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Michael Gaddis, J.D., the host of “The Michael Gaddis Show” on KCBQ AM1170 The Answer, dedicated a segment to discuss foreclosure alternatives for people facing issues with their home loans.  Michael Gaddis, J.D. has extensive experience helping distressed homeowners through his legal practice and wanted to share some tips for his listeners.  Michael Gaddis, J.D.’s first piece of advice was for homeowners to exhaust all efforts to refinance to solve their problem prior to becoming delinquent.  Loan modifications have become more and more difficult to obtain in recent years due to several reasons.  First, as home values increase the incentive for investors to approve loan modification solutions decreases.  Loan modifications are a loss mitigation tactic for investors and are primarily agreed to if the resulting loan modifcation is in the financial best interest of the investor.  During the housing crisis most homeowners that were requesting loan modications were “Under Water” meaning that they owed more on their loan than the house was worth.  As home values rebound and continue to increase resulting in fewer homeowners that are underwater, the risk to the investor is lessened.  Second, equity is the enemy of loan modifications.  All loan modifications have to go through some sort of Net Present Value (“NPV”) test.  NPV is a computer program that takes into consideration every variable related to a particular loan modification application.  If NPV issues a PASS then the loan modification is deemed to be in the best interest of the investor and a loan modification is granted. If NPV issues a Fail then the loan modification will be deemed to NOT be in the best interest of the investor.  Third, many homeowners have already received a loan modification and the terms of those loan modifications are very aggressive making it extremely difficult for the lender to find a solution that is beneficial to the borrower.  Fourth, many homeowners have already received 3 loan modifications.  Normal investor guidelines allow for up to 3 loan modifications during the life of the loan.

The purpose of this segment was not to discourage homeowners from seeking loan modifications.  The purpose was to provide homeowners with some realistic issues that might make seeking a loan modification problematic.  Too many homeowners are chasing hope which, for many, is tantamount to pushing a very large boulder up a steep hill.

“The Michael Gaddis Show” airs on Wednesdays at 8PM on San Diego’s KCBQ AM 1170.  To listen to podcasts of “The Michael Gaddis Show” you may either visit the KCBQ webpage or click the following link: