Loan Modification
Introduction
This is a process whereby a mortgage lender will restructure mortgage payments to possibly lower the interest rate and monthly payment, put arrears back into the loan and give the homeowner more time to pay them back, and to also defer payment of part of the principal by having interest only payments for a time. Modification may also include forgiveness of principal but that is very rare in our experience and not a realistic thing to expect or seek. The main goal of modification is to make a loan affordable again so that a homeowner can keep their home and avoid foreclosure. The government began the HAMP program in 2009 for the modification of residential home loans. However, our managing attorney Scott Lanin has been handling “loan workouts” since the late 1980’s both for lenders and homeowners and has far more experience than most other attorneys who have just recently begun dabbling in this field.
Dealing with lenders in the loan mod process is not easy. There are documentary requirements that must be met and the process can last for many months. Our firm provides this legal service to many clients and has successfully modified mortgage loans for our clients. We begin with an office consultation to review the client’s overall situation. We help our clients put together the loan medication package, including financial statements, request for modification, contributory letters or affidavits, and then we submit them to the lender along with the client’s proof of income, including tax returns, leases, paystubs and profit and loss statements. Many clients try to do this on their own and find themselves hopelessly stuck before they come to our firm for help. We frequently help clients redo loan mods that have gone bad.
If a loan mod is approved, a lender will usually begin with a trial loan modification agreement which hopefully later leads to a permanent one months later.
We also help clients with other financial problems they may face with other debts and bills like credit cards. We provide complete advice and assistance. We recognize that solving one problem may not help a client who still has several other major problems. We look at the forest and not just the trees when we work with clients. We review the situation and try to determine what our client’s goals are. We then review what expectations are realistic and we create a plan to try to help our client meet their goals within a manageable budget. In some cases, we may help a client with a loan mod while also assisting them with foreclosure litigation or defense, counterclaims against a lender for predatory lending and other bad behavior, Chapter 13 bankruptcy and/or out-of court credit card workouts to reduce debts and obtain installments agreements.
Why You Need An Experienced Foreclosure and Bankruptcy Attorney To Handle Your Mortgage Loan Modification – Beware of Loan Modification Companies And Consultants
Many online sources suggest that you don’t need the help of an experienced loan modification attorney to get your loan modification done. Although you are legally allowed to represent yourself in the loan modification process, it is not a good idea. Many clients come to us after having been given the runaround from their lender. They waste months of time while the mortgage arrears (missed payments) accumulate. Having a lawyer does not guarantee results but it most certainly increases your chances of success. An experienced loan mod attorney can help a client gain leverage in the negotiating process and avoid having a bank take advantage of them. It is a fact that banks were simply not prepared for the foreclosure crisis that occurred in the last few years and many of their representatives are just not qualified to handle the process. Many bank loan reps are undertrained and overworked and do not understand the laws. Clients of our firm have frequently been told false statements from bank reps about the law, the process and their rights. If a homeowner is not experienced with real estate law, lender liability law, bankruptcy law, foreclosure law and modification law, they should not try to do this alone.
The assistance of a loan modification attorney makes the loan modification process go much smoother and takes the burden off of the homeowner. Many homeowners never actually get their loan modified when they try to work with their lenders and are told excuses like “you aren’t late on your payments yet” or “your documentation is incomplete.” It happens all the time. By working with an experienced loan modification attorney, you can rest assured that there will not be any “excuses” from lenders when there should be answers. When our firm is faced with these excuses, we know how to protect our client’s rights and not let a lender get away with nonsense.
Key Benefits – How A Loan Modification Attorney Can Help You
• Lower the rate of interest charged – possibly as low as 2%
• Re-amortize the loan to include any past due payments
• Waive interest
• Reduce your loan balance
• Fix your mortgage if it is adjustable
• Lower your total mortage payment
Using a Loan Modification Attorney Levels The Playing Field
The loan modification process is not easy – and working with lenders is difficult for two main reasons: first, you get different answers from different service reps every time you contact your lender; and second, they are not set up to help you unless you already know exactly what they want. To get the best loan modification deal, you need the help of an experienced loan modification attorney. It is the same thing as if you were going through bankruptcy – you would need an experienced bankruptcy attorney.
Fighting for a loan modification is similar to going to court. You might think that you are saving money by representing yourself, but you will get much better results in the long run by hiring a professional.
Beware Of Illegal Loan Modification Consultant And Scammers
If you are a homeowner and have been approached by a non-attorney who asked for a fee in advance of providing some type of loan mod or rescue service, that person or company is conducting an illegal business and you should exercise extreme caution. If they go further and offer guarantees or promises, something that is simply not possible in this area of law, it is a big red flag. Under New York law, only an attorney who is directly providing loan modification consulting services to a homeowner in the course of his or her regular legal practice is allowed to be paid in advance for this service.
In 2010, the New York Attorney General issued a cease and desist letter to over 180 loan modification companies, recognizing the dangers to homeowners who use non-attorneys to represent them in this process.
Under New York law, which is cited in the letter (complete copy below), rescue companies, mortgage brokers and others are not allowed to accept advance payment of fees or make false statements or promises. For homeowners who are seeking modification assistance, they should always use an attorney.
One other aspect of this is that many of these scam companies are effectively engaging in the unauthorized practice of law (a misdemeanor crime). They give legal advice to homeowners without a license or training and often the advice is flat out wrong. Many stand accused nationwide of taking a fee and then disappearing. We have been told by many clients that they used a “consultant” or broker previously to help them but got not help at all. In some cases, the clients were advised to file bankruptcy and then were falsely told that the bankruptcy didn’t really count because it was quickly withdrawn or dismissed. Bad advice is dangerous and risky when your home is at stake.
