Loan modification firms, boom or doom for the economy

Loan modification firms, boom or doom for the economy?

As the situation in the American Real Estate market  becomes worse and worse things are getting better and better for loan modification firms. Such is the case that they are expanding in a dotcom fashion throughout the States. No doubt this trend will follow in other developed countries soon. The growth is so  large that newspapers are even commenting on the effect these companies are having on the commercial real estate markets of cities when they snatch up commercial lots for their offices. Some are even commenting that these companies are creating a positive force of their own in lifting the real estate economy.

That is one view. Another not so flattering view see these loan modification firms as vultures that further weaken the economy taking advantage of the “victims” of the current recession. Your views on this issue are probably flavored by your view on the situation of those affected by the credit crisis. There is the “serves them right, they shouldn’t have been greedy and spend over and above their means” on one side and the “the capitalist economy actually creates an unstoppable spending force that unscrupulous bankers and stock brokers fuel to insanity and we need to protect the consumers from them”.

I personally lean to the “you’re responsible for your actions my friend, don’t play the victim” and I have also lossed a house because of the u-turn the economy made in Spain. I made a mistake, bought at the peak and paid the consequences, I don’t expect the government to bail me out even if it is my only home. However there is a point that a sudden growth in companies whose sole purpose is to modify mortgages and loans for people who are about to default on their payments does kind of smell fishy.

Alas, what long term effect can an increase in occupation of commercial office space have in the real estate. However these firms do carry out the job of explaining to home owners what they can do to save their loan, their home and their credit rating. No matter how bad you feel your situation is there is a lot you can do. Banks and finance companies are aware of how difficult times are and what is more they understand that they are more likely to save their investment if they work with you than if you short sale the house and declare bankruptcy.

Loan modification firms are here to stay, they have digged their teeth into a niche of the mortgage industry and are not going to let go any time soon. The only fly in their ointment would be if large lending banks started doing in-house loan modification programs they could not compete with.

If you are in a bad situation with your mortgage, talk with your lender, consult a professional, preferably one that is not likely to make money from you following his advice and make practical steps to improve your situation.