Open House: Loan modification failure rates are alarming

As an answer to their home mortgage crisis, many homeowners have attempted to qualify for a refinance or a loan modification. Refinancing didn't work because your home is now worth less than what you owe to your bank. Then, a little more than a year ago, the talk of ‘loan modifications' was all the rage. However, the truth of the loan modification attempts is that most applicants have been denied. Across the country, there has been a dismal 1 percent approval rate.

Here is a typical "successful" loan modification story:

House payments were $2,400 per month. Under the loan modification program, the homeowner was set up with a trial period where they had to make a payment of $1,200 per month, on time, for several months as part of the process.

Then the day came when you received great news from your bank and they approved your loan modification. Your new payments were going to be $1,900 per month. Yes, it is a reduction off your original $2,400, but because of a change in your financial situation, you still can't afford the new payment. You are now back to square one, and missing payments again.

You are not out of options quite yet. If you didn't qualify for your loan modification or you can't make the new payment offered to you in your "successful" loan modification, you probably qualify for a program called Home Affordable Foreclosure Alternatives (HAFA).

The benefits HAFA offers are: 1) you can still protect what you have left of your credit by selling your house through a short sale, 2) this program mandates that (in most cases) your lender cannot ask you to pay them the difference between what you originally owed to the bank and what you sold it for, and 3) your lender may even give you a check at closing to help cover moving expenses. I have seen these checks made out for $3,000 to $5,000! There are two catches, however. You must keep the house in good condition and leave it that way, and you must use a licensed real estate agent to complete the process for you.

For the most part, it has been investors who have been buying up all our foreclosures and pre-foreclosures and saving our neighborhoods from becoming blighted neighborhoods. Once they buy these homes, they are renting them. With so many rentals on the market, rental rates have gone down. That means you can short sale your home and have the money to rent a nice home, in a lovely neighborhood, for much less than you were paying before.

So, where do you sign up? You need the support and expert advice of a qualified short sale real estate agent to help get you moving through the HAFA process. The more your agent knows about short sales, the better result you'll get with your lender.

So, if you have exhausted your options with long-term government sponsored payment plans, forbearances, and failed modifications or have been approved for one that you honestly just can't afford, you're not at the end of the road. There is still this wonderful opportunity for you to get back on your feet, still live in a nice home, and be out from under the financial pressure you have been under for the past few years while our economy recovers.

You can do this. Find your strength to make one more attempt at resolving your current housing problem. Do not throw in the towel just yet.

If you know someone in this situation, please pass along the information in this article to them. They'll be glad you did. You'll be glad you did.

- - -

Lori Bender, CDPE, has more than 20 years experience in selling residential real estate in south Florida. Further information on this topic can be found at, or she can be reached directly at either (239) 234-0387 or