Over the last month I spent a lot of time talking to homeowners specifically discussing President Obama’s modification plan. Most homeowners held out great hope that this plan would help them finally get out of their financial mess and possibly save their home if they were in danger of losing their home in foreclosure.

Well the plan came out March 4th and I can personally tell you that the plan has only made things worse. First, the plan still leaves it up to lenders to decide whether or not they want to help you. Lenders actually have until December 31, 2009 to implement the plan. Second, the plan has so many guidelines that you could not actually expect a homeowner to know whether or not they qualify. If you call the lender, they will say, ” we are still in the process of reviewing the plan and we will contact homeowners if they qualify.” When is the last time a lender called you to tell you they were going to save you money and they were going to lose money by reducing their payment. There are many sarcastic lines I could insert here but I will refrain.

Finally, the one area of this plan that is not getting enough attention is the fact that it gives lenders until December 31, 2009  to commit to participating in this plan. So basically, lenders don’t have to enact this plan until the end of the year so it really won’t be available until January 31, 2010. Maybe some lenders will get on board sooner but there is no incentive to do so. There are so many things wrong with this plan because it is not set up to actually help a homeowner. If it sounds like I am frustrated with it, I am because I thought it would help clear some of the financial mess that is getting bigger daily.

Lenders get paid as much as $1000 to modify your loan and if you make payments on time, then every 12 months for the first 5 years you should get $1000 subtracted from your principal balance. However, if your home is losing thousands of dollars in value, there is no incentive with that for you if you could decrease your payments to reflect the atual value in your home. Most people would rather have a lower monthly payment than 1,000 less in principal balance. A lower payment makes more sense and gives the homeowner more stability.

Most homeowners know when they call our office that I ask them if they have talked to their lender. I believe in giving the homeowner tips on how to best modify their loan, regardless of whether or not they are a customer. We are in the business of helping people and that is truly what we want to do. While we don’t charge any fees up front unless we modify your loan, I still encourage homeowners to talk to their lenders to see if they will work with them before going through a modification company.

With this new plan, I would not recommend to my friends or family to do a modification on their own and if I don’t recommend it for them, I wouldn’t recommend it for you either. I understand that homeowners don’t want to pay a fee to someone for something they can do themselves. However, if your lender agrees to modify your loan and saves you $200 per month, but if you went with a company that was experienced in modifications and saved you $500 per month, who would you use? It’s a no brainer. Over the life of the loan it would save you thousands of dollars and even more savings in interest. People go through someone to do their taxes to make sure its done right and also because it might lead to a bigger refund (or less payout to Uncle Sam). This is not that much different.

Ultimately, I’m disappointed that the plan was not better. There was so much hope attached to it and yet it is just disappointing so many people who thought they might qualify.

Have you noticed that this plan is no longer being mentioned in the media online or on television? I think there’s a reason for that. They realize that while the thought might be in the right place, the plan is not going to help very many homeowners.