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Banks have learned that they can help homeowners and themselves by aggressively addressing loan modifications.  Even though only 4% of trial modification programs have been extended to long-term solutions, the modification game is changing.  Initially resistant to change, the banks have taken a harder look at the numbers.

What bankers see is a rising unemployment rate, more defaulted mortgages and increasing foreclosure activity.  These are all negative signs for the financial industry, which is finally coming to realize that something is better than nothing.  Banks do not like owning and managing real estate and in today’s market they are holding more property for longer periods.

Banks, like Wells Fargo, are now attending and working with the Neighborhood Assistance Corporation of America (NACA) and its Save The Dream program.  Most lenders in the program have agreed to reduce interest rates for qualified modification programs to 2%.  Interest reductions of this magnitude are leading to a higher rate of conversion to long-term loans. 

Even though just 4% of American homeowners received long-term modifications, more aggressive modification programs began to up the curve in the second quarter of 2009 when 80% of all loan modifications resulted in lower payments.

Wells Fargo community relations executive, Jason Ferebee, explained, “We’re getting a lot of borrowers looking for a better interest rate.”  Wells Fargo now analyzes each modification application.  If an applicant does not qualify for government programs, the bank now applies its own innovative programs designed to keep the homeowner in the home.

Some programs actually apply the 2% interest rate for the entire length of the mortgage while others offer a 0% interest rate for three years.  The rate then escalates gradually with a cap at 5%.  The new position is leading to fewer foreclosures and more long-term conversions.  The good news for homeowners is that banks are now seeing the merits of modifications.

In October 2009, the foreclosure rates were still 18.9 percent higher than they were in October a year ago. In comparison to the previous months, the rate of foreclosure has dipped, but it’s still very high when compared to previous years. At such times of distress, homeowners are most vulnerable to dubious companies. Therefore, here are some methods in ensuring that you do not fall into sweet talking and smooth operating fraud companies.

One should take advice and information from the Department of Housing and Urban Development (HUD). The counselors will advice you on a range of housing matters, including foreclosures. Also, the website of this department has a list of approved agencies state wide. Please remember that, for homeowners in financial distress, HUD counseling comes at a very low cost and is sometimes free. Refrain from working with an agency that asks for a fee before giving advice.

Any agency promising to stall the foreclosure once and for all and make it go away should not be trusted fully, since no one can give this guarantee. Any fee or service payments demanded by the agency, before the program goes into affect, should not be made unless clarified with the authorities. Before going to a local agency, check the credentials and listing at the HUD website. Ask for some customer names that have already availed the service; speak to them to learn about their experience.

During these times, the Federal Trade Commission (FTC) for the consumer information on frauds, started back in 2008, still holds good. They mentioned that the agencies trying to perpetrate fraud get the information of distressed owners through notices on newspapers and online. These agencies then send personalized letters and offers to the individuals to see if they can get them to take the bait. Extrapolating from this it would be advisable to know how these agencies who contacted you got the information.

The Federal Bureau of Investigation reports that, in the year 2008, the total mortgage fraud Suspicious Activity Reports were 63,173 cases, with a loss of $1.5 billion. Some of the most popular types of mortgage frauds that happen in America include equity skimming, property flipping and mortgage related identity theft. One should also be aware of predatory lending practices, which hurt the primary borrowers and usually result in defaults and delinquencies. These predatory practices target the elderly, distressed owners and defaulters.