Loan Modification And Mandatory Foreclosure Settlement Conferences – A Homeowner Without A Good Lawyer Is Asking For A Denial Letter

There are many who think that the Supreme Court’s mandatory foreclosure settlement program is a bust. I have read that in Florida they have discontinued a similar program because it was not working. Here in New York, when I go to court I see so many pro se (unrepresented) homeowners who try to do this themselves. If it is anything like the stats in pro se Chapter 13 bankruptcies filed by homeowners over the last two decades, it is very likely that these pro se homeowners are all doomed to fail in the loan mod system as well.

The system is just not set up to help them deal with the problems they will face. Without a strong advocate who understands the laws and procedures, most homeowners will not get their loan modified and may ultimately face the loss of their home at a foreclosure sale. I know this because so many of them call me after being denied when they tried a DIY loan mod or gave money to an out of state scam consultant. These calls are so common that I sometimes think we need to put out a sign that says “we fix $6 haircuts” like the famous Office Depot commercial. In the commercial, a cheap $6 barber opens up a competing business across the street from the better barber who charges a more realistic price – instead of lowering his price and cutting corners, the better barber puts up his sign and holds to his principles of doing things right. The cheap barber ends up going out of business.

In the loan mod area, trying to save a few bucks on legal fees isn’t always the right course and can often cost someone their home. It makes more sense to spend a few bucks on fees to get it done right – in the long run the homeowner will be happier knowing that their loan mod was approved and they saved money on their mortgage payments, or, if the loan mod was denied, at least they will know that it was done correctly and denied for the right reason and not because of missing documents or a difficult lender who would not follow the rules.

For those who are curious, here is the commercial. When you consider the company that ran this ad, it is very ironic, but still entertaining and illustrative.

When my firm handles loan modifications and foreclosure work, we often encounter complete nonsense from the lenders – they say that they have not received documents that we have sent many times, they ask us to redo and redate documents because they have “expired” like a container of milk, when the lender has never even responded to the initial submission, they send clients papers directly when they know we are counsel of record, they ignore the loan mod application and when we call repeatedly they say it is pending, which later turns into the well-worn excuse that “the papers have expired”, or different bank reps give different, inconsistent and contradictory information to my paralegal and my staff, they issue decisions without explanation and when pressed for one they later admit they made an error. The attorneys for the lenders try to take a hands off approach in what is a bizarre area of law – perhaps the only area of law where the courts allow lawyers representing a client to appear in court without a real representative and without real authority to settle, instead leaving it to some unknown undisclosed “Underwriter” in another part of the country. I can imagine the “Underwriter” as someone hiding behind a curtain like The Wizard Of Oz when Dorothy and her traveling companions discover the truth. The internal workings of how lenders handle loan modifications is kept so mysterious by some banks that I don’t think the bank reps even really understand it all.

As a result of this, I find myself writing letters to lenders often demanding that they simply act in good faith and process the papers. No one is automatically entitled to a loan mod but at least lenders should be fair and comply with the guidelines and laws. When they don’t, I know what to do about it. I would think that nearly every pro se homeowner has no clue. There are times when I request a scheduling order knowing in advance that a lender will play this game and then at least I will have an order to enforce, possibly with a contempt motion. Other times, if I can show a referee that we have gone above and beyond to try to work with a lender and have provided all required documents, at least I can hold off the lender from filing a summary judgment motion until the loan mod is completed. Other times, I will file an answer with counterclaims and leave open the possibility that I will depose a bank officer or request documents concerning an alleged fraud. But what does the pro se homeowner do? More often than not, they won’t know what to do and despite all good intentions the court and legal aid are just not staffed to assist everyone. When some of our clients finally do get a 2% permanent loan mod or a 3 month trial payment plan, there are many times when I feel like they were successful in spite of the system and not because of it. I like to think that I played a part in that.