. This penalty comes into play if you decide to pay for your loan early to save on interest payments or to change loan or mortgage providers. The fees can range from 1% of the capital paid to completely outrageous penalties. This penalty alone can make the loan modification uneconomic, a complete waste of time so it is a good idea  to check your loan’s penalty and consider negotiating a low penalty fee for your next loan.

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Mortgage interest rates drop but illegal mortgage fees could negate savings

The steep drop in interest rates has caused a shopping frenzy in many western countries with buyers looking for a good deal. The rise in applications has not been in proportion to the number of sales but the figures are still encouraging.

If your credit score is in good shape and you have some savings for a down payment and some more for three to six months mortgage payments you could do very well with either a refinance of your current mortgage or with a new mortgage. Even the high end jumbo mortgages have opened up as the interest rates for large mortgages starts to drop also.

However illegal mortgage fees could nullify the savings you make on your mortgage refinance, loan modification or new mortgage.

How can you identify illegal mortgage fees and what can you do about it?
Illegal mortgages how to find them and avoid them.

It would be hard to list all the possible ways of charging illegal fees from borrowers. Three principles might be more useful: Lenders deserve to be paid for their work and services. They should not charge for services they did not perform and they should not receive illegal kickbacks.
For lowly borrowers like us finding out about illegal kickbacks is pretty much impossible unless we invest counterproductive amounts of money investigating lenders what is more feasible is to check for lenders that mark up on service other companies or individuals provide. For instance if your bank requires a valuation of your property by a qualified surveyor and the company charges the bank $300 the bank is not allowed to charge a handling fee or markup in any other way fees for work they have not carried out.

As I mentioned above it is difficult to provide a comprehensive list of fees you must beware of but this will give you an idea. Banks cannot put mark-ups or get kickbacks for that matter on:
-    Appraisals
-    Settlement fees. That is settlement fees charged by other banks or institutions. Banks will charge settlement fees when you pay loan early as well as other circumstances unless you have negotiated some other arrangement.
-    Credit reports.
-    Flood certifications.
-    Pest inspections.
-    Title insurance and title searches.

This is important to understand because most of us would expect that banks are allowed to charge a handling fee for services they arrange but they aren’t, although that hasn’t stopped many lenders to try and get away with it.
There is an opportunity to find a good mortgage deal or to refinance your mortgage, do your homework find the right mortgage for you, but whatever you do make sure you don’t lose all your savings on illegal mortgage fees.

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What poses the greater threat to homeowners during the current mortgage crisis, predatory mortgage modification companies or the costs of hiring an attorney to represent them during the modification or foreclosure process?

According to California Governor Arnold Schwarzenegger, lawyers’ retainers and fees represent the greatest threat to homeowners. Over the weekend he demanded  state legislature include a clause prohibiting attorneys from accepting retainers for performing legal services to prevent foreclosures in SB 64 if they wanted him to sign the bill into California law.

SB 64 is intended to protect homeowners from mortgage modification companies. It seems that preventing homeowners from retaining legal representation to work on their behalf would not constitute protecting the homeowner. Of course, to give the Governor the benefit of the doubt, his intent in demanding the clause may be to assure all homeowners are able to retain counsel whether they can afford it or not.

At issue is whether eliminating retainers or allowing lawyers representing homeowners during the mortgage modification process to receive payment or security deposits upfront will effectively limit their ability to represent their clients. According to Martin Andleman of ML-Implode this is exactly the effect this will have.

“SB 04 will essentially deny homeowners their right to counsel guaranteed by the 5th and 14th Amendments, by making it so that no lawyer would be able to take on such a client,” Andleman explained.

The National Association of consumer Bankruptcy Attorneys (NACBA) agrees, saying “While there have been a very few law firms implicated in loan modification abuses, adequate legal recourse against bad actors in our profession already exists, including disbandment and criminal prosecution for fraud. Because other fly-by-night scammers can pack up and move on to greener pastures on very short notice and don’t have a bar license to lose, it is understandable why consumer advocates would seek protections for consumers against those predators. However, placing blanket retainer restrictions on attorneys whom consumers may need to represent them is an unconscionable effort to interfere with their legal rights.”

