Increasingly loan modifications are becoming the preferred mechanism to help defaulting homeowners and troubled bank mortgage asset portfolios. All of the major banks, Bank of America, JP Morgan Chase, and Citigroup have announced streamlined loan modification programs.

Now national law firms, like McGlinchey Stafford, PLLC, are making it even easier for homeowners and getting the endorsement of major banks like Banco Popular North America. The McGlinchey Stafford mortgage loan modification package helps streamline the loan modification process for both the homeowner and the lender.

Loan modifications are traditionally confusing, document intensive, and legally tedious processes. Since you are modifying existing mortgage terms each transaction tends to be unique and require specific documentation from the borrower.

Streamlining this process has been the primary goal of government agencies like the FDIC since the inception of the mortgage crisis. In fact, FDIC has already proved the streamlining concept in their own operations ofIndyMac Federal Bank, taken into receivership earlier this year. However, getting lenders and investors to endorse loan modification programs has been challenging. This is whyBanco Popular's endorsement of this program is significant.

The benefits of simplifying these modifications are obvious to borrowers and the bank. "The solution offered by McGlinchey Stafford meets our demands for legal and technical accuracy, speed, and cost," explains Brian Doran, Chief Legal Officer of Banco Popular North America. "The combination of consumer finance expertise, forms creation, and document preparation made it possible for us to turn modifications around in hours as opposed to days or weeks."

This solution and programs like FDIC's loan modification program at IndyMac Federal Bank continue to show that modifications are effective tools to use on bank-owned mortgage asset portfolios. However, more complex mortgage assets like that of Bank of America's Countrywide loans are meeting challenges.

Investors, like William Frey, a private investor in mortgage-backed securities are raising legal challenges to banks ability to modify loans that weresecuritized and sold to investors. In a law-suit, seeking class-action status, Frey contends that many of Bank of America's Countrywide loans (acquired in late 2007) can not be modified in accordance with their investor agreements.

Frey advocates the government buying the assets and covering the potential losses to investors over the loss mitigation strategy that most banks are now pursuing with loan modifications.

These unprecedented economic times are pressuring the government, financial institutions, investors, and borrowers to evolve creative solutions. Loan modifications are just one of the tools that are sure to quickly and radically evolve over the next year to battle these economic challenges.

Published on December 2, 2008