- Do you owe more than the value of your home?
- Have your rates been adjusted so high that you can’t make monthly payments?
- Have you ever received a call or letter offering loan modification services?
This article explains who is eligible for loan modifications. It explains what can be negotiated with the lender and provides advice on how to decide whether to seek loan modifications yourself or hire an expert.
Should you hire someone to help you with loan modifications?
The answer is maybe, maybe not. Before you keep a company negotiating on your behalf, understand that you can negotiate on your own. There is no “miracle” that lawyers, mortgage brokers, or anyone else can bring into loan modification negotiations. Homeowners can take advantage of the free information available from HUD and the California Department of Real Estate and try to negotiate loan modifications themselves. An attorney or broker can communicate on your behalf and try to negotiate modifications to the loan terms, so can you. Recently, California passed Senate Bill 94 which prohibits upfront fees for housing loan modification services. As a result most loan modification providers have stopped offering the service.
Should homeowners use a lawyer or company that ‘specializes’ in loan modification?
Homeowners behind their mortgage payments are often contacted by individuals or companies who will offer to help complete loan modifications. But California law now prohibits anyone from receiving fees upfront. Any person or company seeking an upfront fee is breaking the law now that SB 94 has been filed. The loan modification industry is full of fraudulent practices. Many companies in California are trying to take advantage of desperate homeowners by offering to help them save their homes. Many over-promise and under-deliver. Brokers cannot provide legal advice and may have no more knowledge of real estate law than homeowners can obtain from HUD and the California Department of Real Estate.
What can a lawyer do that a landlord can’t do for himself?
Lawyers can review loans for legal defects that might be used as bargaining chips with lenders, but the most important thing a lawyer can do is act as an emotionless advocate and try to convince the lender that loan modifications are in the best interests of both parties. In other words, the lender will make more money by approving loan modifications than by foreclosing property. Most attorneys prepare reports that highlight the homeowner’s financial situation and explain why loan modifications make sense for both homeowners and lenders.
What can be negotiated with the lender?
Recovery: Your lender may agree to let you pay the total amount you paid, in lump sum and on a specific date. This is often combined with patience when you can demonstrate that funds from a bonus, tax return, or other source will be available at a certain time in the future.
Patience: Your lender may offer a temporary reduction or deferral of your mortgage payments when you bounce back. Patience is often combined with a recovery or payment plan to pay off missed or reduced mortgage payments.
Repayment Plan: This is an agreement that gives you a fixed amount of time to pay back the amount you paid by combining a portion of what is past due with your regular monthly payments. At the end of the payment period you gradually pay back the amount of your mortgage that is in arrears.
Change of loan term: This is a written agreement between you and your mortgage company that permanently changes one or more of the original terms of your note to make payments more affordable. This is the goal of most homeowners who have trouble with home loans. A loan modification agreement changes the terms of your loan – lower interest rates, extension of the loan term, conversion of an adjustable interest rate loan to a fixed rate loan is possible.
What are the problems with loan modifications?
Many people will not qualify. Good candidates are homeowners who have a real reason why they are falling behind, such as a change in their income or loan amount, and can prove that they have enough income to make payments if the loan terms are changed. The mortgage business is a business. The loan holder will not consider changing the loan unless the homeowner is able to make new payments. If the current homeowner, pays on time, he is unlikely to get modifications. Lending companies are less likely to negotiate than banks because they often do not have the power to modify loans.
If you are considering a loan modification, check all the free information available. Think hard about trying to do it yourself. If you decide to get help, a qualified attorney can explain the law, review your situation and guide you towards the most appropriate choice.