Homeowners Beware! What You Need to Know Before Choosing a Loan Modification Company

A loan modification is when the lender modifies your current mortgage in order to work with you because of a hardship. The purpose is to help make your loan more affordable. Usually it is in the form of a rate reduction and conversion of an adjustable rate mortgage (ARM) to a fixed loan, typically a 30 year fixed.

These days, it seems like everyone is purporting themselves to be a Loan Modification Specialist. Borrowers should be wary of such loan modification mills and should only work with a company who has licensed attorneys who actually do the negotiations. Most of these so-called loan modification companies have displaced mortgage loan underwriters doing the negotiations.

Lenders and servicers are very busy with desperate homeowners trying to save their homes from foreclosure. Unfortunately, they do not have the man power or the capabilities to save everyone. Many people are simply getting lost in the system and suffering an unnecessary foreclosure when they could have worked it out with their lender.

As you may have already experienced, lenders can take advantage of a homeowner's lack of knowledge and negotiating prowess. In fact, most homeowners never even reach the real decision-makers.

Homeowners oftentimes wind up settling for much less, than they could have without professional help. I can assure you that without legal representation, you will not get the same results! When a lawyer is involved, it seems as if the calls start to get answered and the letters responded to.

Often this can make the difference between saving your home and losing your home. There should be no doubt that you will achieve far better results than going it on your own.

A forensic loan doc audit should be included with every loan modification. Moreover, you should not have to pay a separate fee for a loan doc audit. A lot of companies will have you pay anywhere from $895-$1,500 just for the loan doc audit itself; then subsequently charge you $2,800 or more for the loan modification.

A loan doc audit should include the following:
a. Review file for efficacy
b. Review file for RESPA (Real Estate Settlement Procedures Act) violations
c. Review file for TIL (Truth-In-Lending) violations
d. Review file for Fraud
e. Review file for Predatory Lending violations

A loan doc audit is critical because the more violations that are discovered, the more leverage you have when negotiating with your lender.

Another common loan modification company scam is to charge a separate fee if you have a 2nd mortgage. You should never have to pay a separate fee if you have 2nd mortgage. Be wary of any company that tries to charge you to negotiate with your 2nd lender. This is a very common tactic.

You should only work with a company that has a true 100% money back guarantee. If the loan modification company you are working with does not offer you a 100% money back guarantee; run and don't look back. If the company is really as good as they say they are, they should back it up in writing.

Each loan modification should also come with a Cease and Desist letter to your lender. The Cease and Desist letter prohibits lenders from contacting you directly and instructs the lender to contact your attorney instead, thus relieving unneeded stress during this difficult time.

With all of the bad press going around concerning loan modification companies it is imperative that you do your due diligence when protecting your most precious asset and possession - your home. So, be sure to ask a lot of questions.

You should look for an experienced team of loss mitigation negotiators that put your case together with expertise and precision. They should have a full understanding of how to package your case file the way the lender expects to see it, saving valuable time and achieving near perfect results. These streamlined procedures reduce the process time, helping you end the stress of waiting for a final resolution. You also should make sure that the company has in-house attorneys who are leading experts in the field of real estate litigation and negotiations.

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Comments

Sat, 17 Jan 2009 at 2:32 AM, by P
Words from a Very Outspoken and Opinionated California Litigation Attorney

Here in California, our Department of Real Estate website (dub dub dub dot dre dot gov) lists the companies that have DRE "permission" to modify loans... add to this list any licensed California attorney, and that is where you should begin your due diligence search when you seek help in California. Other states probably have similar laws, so check with your own state DRE and state bar.

My law firm has been getting more and more calls recently from homeowners that were victims of predatory lenders who put them into an unaffordable loan and now fell into the hands of those same people who sold the toxic loans but profess to be saviors... DON’T BE A VICTIM TWICE! What’s that they say, “Fool me once, shame on you, but fool me twice, and I’ll sue your butt!”

Do your homework and THOROUGHLY investigate any firm before hiring them to save your biggest asset and the place you call “home.” Scammers are popping up like dandelions on a freshly mowed lawn in April. They advertise on the Internet, freeway billboards, radio, television, and print media everywhere, not to mention spamming your email box with those third-world widows needing someone to receive three million dollars for them. Make no mistake, in many cases, these “loan modification experts” are the exact same loan officers and mortgage brokers who fleeced homeowners the first time around. After losing their jobs with the crash of the mortgage industry, they have found a new way to make ill-gotten profits from hard-working homeowners through loan modifications.

In California, with very few exceptions (and attorneys are one exception… no coincidence there… attorneys make the laws), it is against the law for anyone to take money up front for helping a homeowner who is in default. Don’t trust a company that begins its relationship with you by breaking the law.

HERE’S THE BOTTOM LINE!

Hire an attorney – and not just any attorney either - one with experience in mortgage law, not just one with real estate law experience but one with experience in both FEDERAL and STATE litigation against mortgage companies, one who doesn’t also do family law, criminal law, admiralty law, and immigration law as well, one who limits the practice to mortgage law (or at least a great majority of it), one who has the experienced staff, training, and know how to take on the big lenders and their top notch lawyers (lenders have attorneys – and darn good ones – check out their counsel on the web – big names top schools, shouldn’t you have a lawyer too?).

We are not talking about a refund on your broken television here, we are talking about hundreds of thousands of dollars and your HOME – if you don’t think this is the time to hire a highly educated and experienced professional instead of a weekend schooled, almost out of work, broker slash loan officer slash “expensive water in a wine bottle with alleged magical curative powers” salesperson, I don’t know what would make you take things seriously.

Of course, this is one obnoxious lawyer's totally biased opinion, but one based on many many distressing calls to my office every day. And, yes, my firm loves taking cases against loan modification companies who have violated laws. This field is quickly becoming one of the fastest growing sections for our mortgage law firm.

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