The simple fact is, retainers are a standard business practice for attorneys. Retainers assure  lawyers that they will be paid for their services at the time they are rendered, something that is particularly important in situations like mortgage modifications which can take months to resolve or may be over in a matter of weeks.

In addition, the possibility exists that lawyers may not get paid for the work they do on mortgage modifications if they have to wait until the process is complete. Loan modifications are not the solution to every financial problem homeowners encounter. In fact, some homeowners may still end up losing their home to foreclosure or filing for bankruptcy after their mortgage is modified raising serious questions regarding how attorneys would be paid in these circumstances. Also, consumer filing bankruptcy commonly consult attorneys during that process and it makes no sense for consumers not to have the same protections while trying to prevent bankruptcy.

“Homeowners are scared, emotional, unknowledgeable and panicked when at risk of losing their homes,” said Andleman. “For the government to support a position that they should go to their lender alone is criminal. It is the worst abuse of power I’ve seen in my lifetime.”

If consumers do not benefit from the elimination of retainers, the question must be asked: who does? The obvious answer is lenders and mortgage servicers who will be more likely to be dealing directly with homeowners rather than attorneys. This gives lenders a distinct advantage in negotiations. Beyond the favorable terms lenders are likely to insist on before agreeing to modify a mortgage there are also the fees banks will collect. Data collected by the federal government indicates banks will earn $38 billion in fees this year and that’s just from overdraft fees. Imagine what else might be hidden in the fine print.

When you dig a little deeper it becomes obvious that the clause eliminating retainers in SB 94 is just not in the best interest of homeowners. It may even prove to be instrumental in prolonging the current crisis rather than shortening it. As with so much in this crisis it is “buyer beware”.

“The modifications that the loan servicers are offering homeowners, if they will even talk to them, are short term fixes that will leave the homeowners facing foreclosure at a later date,” said Alan Jablonski, a Long Beach, CA based consumer tights attorney and author of “Successfully Navigating the Mortgage Maze”.

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What is a Home Loan Modification?

Mortgage modification is where your current mortgage lender agrees to change the terms of your current home loan so that you may afford to service the monthly payments and avoid foreclosure.  Generally the mortage provider will lower the interest rate and change the length of your repayment.

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Be very careful if you choose to use a loan modification company that takes a fee up front to negotiate your loan modification for you. They cannot guarantee a successful modification and can end up costing you another month’s mortgage payment in exchange for false hope. The best of these companies have done the modification countless times and will actually try to help you in earnest without guarantee. The worst are scams that take your money with a cursory attempt to help you (if any).

We have found that Foreclosure Fighter offers useful advice that achieves a high loan mod success rate and we therefore recommend you visit their site.

Do It Yourself Loan Modification – A DYI Guide

We are big fans of Do it Your Self  Home Loan Modifications. And  we currently believe that the down to earth ebook entitled The Mortgage Relief Formula is the most useful resources currently available on the subject . This book walks you through how to modify your loan on your own – saving costs and headaches of false promises of loan modification companies. This book is wide ranging and covers everything from loan modifications to dealing with debt collectors to short selling your home in 9 days. Even if we receive a small commission for recommending it this ebook we are confident that if you are in a situation where you are looking to modify your home loan or short sale your home you will be happy you have read this book.

Below you can see a sample of the type of loan modification information you’ll find in Mortgage Relief Formula. If you find the sample video below interesting we are confident you’ll really appreciate the loan modification course and book.

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We recommend that you check out the full information on Richard Geller’s Home Loan modification insights.

Read our full article on loan modifications on your own

Click here to connect with confidential Loan Modification and Foreclosure prevention consultants – NON obligation

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