What is a loan modification? ANSWER: A loan modification is the result of negotiations where a "lender" (really the "servicer") agrees to modify or restructure one or more terms of a borrower’s loan (which is problematic being most "servicers" are not real parties in interest and have no authority to modify anything), making it more affordable for the homeowner.  This allows the homeowner to stay in their home and the the lender to be less likely to have to foreclose on a property with borrowers in financial difficulty.   Do I have to be behind in payments to get a loan modification? ANSWER: No.  See: Loan Modification Laws What is Foreclosure? ANSWER: Foreclosure is a process where a lender regains a property they have financed. This us usually due to the borrower being behind in house payments and unable to catch up, often due to circumstances beyond their control.  When a lender forecloses,  the homeowner will have to move out of the house, in all likelihood losing both possession and equity that the homeowner may have in the home. There is a legal time frame and procedure involved which which determines how long the foreclosure process may take. Click here for more information. How can a Loan Modification stop foreclosure? ANSWER: It can't but might delay foreclosure.  Contact a skilled and competent attorney experienced in foreclosure defense.  Contact me directly for a list of available attorneys in your area. How is the borrower’s credit affected by doing a loan modification? ANSWER: Generally, your credit is not affected.   How is the borrower’s tax liability affected? ANSWER: Generally, your tax liability is not affected by doing a loan mod.  See your CPA or Tax Attorney for more specific details. Does the borrower have to verify their income? ANSWER: Yes. Is a CMA (Comparative Market Analysis) or a BPO (Broker’s Price Opinion) required for a loan modification? ANSWER: No. A statement of value is required, less detailed than a CMA. That being said, each servicer has different "requirements" which can change by the hour, day, week or depending on whom you talk to on which day. How long does the borrower have to act? ANSWER: Time is of the essence when you are behind on payments. Each day that passes makes it that much harder to get a work out agreement with your lender that you each can live with. The home foreclosure process can take anywhere from a few weeks to many months, depending on your state law and the method of foreclosure your lender chooses to use.   How long does it take to complete the loan modification process, once the paperwork is filled out? ANSWER: Anywhere from 2 days to never (mostly never). This depends on the stage of foreclosure, the state you live in, your financial position and the lending institution. Typically it takes several weeks to complete a work out agreement and stop foreclosure proceedings which are best handled by your attorney. How much time do I have to stop a foreclosure? ANSWER: Up until the foreclosure sale occurs there is still hope. If a sale date for the house has been set you need to act fast.  It is possible to stop a foreclosure within days of the auction date but this is unusual and not all lenders will agree to it.  You're best option is to take action immediately to stop foreclosure before it goes too far. If there is still negative equity in the home, in other words, the homeowner is ‘upside down’, why would they want to keep the home, even if the modified loan creates a better payment? ANSWER: Everyone has a housing expense.  If the modified payment is similar to a rent payment, it makes sense to simply keep the home.  The payments will be lower and the homeowner won’t have the expense of moving. What if the homeowner can no longer afford their home? ANSWER: Another solution may be a Short Sale of the home.  This will also allow the borrower to avoid foreclosure and have less damage to their long-term credit.  Cllick Here for Short-Sale Info Are "lenders and banks" really willing to negotiate? ANSWER: They say they are, but proof is in the pudding as they say.  Usually it is just a rouse and they simply waste time giving you hope that something will be done that never is. What if the lender has said NO when the borrower asked about a loan mod? Can it still be done? ANSWER: Sometimes, yes. Many clients have experienced this kind of inflexibility from their lender before calling an attorney. What is the first step? ANSWER: Call (831) 466-3440 or eMail: Charles@BayLiving.com for a list of competent attorneys in your area.   Articles   Mortgage Modifications - "Great Deception"   Lucrative Fees Deter Efforts to Alter Loans   New Modifications Especially Prone to Re-Default

