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BEWARE THOSE LOAN MODIFICATIONS

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For information about luxury real estate in Los Angeles, Orange County, and coastal San Diego homes for sale, call Bob Cumming, Keystone Group Properties, at 310-496-8122. Keystone Group Properties services buyers and sellers of distinctive Southern California real estate from Newport Beach to La Jolla to Beverly Hills.

BEWARE THOSE LOAN MODIFICATIONS

The lenders are holding questionable if not worthless paper. One is validating a debt that he or she likely does not have anymore or at least has substantial offsets against as soon as one signs the modification. One is validating a security instrument (mortgage) that was most likely destroyed in the securitization process.

Unless one gets all the terms one wants, do not sign the modification. Consult with your real estate attorney. As a minimum, one also needs to protect themselves from later claims as it relates to a break in the chain of title caused by securitization. It is suggested one acquire new title insurance, conduct a quiet title action in the courts or perhaps do both.

Engaging a competent attorney and law firm is paramount to the success of securing a loan modification that meets your short term and long term needs.

Mortgage crimes are focus of new task force

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For information about exclusive Los Angeles real estate, Orange County CA homes, and coastal San Diego homes, call Bob Cumming of Keystone Group Properties at 310-496-8122. Keystone Group Properties servicesbuyers and sellers of distinguished Southern California homes from Laguna Beach to San Juan Capistrano, Beverly Hills to La Jolla real estate.

Mortgage crimes are focus of new task force

WASHINGTON (CNNMoney) — A new special task force to investigate and prosecute those responsible for bad mortgages during the housing boom will be part of President Obama’s 2012 agenda.

Obama announced Tuesday that he’s asked the Justice Department to create a special unit of prosecutors and state attorneys general to investigateg abusive lending and packaging of risky mortgages that led to the housing crisis. And he’s tapped an avowed Wall Street enemy, New York Attorney General Eric Schneiderman, to help run the crime unit, according to a White House official.

“This new unit will hold accountable those who broke the law, speed assistance to homeowners, and help turn the page on an era of recklessness that hurt so many Americans,” Obama said in his State of the Union speech.

The new unit’s goal will be to investigate banks, financial firms and mortgage originators that broke the law, and to compensate victims and provide relief for homeowners, the White House official said.

Although the housing bust is more than four years old, this is the first time the Obama administration has indicated it will go after mortgage originators and Wall Street banks that got homeowners into loans they couldn’t afford — actions seen as a key culprit of the financial crisis.

The mortgage industry has often been blamed for its role helping homeowners get lines or credit and bigger mortgages during the housing boom. The industry saw little downside, unloading the risk that the loans would go bad on to the financial markets.

With Schneiderman, who has been working on his own investigations into big banks, Obama is signaling he’s ready to go after financial crimes. And left-leaning progressive groups cheered the news.

“Schneiderman has shown himself to be a courageous hero in his defense of the struggling underwater homeowners in his state and across the country,” according to a statement released by a coalition of left-leaning advocates such as MoveOn and New Bottom Line.

The news came as a surprise to the financial industry, which had been predicting Obama would tout a proposed settlement under discussion among federal regulators, state attorneys general and the largest bank mortgage servicers under investigation for improperly foreclosing on homeowners.

“We believe the industry is worried that this new task force will go after the banks for the origination of many of the mortgages that have defaulted or are now underwater,” said JaretSeiberg, a senior policy analyst for the Washington Research Group.

The state attorneys general, the Justice Department and the Department of Housing and Urban Development have been in talks for nearly a year with big bank servicers that stand accused of using robo-signers to service home loans. The five largest mortgage servicers involved in the talks are: Bank of America (BAC, Fortune 500), Wells Fargo (WFC, Fortune 500), JPMorgan Chase (JPM, Fortune 500), Citigroup (C, Fortune 500) and Ally Financial (GJM).

According to people familiar with the talks, a draft settlement would result in those banks paying $20 billion to $25 billion toward housing relief. About 1 million underwater homeowners would be eligible for an average $20,000 off the principal owed.

In return, state attorneys general would not be able to file future lawsuits against the bank mortgage servicers that agree to the deal. The amount of relief available for homeowners depends on how many state attorneys general agree to the deal.

Obama didn’t mention the talks in his State of the Union speech. A White House official said Wednesday that the new task force would not prevent progress that has been made on that deal.

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Truth in Savings Act

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Keystone Group Properties offers distinguished Southern California luxury real estate in Los Angeles County, coastal Orange County homes, and San Diego homes in LaJolla. For more information, call Bob Cumming at 310-496-8122. Serving buyers and sellers of exclusive real estate in Newport Beach, Dana Point, Laguna Beach, Laguna Niguel, Coto de Caza; Marina Del Rey, Manhattan Beach, Hermosa Beach, Dove Canyon, Ladera Ranch, San Juan Capistrano; Palos Verdes, Pacific Palisades, Mission Viejo, Rancho Margarita, San Clemente, Redondo Beach, Santa Monica, Venice, Malibu, Irvine; and homes in Bel Air, Beverly Glen, and Beverly Hills CA real estate.

