No matter how a company or lawyer tries to justify some up front fee to help with a loan modification, whether they call it a progress payment, or break up their “services” into sections, it still is going to get them into legal hot water.
The law is very clear and was intended to make sure homeowners do not pay anything until the service has been performed. Many people charge a large fee to do a forensic loan audit or compile documents and review possible qualification for modification programs. They then claim they will do the loan modification for free or low cost (to avoid being guilty of Civil Code Section 2944.7, subjecting them to up to 6 months in jail).
Do not pay large fees for a loan audit or other alleged services or education about modification/foreclosure. The claims that they have some special knowledge or that they will find legal violations that will make the lender roll over and give you what you want are completely false!
The process is not that complicated and there are free services through HUD and others that can help guide a homeowner through the process. Our firm put together a do it yourself guide for $99 that can help homeowners try to save their home through a modification without huge fees.
There are times when certain laws are violated or homeowners have legal rights and claims against lenders and servicing companies; however, this requires a licensed attorney to review and without an actual lawsuit pending, most lenders will pay no attention to claiming they violated TILA, RESPA, or any other laws.
For more information on our do it yourself loan modification 101 guide, visit our website.
It seems that banks are continuing to be extremely slow and difficult to deal with on modifications, even though the HAMP guidelines were published almost 9 months ago. I see many clients come in that may have tried a modification on their own or through a company, only to obtain no real relief. Many banks will give a denial, but then tell the homeowner to resubmit the exact same paperwork to be re-reviewed. This is only going to result in yet another denial unless something has changed in terms of financial ratios and the homeowner is kept is more months of frustration and delays.
The problem, as discussed in my do it yourself guide, is that homeowners often do not give the banks what they want to see. The other problem is that many homeowners are in over their heads and the terms a bank might give them will still not help, even if they can actually get approved.
In many cases, homeowners can keep their home through a Chapter 7 or 13 bankruptcy filing. This also helps the homeowner reduce other debts at the same time. The homeowner can still keep certain property and vehicles, so unless the homeowner was planning on buying a major item in the next 2 years, a bankruptcy filing can be the most effective way to get a fresh start.
A short sale (where the bank allows you to sell your home for less than what is owed) is also a good alternative. The banks will take tremendous losses in the process and the homeowner is no longer liable for a huge mortgage. It will take a few years to get bank into a position to purchase, but with the large number of vacant properties available for rent at a reasonable price, it shouldn’t be that much of a concern.
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