America’s worst unnoticed nightmare: The Big Bad Loan Modification ManDaniel Movtadyloan modification, lenders, banks, foreclosures, FHA
Mortgage banking is in my blood. I was 13 the first summer I
decided to work in my father's mortgage company. While other
children my age were playing kickball at day camp, I was processing
loans. I assume my grandfather had a mortgage banking gene; four of
his five sons chose to make careers out of it, while the fifth
brother's life was taken untimely. Since that time, I am proud to
say that I have come to understand all the nuances that make our
industry interesting and lucrative, while allowing us to help
citizens achieve the dream of homeownership.
Today, I worry about the sanctity and trust a mortgage lender
has in funding a mortgage to who they believe is a qualified
borrower. In recent years, the mortgage industry has been like a
rollercoaster ride at Six Flags. Through 2006, it was the slow
climb to the peak, while the crisis of 2007 began the high velocity
shot downward. Sub-prime was a global industry error, one that I am
glad that my father and I were not part of. However, it is my
personal belief that many of these same individuals that brought
the industry to its knees in the first place, have now found
another niche.
Here is the story that brought everything to my attention. A
borrower, who had no reason in the world to not make their mortgage
payments, was currently delinquent. After going back and forth with
this individual for some time, they confessed to me that they paid
someone $3,100 because they told them that if they did not pay
their mortgage, they would be able to keep their house and be able
to lower their payment. Upon further research and discussion with
other local and national lenders, I came to understand that a new
phenomenon was brewing, and this was not an isolated incident.
Across the nation, borrowers are being contacted by "loan
modification companies" and being told to not make their payments.
Borrowers were being told, "The bank won't even think about taking
your house for eight months, at that point, we will renegotiate
your mortgage on your behalf with the bank." Inexplicably and
unfortunately, many borrowers are falling for this trap and causing
a domino effect of which results are not yet completely in. These
companies collect fees from the borrower and commonly pay referral
fees to anyone that will throw them a bone.
In a perfect world, a loan modification company may not be so
bad; a borrower truly cannot make their payments, then they work
with the borrower and lender to come to an amicable conclusion.
However, the reality is that borrowers are being cold called and
solicited to not make their payments, and kickback money is readily
available. The fact that large institutions have so many
foreclosures that they have no choice but to consider loan
modifications only adds fuel to the fire. Loan modifications should
not be considered as a burden free, money saving proposition for
homebuyers.
I believe that the government needs to enact certain laws to
prevent this from causing more distress on the economy, such as
losses for banks, advances for seller/servicers, and a decrease in
demand in the portfolio market; all of which trickles down to the
many employees that are hired to work in these fields of business.
We are talking about processors, loan originators, underwriters,
closers, title companies, traders, and the list goes on and on. In
an already damaged economy, we have enough problems to deal with.
We cannot let any threats to the housing and mortgage market go
unnoticed ad unpunished, especially with today's dominant mortgage
product being federally-insured FHA loans. My message to brokers
and bankers is, educate your consumer; don't let them be fooled
into believing that they are better off NOT paying their
mortgage.
Daniel Movtady is director of business development for Great
Neck, N.Y.-based Golden First Mortgage. He may be reached at (516)
570-4100, e-mail
[email protected] or visit www.goldenfirst.com.
