The recent announcement by President Obama of incentives to homeowners of $1,500 for selling their home in a short sale is just further evidence that lenders are unwilling or unable to complete realistic loan modifications. The President is realizing that lenders would rather take a short sale loss and move on than deal with modifications.
Many homeowners get emotionally attached to their homes, but they need to be realistic. If you are in a position where you cannot afford the existing payment and are severely behind in payments, it is unlikely a loan modification is going to help. With only 66,000 modifications in 2009 under the Obama HAM program nationwide, it seems unlikely that anything is going to get better.
Once homeowners realize that they may not be able to save their home and realistically think about moving on, they can properly evaluate all possible options. Many homeowners end up losing their homes during a modification review and end up with personal liability on 2nd or 3rd mortgages. Bankruptcy can be a useful tool to resolve some of these issues. It can be used to remove 2nd liens and bring a homeowner current on back owed payments.
The other options are short sales or deeds in lieu of foreclosure. Homeowners should consult with a local real estate or bankruptcy lawyer to be sure they are protecting their finances moving forward.
Many homeowners are pounding their heads against a wall trying to get lenders to work to get them current or give them some form of loan modification. Many of these homeowners have been taking out of credit cards, personal loans, or other sources just to survive. However, many lenders look at large amounts of other debt negatively when considering your total debt to income ratio in a modification. These homeowners don’t realize that a loan modification is not going to suddenly save them from the brink.
Often times a bankruptcy filing is a better option. It can eliminate the other credit card debts, personal loans, 2nd mortgages, and 3rd mortgages. It all depends upon the type of filing under what chapter of the Bankruptcy Code, but it is even possible to force principal reduction in some cases. Although there have been attempts at federal legislation over the last year to allow bankruptcy judges to force modification of terms of mortgages on principal residences, they are always defeated. There are ways to eliminate 2nd mortgages even on principal residences in some cases.
Homeowners needs to look at all their options and not delaying because your lender will move a foreclosure forward no matter how seemingly nice them seem on the phone.
For more information, contact us or view our website.
The Obama administration released figures at the end of last week indicating that only 32,000 homeowners have entered into final loan modifications under the HAM program this year. That is out of the several million homeowners that are likely eligible. These results show that lenders are slow or unwilling to finalize modifications to save homeowners. Lenders are putting homeowners in 3 month trial plans that are lasting 6 months and not leading to final modifications.
A Chapter 13 bankruptcy can result in elimination of 2nd mortgages and other debts and allowing homeowners to keep their homes. A Chapter 7 can still allow homeowners to keep their homes as well through reaffirmation agreements. The additional bonus is that the bankruptcy puts a stop on foreclosure or eviction proceedings, resulting in additional time for the banks to get their acts together and start finalizing modifications. Homeowners without this protection are relying on lenders telling them they will hold off on selling the home, but that is not a legally binding agreement. I get new clients who tell me their lender said they were working with them and not to worry, only to get an eviction notice stating their home has already been sold.
Now is the time to take action. Do not rely on a customer service rep telling you not to worry, they won’t sell your house, because they will. You will never hear from that person again and they are not about to help you find a new place to live.
For a free consultation with an actual attorney and not a paralegal or assistant, call us today. 888-881-6591.
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.
The governor took action over the weekend on two pending bills regarding loan modification. AB 764 was a tough measure with various restrictions, but it was vetoed. SB 94 was signed into law October 11th and is effective immediately as urgency legislation.
SB 94 essentially prohibits anyone (including an attorney or real estate agent) from collecting any fees to perform a loan modification or forbearance until the service has been completed. It also prohibits obtaining any security to assure payment and obtaining a power of attorney. Even if the person assisting you with a loan modification is willing to wait to get paid until the service is done, without a power of attorney, the homeowner will have to do all the work with the lender themselves. Attorneys often take deposits called retainers up front, but do not bill the client until the work is performed. This assures that the bills will get paid; however, the broad language in this bill implies that attorneys cannot collect a retainer to secure payment.
AB 764 was much tougher and required payment be collected only after the modification was successful, so even if the work was done, if it didn’t go through, one couldn’t collect.
Without a power of attorney or deposit to assure payment, our firm will no longer be taking new cases for loan modifications. We will provide related legal services for foreclosure relief, bankruptcy, wrongful foreclosure, and can provide a consultation to help homeowners pursue a modification on their own. This consultation comes with a copy of our self-written how to guide for performing your own modification.
Unfortunately, the law intended to protect consumers went too far in making it nearly impossible for a homeowner to get even legal assistance in the process.
Chris Barsness, Esq.