Reply To: Doing Bad Business

Posted by Law Article on July 17th, 2009 at 02:53pm

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.

Tags: Federal Loan, Home Loan Modification, Loan Modification, Loan Modification Companies, Loan Modifications, Modification, Mortgage Loan Modification