July 17th, 2009 at 02:53pm
Under Business Law
Much of the dissatisfaction directed toward loan modifications and the companies that operate in that space comes from people that have been turned down for one. There are many factors that can derail the loan modification process:
1) No hardship – The biggest requirement in determining eligibility for a loan modification is verifiable financial hardship. This hardship can come in many forms including upward mortgage rate adjustments, the loss of a job, being upside down in the house, etc. Where no hardship can be determined the loan modification will stop in its tracks. The one positive, for both client and company, is that the lack of hardship can usually be determined early on in the process, thus saving time money and effort.
2) No income – This is part of walking the fine line between hardship and too much hardship. Lenders in general have tightened up on income levels considerably since the first half of 2008. The lenders’ wake-up call came in later in 2008 when a study showed that half of loans modified were back in default only six months later.
3) Equity in the home – Lenders will typically back away from modifying a loan if there is equity in the house for a couple of reasons. The first one being that it’s much easier for the bank if the homeowner can get out whole by selling the house. The second reason is that should the bank need to foreclose the equity cushion could turn the foreclosure in to a profit for the bank once they resell the house.
4) Pending bankruptcy – A deal killer for obvious reasons.
5) Initiating the loan modification too late in the foreclosure process – There are rare examples where foreclosures are avoided at the 11th hour but don’t count on it. If the sheriff is scheduled to be knocking at the door at any moment a loan mod is extremely unlikely to happen.
6) Being current on the mortgage – This is a controversial point with valid arguments from both sides. Some banks won’t look at a loan modification unless payments aren’t current, some will. This varies from lender to lender so if missing a payment does not sit well with you, getting that information ahead of time will take care of any surprises down the line.
7) Lies, omissions, and inaccuracies – These factors are the ones that fall right in the lap of the applicant and will typically result in forfeiture of some, if not all of the loan mod fees. To compound the problem, these deal killers are usually found long after the initiation of the process costing valuable effort, time and money. Applicants sometimes forget that the loan mod is going to be done with their current lender who, in all likelihood, still has the original doc’s from the mortgage to be modified. Pleading hardship while forgetting to include the $2 million brokerage account from the original application generally makes people angry and will crush the loan mod immediately. For more information call 1-800-470-0865 or visit Feldman Law Center.
The information contained herein is provided for general information and advertising purposes only and is not intended to convey a legal option nor legal advice for any particular case or situation. Nothing in this article shall create an attorney-client relationship. Nothing sent to this law office via e-mail shall constitute an attorney-client relationship. Nothing contained in this article shall be construed to be a guarantee or prediction of result. Prior results are provided for general information purposes only and do not guarantee, warranty or predict a similar outcome with respect to any future matter. Results achieved depend on individual circumstances and not everyone will qualify or be successful in restructuring their mortgage loan.
The
Feldman Law Center is one of the premier
loan modification companies in California, and our skilled loan modification professionals are trained to successfully and carefully guide homeowners through the loan modification process.
By Law Article
July 17th, 2009 at 04:38am
Under Estates Law
Hope and optimism emanating from the announcement of the Obama Administration’s “Making Home Affordable” plan have been replaced by the cold reality that the program has gotten off to start deemed by industry watchers as “anemic”. After almost four months since President Obama first announced the $75 billion mortgage rescue effort, the administration continues to tweak the program in an attempt to reach its originally stated objective of saving up to 5 million homeowners from foreclosure. Standing between the anemic start and lofty goals of the program are four roadblocks:
1) Overloaded loan modification processors – While the specifics of the plan were released in the first week of March, lenders couldn’t start handling applications until systems were re-programmed and processors were brought up to speed, which took an additional four to six weeks. Processors were immediately buried with stacks of applications that had been accumulating during the conversion to the new guidelines. Participants in the process report that servicers are still digging out from the initial rush as applications continue to flood their desks. Troubled borrowers, many backed up against the possibility of foreclosure, have become increasingly frustrated to the point where they have abandoned the process to retain their own legal assistance. JP Morgan Chase spokesman Tom Kelly recently said of the ramp-up, “It’s an enormous task. We’re moving quickly, although not as quickly as an individual might wish.”
