I couldn't help her...but I did

I had a long day yesterday. My last of five loan mod prospects was a single mom who showed up early for her 5:30 appointment. "Patty" brought her six year old son, who spent most of the time clinging to her lap like a marsupial.

I started the appointment with my typical, scripted comments, reassuring her that she would be under no pressure to make a decision to work with me and a few other key points that I always bring up. (After four other appointments I really felt like a broken record by 5:30.)

I departed from my script to ask Patty's son, "Johnny" about whether Sponge Bob was, indeed, his favorite show and which characters would make up his "Fave 5." After we compared notes on that (my top character is Plankton, the one-eyed, tiny meglo-maniac) I got down to business with Patty.

She told me her story - she worked for a big lender, got laid off and recently found a new job at a foreclosure attorney's office as a processor for far less money. At the same time, she went through her divorce. She was way under water on her mortgage - she owed 280K and the place was worth an estimated 190K. She owed more than $50,000 in unsecured debt and was considering filing bankruptcy (her attorney had referred her to me to see about a mortgage loan modification.)

I told her that I could help her and ran through the numbers with her. I always give a projected range of savings, i.e. $400-700 per month without pinning down an exact number.

But as I looked at her other expenses that I could not affect, her taxes, homeowners association dues, insurance, etc. I concluded that the loan mod would not provide enough meaningful relief to her to make it worth doing, especially in light of the fact that she could rent an identical place in the same complex for more than $1,000 per month less. And that it would be a long time, if ever, before she built any equity in her current home.

See, people come to us to learn about modifying their loan, but that's not the real problem they need solved. Patty's real problem is cash flow - her reduced income was no longer sufficient to pay her bills. Sometimes a loan mod will help the cash flow problem, but in this case, I made the judgment that it wouldn't be enough.

We talked about all the other issues surrounding foreclosure, bankruptcy, credit, etc. - and Patty agreed that she should rent. In fact, she commented that she felt that before she came to see me and was glad that I helped confirm her decision.

So always give your best advice and analysis. We all have a right to make a living - a good living - doing mortgage modifications, but only if it's in the best interests of the client. Loan mods are a highly controversial area that is receiving more and more scrutiny from various attorneys general throughout the country.

In Patty's case, I did not earn a dime for my efforts but I can honestly tell you that the psychological payoff to me for knowing that I helped her was 100 times greater than any fee I would have earned on her loan mod.

I'm polishing off my Loan Mod Warrior system and will give details on it this month!