Plan for Loan Modifications
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Plan for Loan Modifications
Recent Loan Modification studies have shown that a large percentage of traditional loan modifications put the borrowers more upside down than when they started. Many loan modifications are leaving people with higher monthly payments. In many loan modifications the money you did not pay gets tacked on to the back of the loan… Increasing your loan balance and making you more upside down. This is why over 50% of all loan modifications are in default. They are not fixing the problem they are just postponing it.
Before you go into default on your loans at the advice of some former subprime loan seller, make sure you understand that absent finding some legal leverage over the lender you have a good chance of seeing your payments going up.
It is recommended that legal counsel be used in the structuring of any loan modification. The legal counsel needs to be versed in real estate and loan modifications.
The Loan Modification process should include the following to be effective:
- Analysis of the loan(s)
- Qualified Written Request and offer of Loan Modification
- Letter informing lender of election to pursue remedies carved out by recent California Law under 2923.6 and or Federal Programs under the Truth in lending Act and the Fair Debt collection practices Act.
- Letter Disputing debt is a questionable item and may or may not be advisable
- Cease and Desist letters a questionable item and may or may not be advisable
- Follow up, contact with negotiator, and negotiation by an attorney when needed.
There continue to be multiple scams by a number of different organizations including brokers who put people into the loans in the first place.
Before you spend thousands of dollars with someone, do an investigation. Questions that should be asked include but are not limited to the following:
- Is the person licensed by the California Department of Real Estate? Or, the California State Bar?
- Are your potential representatives aware that have to be licensed according to the Department of Real Estate (DRE)?
- Are they asking you for money up front? They are violating the California Foreclosure Consultant act if they are neither California attorneys nor perhaps Real Estate brokers in possession of a no opinion letter from the California Department of Real Estate?
If a Notice of Default has been filed against your residence only attorneys acting as your legal representative can take up front fees. Most attorneys will want you to sign a retainer agreement for services to be rendered.
- If your potential representative is not an attorney make sure he or she is a Real Estate Broker capable of proving their upfront retainer agreement has been given a no opinion letter by the DRE.
- If someone says they are attorney backed – ask to speak with the attorney. Normally, you are dealing with someone who cannot be licensed.
- Find out how your loan modification people intend to gain leverage over the lender.
- If you are offered a loan audit or a Qualified Written Request under RESPA letter – will an attorney be doing the negotiating against the lender? Will you have to hire the attorney after you pay for your loan audit?
- Will it do you any good to have a loan audit done if you later have to go out and retain an attorney. You want to retain their services of an attorney before you pay for the audit. The loan audit is the profit center; negotiation takes time.
- What kind of results should you expect?
- Who will be doing your negotiating?
- Will the Loan Modification request go out on Legal Letterhead?
- How much will you have to pay? Are you looking for a typical loan mod result or are you looking to leverage the law in the hopes of getting a better than average loan mod result.
- What if your are not satisfied with the loan modification offered by the lender?
- Should you go into default on both loans prior to requesting a loan modification? Why? An important question is what happens if the loan mod does not work out to your satisfaction?
- Will an attorney review the terms of your loan modification with you? Will you have to waive your anti-deficiency protections if you sign your loan modification paperwork? Will an attorney help you leverage recent changes in California law in an attempt to get a substantial reduction in the principle?
To summarize, it cannot be stressed enough to hire experienced legal experts who have been working with lenders in the areas of loan modifications. It is suggested one interview a number of legal experts before a final decision is made.
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