Loan Modifications: What an Attorney Does and Why Is Representation Important
So recently I had lunch with my friend Banch, and she told me that she wasn’t really clear on exactly what a loan modification was and that she did not know that my firm was handling loan modifications. Oops! I have taken it for granted that everyone “knew” what I meant by loan modification. Now, then, is a good time to explain exactly what this is all about and how we have assisted some of our clients.
As you are certainly aware, many people have lost jobs or had their pay cut. Others have adjustable mortgages that have adjusted up to unmanageable rates, or owe more than their house is worth.
Many in these situations qualify to have their loan terms modified so as to either a) reduce the interest rate or b) extend the loan, or c) get a reduction in the principle. Any of these changes will result in a lower monthly payment, and if that adjusted payment amount is one that the homeowner can afford to make, then seeking a modification rather than being handed a foreclosure certainly makes sense for the homeowner.
Financial institutions are overwhelmed with the number of loans in which payments are coming in late or have stopped altogether. General consensus is that it is an advantage for the bank to keep someone in a home making slightly smaller payments rather than foreclose. But if banks make it TOO easy to revise mortgage terms, then people who could have made their original payments will take advantage of the situation and ask for a modification they don’t really need.
The problem for the banks then, is trying to determine who is REALLY in trouble. A second problem is that some homeowners have had their mortgage modified and then fail to make the adjusted amount and so lose the home anyway.
Banks have discovered that if a homeowner secures the assistance of an attorney to manage the modification process there is a better chance that a successful modification will be done. It is assumed that the attorney will have advised their client if a modification should even be attempted.
Homeowners are discovering that there are many twists and turns in the process of getting a modification and that it takes someone with experience, persistence and persuasion to get the job done. And attorneys are nothing if not experienced, persistent and persuasive – myself included!
And so, since I have found that family law matters often impact home ownership, my office now handles mortgage modifications.
Generally, a client comes to us and says, “Demetria, I am behind two + months on my mortgage payment, my spouse is not working and I’m earning less than I was last year. Or, “Demetria, my spouse left me, I am making these payments alone, I don’t want to uproot the kids, how do I keep the house?” Or, “Demetria, I attempted to work with a loan modification company, time was wasted, nothing was resolved and now I have a foreclosure sale date in less than a month.”
What we do at that point is obtain all the necessary documents and information. The situation is carefully reviewed to ensure that there is a good chance of meeting the bank’s criteria (and hopefully the guidelines for the Making Home Affordable Program). Sometimes a modification isn’t a viable option, and that is good to know early so that other action can be taken.
But once we have determined that we can in fact assist the client, we prepare the necessary documents to be submitted to the bank to assist in “modifying” the current loan obligations. We then contact the bank and inform them that we are representing the client and take over all the work needed to follow up with the bank, keep them moving forward with the process and ensuring that they follow the laws.
The bank may or may not offer a modification, and if they do their first offer may not be much better than the current situation. There again is a good reason to have someone representing you. Banks are often NOT advising people that they qualify for the Making Home Affordable program even when this would be a great savings for the homeowner.
By the way, it is not uncommon for the financial institution’s staff handling foreclosures and modifications to be misinformed about their own process and unaware of the requirements of the law, so we find we are often correcting the bank staff on their errors.
Depending on each client situation, we have been extremely successful in reducing the amount in which clients pay (we have seen an average of $500 to $1000 in reduction of mortgage payments), and pretty decent negotiations for the 2nd Mortgage. Because the bank who is second in line wants to re-coupe something from the homeowner, they are often willing to negotiate and more open to accepting a lump sum instead of nothing at all.
I truly hope this makes more sense (Banch you can let me know) and please do not hesitate to call me with any California Loan Modification questions you may have!
Selecting a Loan Modification Professional – Do’s and Dont’s
Here are 5 key points to consider when selecting a professional to assist with a loan modification.
1) Do you have all your facts straight? Have you pulled out a copy of your mortgage and studied it as best you can? Have you got solid data on the current value of your home? Do you have documentation that proves a financial hardship which didn’t exist a year ago such as decrease in income or increase in expenses, such as unexpected medical expenses? This is just some of the data you will need to determine if you qualify for a mortgage modification.
2) If you want to hire someone to assist you, do your own research on the professional and make sure that they are legit! Are they a licensed attorney or another qualified individual that can assist you?
3) Beware of anyone who guarantees results in a mortgage modification or that wants upfront fees before determining if you even qualify under the loan modification program. This program is new and there ARE no guarantees. The program does NOT require that you release any rights to title of your home or that you grant your consultant any authority to sign papers for you. If anyone asks you for these rights – run!
4) Beware that some ‘professionals’ (including some attorneys) are running “mills,” taking money and doing little, if any, work after making undeliverable promises. Ask for a monthly statement of work done and costs so you are aware of where your money is spent. Also request that you be sent copies of all documents produced on your behalf. Ask what follow up will be done after they send off any documents to your financial institution. Be proactive!
5) DO YOUR RESEARCH!
Loan Modification in California 