Modifications

Home Loan ModificationsThis page will provide general legal information about the topic of loan modifications / loan restructuring / loan workouts and how it may help you save your RESIDENTIAL and/or COMMERCIAL PROPERTIES from foreclosure. All information contained on this website is general in nature, and should not be construed as legal advice or a substitute for legal advice. Although we have tried to be as accurate as possible, the following information may be inaccurate, missing some information, or outdated – as law can frequently change or become modified. If you have questions about your case, please contact a foreclosure defense or bankruptcy lawyer in your area. Please note, comments posted to this blog and emails sent to us are NOT confidential and do not create an attorney-client relationship.

General Information on Loan Modifications:

  1. There are many people looking for loan modifications to save their homes from foreclosures and deal with financial hardships.
  2. The lenders have been “bailed out” and they do have money to fund loan modifications.
  3. From our experience, most lenders/loan servicers are participating in granting loan modifications (they do get incentivized in many cases to modify your loan)
  4. There are several different types of loan modifications a lender may qualify you for (HAMP, MAP, FHA, Internal Mod Programs, etc.  (Keep in mind, lenders and loan servicers WERE modifying loans prior to President Obama’s making home affordable loan modification program).
  5. If lenders and loan servicers want to modify your loan, they can, and if they don’t want to – then they don’t have to.  THERE IS NO STATUTORY OR CONSTITUTIONAL RIGHT TO RECEIVE A LOAN MODIFICATION AND A LENDER AND LOAN SERVICER HAS NO OBLIGATION WHATSOEVER TO HELP YOU (a minor exception might be California Civil Code Section 2923.5 which is part of the California foreclosure statutes and which requires a mortgagee, beneficiary, or their authorized agent to contact a defaulting homeowner and assess their financial situation and discuss potential loan modification options with a defaulting borrower before filing a Notice of Default).  Other than this, you signed a loan contract, and assuming the agreement is valid (ex. no contract formation, or unconscionabilty or rescission issues) then you are obligated on your contract.
  6. Most loan modifications are now based on the homeowner meeting certain financial criteria (for example, the borrower in most cases must have a verifiable financial hardship, and/or solid legal case – ex. TILA rescission right or other claim of predatory lending that would compel a lender to modify rather than litigate).  In addition, what we call the “mathematics of modifications” are taking place in many loan modifications wherein the lenders and servicers are trying to underwrite loan modifications to safe and afffordable housing ration and back-end loan rations.  Typically a lender or servicer wants to see a 31-38% housing ratio and a back-end debt-to-income ratio not exceeding 55% of a borrowers gross monthly income.  So believe it or not the sound underwriting principles that were often abandoned during the mortgage “hey-day” are now creeping back into the marketplace.
  7. The Loan modification process can take MANY MONTHS AND MANY HOURS OF YOUR TIME.  This is no joke.  With the advent of the Obama HAMP trial plans, the process of submitting your financial documentation to the lender and having them receive and review it could take 1-4 months.  Then, you could get a “trial plan modification offer” (some of these seem to be computer-generated offers to everyone while others might be more legitimate and tailored to the borrower).  The trial plan modification offer will require you to make three monthly payments, and if all goes well, and if the lender still wants to go through with it, you get a modification at some point.  You may have to make several additional “trial plan payments” beyond the three called for in the agreement, and this raises other legal issues – see our section on “Trial Plan Fraud” to understand some of the issues that are going on in this regard.
  8. So the whole process, start to finish, could take anywhere from 2-12 months.  This consumes alot of your time, and will undoubtedly lead to a lot of frustration.  Even being a law firm we deal with an ENORMOUS AMOUNT OF NONSENSE FROM THE LENDERS AND LOAN SERVICERS.  From lost documents, change in internal policies, to claiming there has been no work done or contact made, to saying a modification was denied or granted when the opposite was true.  Clearly it is a mess for the lenders.
  9. In California, it is illegal (per SB94) to pay anyone (including attorneys, brokers, and the “attorney-backed” companies) from accepting any advance fees for performing loan modifications on your behalf.  In Arizona, we can still accept advance fees and do the “dirty work” some people would rather avoid like the plague – and for good reason.   This means you should not pay anyone in advance to submit your documents to your lender or loan servicer, even though that strips away your “freedom to contract.”  SB94 was passed due to the overwhelming amount of loan mod scams, and ripoffs – this business has brought out all the Hooligans, including the “attorney-backed” nonsense we are seeing.
  10. If you have a World Savings of Wachovia loan, call us at (877) 276-5084.  We take these cases on a no-up-front-fee-basis.  We also have documentable proof of principal loan balance reduction and interest rate reduction in a high percentage of cases.  If you do not sign a modification, you pay absolutely nothing.  This section is not to imply or guarantee any particular result or outcome as each loan, borrower, property, etc. is different.  On Wachovia and World Savings loans, we can generally obtain a “yes” or “no” from the lender within 20-60 days in most cases.
  11. Other resources you can look to for loan modification assistance is http://www.HUD.gov, which offers assistance to homeowners at no charge.

This is a general overview of the loan modification arena as seen by our firm.  Loan mods can be tough to get, but we are getting positive results in a good number of cases.