One of the biggest advantages to hiring an attorney to assist a homeowner with foreclosure relief or loan modification is the fact that there are numerous issues people are unaware of that, if not handled properly, could result in making their situation worse.
Remember that your lender is often taking computer notes and usually records calls. Although there are issues regarding the legality of recording phone calls in California and its potential as evidence in a case, it is still something that could come back to haunt homeowners.
Here is just one example: Let’s say you purchased your house 3 years ago and told your loan officer or broker that you made a certain amount per month. The broker may have done what is called “stated income” which does not require proof of income, such as paystubs. Some borrowers may have heard or even been told by their broker that they can exaggerate or increase how much they make because it is not verified by the bank, thus allowing them to qualify for a more expensive house. Whether you intentionally increased (“fudged”) your income or your broker may have done it for you, if you later tell your lender how much you were really making at the time or accidentally tell them you may have gone a little too high on what you actually make, you may have just given the lender the leverage it needs against you. “I shouldn’t have even qualified for the loan because I didn’t really make that much.” You were likely in a non-recourse loan in California, which means you have no personally liability. The only thing the lender can do is to take back the home, they can’t sue you for any missed payments, decrease in value of the home below what you owe, etc. Now suddenly the lender can sue you for fraud in connection with the original loan. Without realizing it, you opened yourself up for personal liability.
This is only one of a number of small legal issues that many homeowners don’t understand. Lawyers serve as an intermediary to take the emotion out of the issues and understand the potential legal issues out there.
I am often asked by potential clients what exactly I do for homeowner that they couldn’t do for themselves. Many people think it is just a matter of calling the lender and faxing over some bank statements and tax returns. Yes, that is part of the process, but remember that the banks spend millions of dollars per year on law firms and lawyers. They have an army of lawyers working for them to be sure they protect their financial assets. Homeowners should understand that banks see numbers not people and they will use any potential legal edge possible to be sure to maximize their profits.