2) Investors – The massive sums of money that supported the real estate/mortgage boom came from investors on Wall Street, pensions, and other institutions. Servicers say those investors are now balking at some of the terms being presented when a loan needs to be modified. The net present value test, a little known aspect of the plan, allows for a calculation to determine whether the greater return for investors will be achieved via modification or foreclosure. In the modification versus foreclosure decision, investors have been threatening lawsuits against servicers when the servicers are deemed to not be acting in the best interests of their investors. The threatened legal action adds another layer to the home loan modification process and can draw out the approval process even more. The “safe harbor” bill recently passed by Congress was intended to alleviate that logjam by protecting servicers from investor lawsuits but it’s likely that lawsuits will arrive on the servicers doorsteps anyway, safe harbor or not.
3) Lenders – Lenders are caught in a three sided bind between the above mentioned borrowers/investors and their own capital structure. No longer required to mark their loans to market, they can carry the value of the loans in their own portfolios at values they can rationalize, whether factual or not. Loan modifications could generate reviews of portfolio values, and nobody wants to go there in the current environment.
4) Unemployment – According to John Taylor, head of the National Community Reinvestment Coalition, “Unemployment is becoming a bigger factor than almost anything.” When sub-prime mortgages started blowing up it was attributed to the risks inherent in lending to lower quality borrowers. Increasing unemployment, in addition to taking down the lower quality borrowers, is now hitting prime mortgages. In fact, primes are now going into default at a much faster rate than sub-primes as previously solid borrowers are now being affected by the contracting economy.
Of the four roadblocks, the toughest barrier is unemployment due to the fact that, regardless of credit scores, if a homeowner doesn’t have a job a loan modification isn’t going to help. Short sales, cash for keys, or foreclosure become the next options. At that point every side of the three sided bind ends up on the losing end.
By Law Article
July 10th, 2009 at 08:56pm
Under Consumer Law
It’s like the “perfect storm” for ex- mortgage brokers and ex-cons alike. All of a sudden we have thousands of “loan modification experts” hitting the internet. The truth is these guys have absolutely no clue and no leverage with your lender. The best most of them can hope for is an unaffordable forbearance agreement or a loan mod under a government or FDIC backed program that you can probably do yourself. The truth is most of these struggling homeowners end up losing their home to foreclosure because they fell for some gimmicky website, a smooth talking ex- loan officer promising a super low interest rate, and a promise of principal reduction and no payments for 6 months or your money back ( minus a small processing fee of course). At the end of the day they have divulged all of your financial information to the lender, only to get turned down and unfortunately lose their home. The truth is most of these guys who boast “attorneys” and whatever else they can throw at you, are nothing more than beat up loan originators running around town trying to find someone… anyone cheap…,,(usually an ex-loan processor) to send your file to the bank and see what they’ll do. Common sense should tell you to pick up the phone and call your lender or mortgage loan servicing company and if you don’t like what you hear, then hire an attorney! Yes, when you are in trouble hiring an attorney to fight for you is what one does for the best possible results.
Do NOT buy a “do it yourself book” and do not trust a loan modification company or send them any money to negotiate with your lender. There are about 10 mortgage shops in all of California (most loan mod shops are in California) that have advance fee agreements, see http://www.dre.ca.gov/mlb_adv_fees.html for details. The California Department of Real Estate does not endorse these companies; they only try to regulate them. The rep from these companies must be licensed as well. Also, you should take note that these companies have been doing loan modifications for less than 6 months, but of course, they are all experts. Yes, I believe some mean well, but the truth is even if they have an attorney on staff, he is not your attorney… and he does NOT represent you at all. Look, you can put a Ferrari emblem on a Ford and it’s still a Ford with a Ferrari emblem. There are just way too many loan mod companies using words like legal and law in their name or boasting they have “in house attorneys”.
You can expect to pay somewhere in the neighborhood of $3,000 to $5,000 with these companies which is general the same amount you will pay to an attorney. If you are in default or foreclosure, only an attorney may collect upfront fees to help stop a foreclosure and save your home. If you don’t have all the money the lender wants to reinstate your loan, an attorney can usually negotiate with the lender to modify the loan, waive the arrearages, and even modify the principal balance to make the loan affordable. There are several laws in place that make it difficult for a mortgage loan servicing company to foreclose on you and have the investor take a huge loss through foreclosure. A good attorney understands how to work with the lender to stop a foreclosure and the lenders… recognizing when someone ‘knows their stuff’… will generally respond to reasonable offers made by a law office for their client. I am confident in saying that as a law firm, we have secured modifications for our clients that neither a loan mod company or homeowner dealing direct, would have been able to secure For more information on loan modifications go to www.feldmanlawcenter.com or call Mr. Steven C. Feldman at (800) 527-8497.
By Law Article