The Loan Mod Do-Over

It has become the norm and not the exception lately that I receive calls from people who already tried to do their own loan modification. I discuss it with new callers and make the notation on my call notes “LM pro se”. This means that the homeowner tried it without a lawyer.

That’s understandable since the banks are all telling people that they don’t need a lawyer. But that’s a deception by the banking industry. The banks have their own lawyers. The bank reps, as nice as they may seem on the phone, are not looking out for the homeowner’s best interest. The reps have a job to do and their loyalties are supposed to lie with their employer, the bank (mortgage lender). Many unsuspecting homeowners are lulled into a false sense of security when speaking with bank reps on the phone. They are told to fax in a variety of documents and that is when the runaround begins. In some cases they are actually told that the bank will not consider them for a modification unless they have missed payments. Later on, the bank will deny the application and foreclose based on that very missed payment!

For the homeowner, the typical cost of having a lawyer represent them in connection with a loan modification application is about the same as 1 to 2 monthly mortgage payments depending on the size of the loan. For many, they have missed many of the monthly payments. Some clients I speak to have not made a mortgage payment in 2 years or more. For them, isn’t it worth it to use a small part of the money they saved by not paying their loan, to hire an experienced lawyer to help get them out of the hole they are in? For those who try to save this legal fee, they often find themselves stuck in the loan mod machinery where they cannot get their bank to cooperate or follow the HAMP guidelines. Banks routinely lose documents or say that they have expired – like a container of milk. That one really gets me. Papers don’t expire. As long as the loan mod package was complete when submitted, it is usually the bank’s fault for not processing them. But that is the system we are faced with. Bank’s ignore procedures and sometimes even ignore court deadlines. If the bank has delayed in processing a fully submitted loan mod package, is it really right for the bank to tell the homeowner that the papers have expired or become stale?

Most homeowners do not know what to do when faced with a difficult bank. Most homeowners are unfamiliar with court procedures if a foreclosure action has already begun. Most do not know what to do if the bank has denied the application but made a mistake – which happens regularly. For many new callers who have already been denied, I tell them that there may still be hope. I meet with them in my office to review what happened – what was submitted by them and what letters were sent to them by the bank. I review the reasons for the denial – or in many cases, I try to find out the reason from the bank when none was given. When banks behave badly, I go after them. My firm routinely asserts counterclaims against lenders in foreclosure actions.

For one couple in my office who had the misfortune of losing family in the Haitian earthquake, the process has been particularly difficult. The bank and its attorneys have not cooperated and we attended multiple settlement conferences in Brooklyn and submitted many papers over the course of a year. Finally, I said enough and I requested a court order setting deadlines. My clients and I of course complied. The bank and its attorneys of course did not. So I am filing a motion with the court now to punish them for contempt.

It makes me wonder what the pro se homeowner might do. Probably nothing. Without an attorney, most homeowners will not know what to do when the bank behaves like this or when they get a wrongful denial of their pro se loan mod request. If you fall into this category and want an attorney to take a fresh look at this, it is possible to get a do-over. Banks make mistakes all the time and are willing to correct them if you put pressure on them.