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Persistence Pays Off When Loan Modification Saves House and Credit
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Servicing cost: Servicers have an interest in minimizing modifications because they add to costs. They try to keep costs down by computerizing the servicing process to the greatest degree possible and standardizing customer support procedures so that low-paid and easily trained employees can perform them.
Modifications must be handled by a special group who are more highly trained and better-paid, and the increased cost of expanding their number cuts into the bottom line. Hence, there is a tendency to be nonresponsive in the hope that the borrower will go away.
Borrowers have to be persistent. Brasch said: "If a servicer says they will call you back . . . forget about it. You need to call them and call them constantly. They will lose your paperwork, fail to return calls, put you on hold and then hang up. It's what they do. Keep fighting, calling, faxing. This does work!"
In deciding whether a modification would be less costly than a foreclosure, servicers usually ignore an asset possessed by the borrower that could tilt the balance toward modification. This is the right to future appreciation in the value of the borrower's house.
In exchange for a modification that might otherwise be more costly to the owner than a foreclosure, the borrower could pledge a percent of the future appreciation, which could shift the balance to modification. I will discuss that next Saturday.
Jack Guttentag is professor of finance emeritus at the Wharton School of the University of Pennsylvania. He can be contacted through his Web site,http:/
Copyright 2007 Jack Guttentag
Distributed by Inman News Features
