Blind loan modification is a relatively new term that has popped up in the area of bank lending. Blind loan modification is a way that banks make an alternate offer to you on your preexisting mortgage with them. These offers may include a different interest rate, different monthly payment, and different terms. While they are becoming more popular, they are not always the best route to take. Here are three reasons to avoid blind loan modification.
1. Automatically Generated
These blind loan modifications are automatically generated by the bank's computer system. There is no human loan officer sitting there crunching numbers and trying to come up with the best plan for you. It is an automated program that is simply spit out by a printer, packaged up in an envelope and sent to you. Even though they market it as a special offer designed just for you, do not let it fool you. They send out several of these automated loan modifications.
2. No Customer Service
Since the blind loan modifications are engineered by a computer system, most of the time, people that work at the bank will have no knowledge of the offer. If you call in to the bank to discuss the loan modification, they will have no idea what you are talking about. They might put you on hold and transfer you to a few different people, but not many people there will be able to talk intelligently about the offer. Therefore, you won't really know what is going on with the offer until you accept it. This is part of the reason that it is called a blind loan modification. You are basically agreeing blindly to a loan that you only have generalized information about.
3. Terms are not in Your Favor
Although these terms might look attractive, they are never going to be in your favor. Think about this for a moment. The bank already holds your loan. They've already got your business. What incentive would they have to lower your effective interest rate and the amount of money that you pay them? Although it might look like a flashy offer, you should probably stay far away from it. Bank offers will always end up helping the bank more than they help you.
They are in the business to make money and this offer is just another way for them to make more money. They might not make more money upfront, but they will make more money in the long run. Banks can afford to be patient, so they might fix the loan where you make only interest payments now, followed by a balloon payment. Most of the time, you will not be able to afford the balloon payment unless you sell the house.
It is in your best interest to have an attorney that specializes in contract law to take a look at their proposal. Most of the time, they can find the catch that is associated with the offer and help you make the best decision.