Another related issue is that courts may require homeowners with lawyers assisting them with out-of-court loan modifications to nonetheless have their lawyer appear with them in court. Many people seeking a modification are already in foreclosure, a process that can take many months in the New York Supreme Court. The Court system has ordered that mandatory foreclosure settlement conferences be held. These conferences are well-intentioned but seriously flawed. Our firm has attended many of these conferences.
The Court is powerless under the current laws to compel a lender to modify although we do think that it can be helpful to have judicial oversight of the process. The conferences usually involve a lot of waiting at the Court and then a quick meeting where a per diem attorney covering for one of the large foreclosure law firm factories hands you a few papers, usually an RMA form and a 4506T with a checklist for loan mods. No decision is ever made at a Court conference about the loan mod as this is an internal decision by the lender. Most homeowners leave these conferences bewildered and unclear about whether they will actually be able to save their home.
Since the courts are requiring attorneys to handle the mandatory conferences, homeowners should not rely on rescue companies or out-of-state lawyers who cannot appear in a New York court. The lawyers who are most qualified to assist New York homeowners with this are New York licensed attorneys who are experienced in the areas of foreclosure litigation and bankruptcy law.
Here is the Attorney General’s letter to the non-attorney loan mod companies:
STATE OF NEW YORK
OFFICE OF THE ATTORNEY GENERALJune 23, 2010
COMPANY NAME
ADDRESS
CITY, STATE ZIP CODEDear Sir or Madam:
As you may know, the New York State Attorney General’s Office (”OAG”) is conducting an ongoing investigation into the so-called “mortgage rescue” industry. To date, we have issued subpoenas to more than 20 mortgage loan modification companies, entered into settlement agreements, and pursued enforcement actions against several companies which have been unwilling to end their illegal and deceptive practices. It has been brought to OAG’s attention that your company may be offering services to New York residents to help them avoid foreclosure or obtain a loan modification. Therefore, I want to share with you some preliminary findings of OAG’s investigation and urge you to promptly review your company’s practices to ensure that they do not violate applicable laws.
Our investigation has revealed widespread violations of New York Real Property Law
§ 265-b, which went into effect on September 1, 2008 and was amended effective December 15, 2009. Under this law, distressed property consultants, as defined by New York Real Property Law § 265-b(1)(e), must, among other things:
• Not charge or collect upfront fees for consulting services prior to the full completion of such services. Under the 2009 Amendment, this prohibition on upfront fees was extended to apply to licensed mortgage bankers, registered mortgage brokers and registered loan servicers.
• Enter into a written, fully executed contract with homeowners that fully discloses the exact nature of the service to be provided and the fee to be collected.
• Provide homeowners with contracts that are written in the language that the homeowner uses and was used in discussions with the homeowner to describe the consultant’s services or to negotiate the contract.
• Allow homeowners to cancel the contract, without any penalty or obligation, within five business days after signing and provide the homeowner with notice of this right in the contract.
The law sets forth other requirements that you should carefully review. In OAG’s investigation, it was uncovered that loan modification companies routinely fail to comply with the provisions of this law. Violators of the law may be subject to a civil penalty of up to $10,000 for each violation of Section 265-b, and will be required to refund all fees improperly collected. You may review the text of the statute at my office’s website, www.nyprotectyourhome.com.
OAG’s investigation also has revealed instances where companies have developed various arrangements with attorneys in an apparent attempt to circumvent the requirements of Section 265-b, which exempts from the definition of distressed property consultant “an attorney admitted to practice in the state of New York when the attorney is directly providing consulting services to a homeowner in the course of his or her regular legal practice.” (Emphasis supplied.) Please note that this exemption only applies when attorneys are “directly” working on the client’s loan modification file as part of their “regular legal practice.” Merely having an attorney on staff does not exempt a company from the requirements of Section 265-b.
In addition to violations of Section 265-b, OAG’s investigation has also identified companies that may be marketing their services with advertisements or claims that are deceptive or misleading to homeowners. Some of the problematic practices include:
• Unsubstantiated guarantees or representations regarding success rates, the likelihood of obtaining a loan modification, or the time it will take to obtain a
loan modification.
• False 100% money-back guarantees.
• Fabricated consumer testimonials.
• Advertisements and solicitations designed to give consumers the false impression that a company is affiliated with the government or a government-sponsored program.
Such conduct violates New York State General Business Law §§ 349 and 350 and will subject violators to additional penalties and remedies.
The Attorney General is committed to aggressively enforcing the law against “mortgage rescue” companies that engage in illegal conduct and attempt to take unfair advantage of homeowners facing possible foreclosure. Recently, the New York Supreme Court issued a favorable decision in one case filed by this Office, finding that one of the largest foreclosure rescue companies and its president had violated Section 265-b as well as General Business Law §§ 349 and 350. Specifically, the Court found that the company violated Section 265-b by charging illegal, upfront fees for its loan modification services, failing to provide contracts in the language of its customers, especially Spanish, and failing to provide homeowners with the legally required notice of their right to cancel within five business days. The Court also ruled that the company made numerous false claims in its advertisements, including misrepresenting the number of homes it had saved, falsely claiming to have a 90% to 100% success rate, falsely claiming to be “licensed” by a government agency, and falsely claiming that it was affiliated with “legal experts.” The decision holds the company’s president personally liable for engaging in fraudulent and illegal acts, and permanently prohibits the respondents from engaging in the illegal, fraudulent and deceptive business practices and false advertising described in OAG’s lawsuit.
I encourage you to review your company’s practices and, where applicable, to cease and desist engaging in any unlawful, fraudulent, or deceptive practices. If you have any questions, please do not hesitate to contact our office at 212-416-8300 or 212-416-8250.
Very truly yours,
Joy Feigenbaum
Bureau Chief
Bureau of Consumer Frauds & Protection