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Mortgage Modifications - The latest chapter in the “Great Deception”   By David Leibowitz, Illinois and Wisconsin Bankruptcy Attorney on Jul 12, 2009 Joe Nocera’s article in Saturday’s New York Times demonstrates the futility of the Obama Mortgage Modification program, Home Affordable Modification Plan.  It simply has no teeth.  It dangles a pitiful carrot at the lenders - a measly $1000 per loan modification - and no stick if the banks don’t take it.  Without court ordered modifications of mortgage in chapter 13 - the “dreaded cram-down” that the banks spent another $50,000,000 to defeat in Congress - the banks have no incentive to modify loans.  And in general, they are not.  Moreover modifications which are being made rarely reduce principal.  They might reduce interest or stretch out the term of the loan.    But they reduce the so-called “homeowner” to a perpetual renter of the property with little or no hope of ever regaining equity.   You can see my comment as well as the comments of many other thoughtful readers here Now, years after I’ve been fighting this fight, I’ve finally figured out what really happened.  Here’s the first chapter of the story.   Wall Street looked at the trillions of dollars in home equity which had built up in the hands of ordinary Americans and said to themselves, “How come they have all this wealth and we don’t?”  So they asked themselves, “How can we get it for ourselves?  After all, we are the masters of the universe and we deserve it far more than ordinary people.”  So they decided, “Let’s make homeowners an offer they can’t refuse - they’re stupid anyway and don’t know better.”    And so they created ARMS, Option ARMS, HELCOs, 80/20 loans, Pick-a-pay loans, Balloon Mortgages and a wide variety of other mortgages which allowed homeowners to cash out all the equity in their homes, buy houses for no money down, and in general make deals that over time were doomed to fail.   And that’s what they wanted.  So far as they were concerned, housing prices never went down.  And if they did, no worries, they had credit default swaps to protect them.  And they organized a system which pretty much covered up their fingerprints anyway.

New Modifications Especially Prone to Re-Default Posted on August 11, 2009 by livinglies August 10, 2009 Editorial $75 Billion Carrot, but Few Nibbles In March, the Obama administration began an antiforeclosure effort that offers lenders up to $75 billion in incentives to modify troubled mortgages. If that sounds like a lot of money, it is. But so far, it has not been enough to persuade the mortgage industry to do what is needed to help Americans stay in their homes and keep the economy from falling into deeper trouble.   The first report on the program, released last week by the Treasury Department, shows that as of the end of July, 235,247 mortgages had been modified on a trial basis. That is not even 9 percent of the 2.7 million troubled loans currently deemed eligible. (During the trials, borrowers are granted reduced monthly payments. After they pay on time for three consecutive months, the lowered payment will be fixed for at least five years.) The report also shows that 117,295 trial-plan offers were pending at the end of July, but it is unclear how many of those will ultimately result in reworked loans.   Why aren’t the banks snapping up the incentives?   Some may prefer foreclosure because it allows them to delay reporting a loss. A delay is especially valuable for banks with other loans that are going bad, say, on commercial real estate. Modifications also require much more time and effort than processing foreclosures. For some mortgage firms that collect payments and handle defaults, the incentives may be outweighed by the fees they collect on delinquencies and foreclosure sales.   For all that, the administration still maintains that the incentives will overcome the industry’s manifest reluctance. It also seems to believe that by exposing lenders’ slow progress, it can shame them into doing better. As far as we can tell, the industry knows no shame.   Administration officials say that they now expect 500,000 modifications by November. That would be a boost, but likely too little given the size of the problem and the vulnerability of the economy.   According to Moody’s Economy.com, it would take at least one million successful modifications over the next six to 12 months to avoid the worst effects of mass foreclosures, including severe damage to families and communities and — as foreclosures drive prices down — a continuing loss of home equity nationwide.   Unfortunately, there is also no telling at this point how many of the loans that are modified under the Obama plan will stay current, and how many will redefault. What is known is that with unemployment rising, even lowered monthly payments may prove too onerous.   With home prices falling, a better way to avoid redefault would be to forgive principal. In apparent deference to banks that do not want the losses associated with principal reductions, Obama officials have not pressed lenders to adopt that approach.   There is a real danger now that lenders, pushed by the administration, may ramp up the number of loan modifications, but that those may be especially prone to redefault. And there is a danger that the administration will squander valuable time pursuing a solution that proves inadequate, allowing the foreclosure crisis to persist. To guard against those dangers, the administration must provide copious data on the performance of modified loans over time. And it should reveal the assumptions it is using to project the program’s goals.   If the Obama plan does not produce enough successful modifications, Congress must give homeowners an alternative route to relief. The best way to do that is by changing the law to allow bankruptcy judges to modify bad mortgages. The prospect of having to live by a judge’s ruling would be the biggest incentive of all for lenders to modify bad loans, and it would not cost the taxpayers anything.