According to Salon.Com, about 40 mortgage brokers and real-estate agents paid $195 to attend a seminar conducted by broker Allen Brodetsky and local real-estate attorney Steve Vondran in Long Beach to learn fresh ways to make money.
What was this new method. Something that bankruptcy and consumer lawyers have known for some time -- Qualified Written Request, which is a request of receipts and disbursements of a mortgage loan that has to be provided to a borrower on request so they may perform an audit of their loan.
This is the first step in pursuing loan modifications. When borrowers are unable to pay their monthly mortgage bills, a frequent occurrence in this era of self-destructing subprime loans, loan modifications allow the borrowers to renegotiate the terms of their mortgages. They pay a lower monthly charge and keep their houses, and the broker earns a paycheck for arranging the new deal.
Vondran and Brodetsky do loan mods and investigate improprieties in the loan records, and they are teaching others to do the same thing. Many of the lenders did, and loan mod brokers who can promise their clients a legal review have an edge on the competition.By the Obama administration's account, its new housing rescue plan, which goes into effect on Wednesday, will pull up to 4 million homeowners back from the brink of foreclosure. It also offers another 5 million or so excessively indebted borrowers the chance to refinance into lower-interest loans.
Now the government is thinking about getting into the act with money and bankruptcy protection.
In California, home to nearly one-fourth of all the foreclosures in the country, there are now applications pending from some 500 brokers and real estate agents seeking to get in on this new line of business, which hardly existed six months ago. (but now has its own trade group). California's Department of Real Estate, which licenses mortgage brokers and real estate agents, has so far authorized more than 200 companies to negotiate with mortgage lenders to modify loans. They may charge borrowers whatever they choose for this service, as long as they only collect a portion of the fee upfront and take the rest once the job is completed. The going rate ranges from a flat $2,985 to about 1 percent of the amount of the mortgage, or $4,000 on a $400,000 loan. California's state regulator urges borrowers to use loan mod advisers from the state's approved list, if they're going to pay someone for help.
The Obama plan aims to improve that dismal track record of loan mod specialist, by promising lenders that if they and a borrower can work out a deal bringing monthly mortgage payments down to 38 percent of the homeowner's income, the feds will kick in money for five years to bring down the bill even further, making it more likely the borrower will be able to keep paying, and for many borrowers, a lower payment will be all the difference between staying in one's home and going into foreclosure.
Just like mortgage brokers, loan mod companies are under no obligation to act in borrowers' financial interests, short- or long-term. Under California's model contract, which brokers are encouraged to emulate in their dealings with borrowers, almost any change to a mortgage is an acceptable result, whether or not it saves a borrower money. And while the client has to accept the proposed deal in order for the company to get paid in full, the sales forces at these firms are veterans of pressure pitches to people in tough financial situations.
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