Truth in Savings Act (TISA)

The Truth in Savings Act (also known by the acronym TISA) is a United States federal law that was passed on December 19, 1991. It was part of the larger Federal Deposit Insurance Corporation Improvement Act of 1991 and is implemented by Regulation DD. It established uniformity in the disclosure of terms and conditions regarding interest and fees when giving out information on or opening a new savings account. On passing this law, the US Congress noted that it would help promote economic stability, competition between depository institutions, and allow the consumer to make informed decisions.

The Truth in Savings Act requires the clear and uniform disclosure of rates of interest (annual percentage yield or APY) and the fees that are associated with the account so that the consumer is able to make a meaningful comparison between potential accounts. For example, a customer opening a certificate of deposit account must be provided with information about ladder rates (smaller interest rates with smaller deposits) and penalty fees for early withdrawal of a portion or all of the funds.

The Act is only applicable to deposit accounts that are held by a “natural person” for personal, household, or family use. Accounts owned by businesses or organizations such as churches and neighborhood associations are not subject to these rules.

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Real Estate Settlement Procedures Act (RESPA)

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For information about upscale Los Angeles County Southern California luxury real estate and luxury homes in coastal Orange County and San Diego, call Bob Cumming of Keystone Group Properties at 310-496-8122. Keystone Group Properties serves discriminating buyers and sellers of exclusive properties from Newport Beach and Coto de Cazato, Hermosa Beach and Ladera Ranch to Pacific Palisades and Malibu, and Irvine to Beverly Hills CA real estate.

Real Estate Settlement Procedures Act (RESPA)

Purpose of the Act

It was created because various companies associated with the buying and selling of real estate, such as lenders, real estate agents, construction companies and title insurance companies were often engaging in providing undisclosed kickbacks to each other, inflating the costs of real estate transactions and obscuring price competition by facilitating bait-and-switch tactics.

For example, a lender advertising a home loan might have advertised the loan with a 5% interest rate, but then when one applies for the loan one is told that one must use the lender’s affiliated title insurance company and pay $5,000 for the service, whereas the normal rate is $1,000. The title company would then have paid $4,000 to the lender. This was made illegal. The reason is to make prices for the services clear so as to allow price competition by consumer demand and to thereby drive down prices.

Restrictions

The Act prohibits kickbacks between lenders and third-party settlement service agents in the real estate settlement process (Section 8 of RESPA). Even reciprocal referrals among these types of professions could be construed in court as a violation of the law of RESPA. It requires lenders to provide a good faith estimate (GFE) for all the approximate costs of a particular loan and finally a HUD-1 (for purchase real estate loans) or a HUD-1A (for refinances of real estate loans) at the closing of the real estate loan. The final HUD-1 or HUD-1A allows the borrower to know specifically the costs of the loan and to whom the fees are being allotted. Beginning January 1, 2010, amendments to RESPA restrict the amount that fees can increase between the GFE and HUD-1 or HUD-1A. Origination charges are not allowed to increase, while certain third party service providers’ fees can increase by no more than 10%.

Account Inquiries – “Qualified Written Request”

If the borrower believes there is an error in the mortgage account, he or she can make a “qualified written request” to the loan servicer. The request must be in writing, identify the borrower by name and account, and include a statement of reasons why the borrower believes the account is in error. The request should include the words “qualified written request”. It cannot be written on the payment coupon, but must be on a separate piece of paper. The Department of Housing and Urban Development provides a sample letter.

The servicer must acknowledge receipt of the request within 20 business days. The servicer then has 60 business days (from the request) to take action on the request. The servicer has to either provide a written notification that the error has been corrected, or provide a written explanation as to why the servicer believes the account is correct. Either way, the servicer has to provide the name and telephone number of a person with whom the borrower can discuss the matter. The servicer cannot provide information to any credit agency regarding any overdue payment during the 60 day period.

If the servicer fails to comply with the “qualified written request”, the borrower is entitled to actual damages, up to $1000 of additional damages if there is a pattern of noncompliance, costs and attorneys fees.

Criticisms

Critics say that kickbacks still occur. For example, lenders often provide captive insurance to the title insurance companies they work with, which critics say is essentially a kickback mechanism. Others counter that economically the transaction is a zero sum game, where if the kickback were forbidden, a lender would simply charge higher prices. One of the core elements of the debate is the fact that customers overwhelmingly go with the default service providers associated with a lender or a real estate agent, even though they sign documents explicitly stating that they can choose to use any service provider. Some say that if the profits of the service providers were truly excessive or if the price of the services were excessively inflated because of illegal or quasi-legal kickbacks, then at some point non-affiliated service providers would attempt to target consumers directly with lower prices to entice them to choose the unaffiliated provider.

There have been various proposals to modify the Real Estate Settlement Procedures Act. One proposal is to change the “open architecture” system currently in place, where a customer can choose to use any service provider for each service, to one where the services are bundled, but where the real estate agent or lender must pay directly for all other costs. Under this system, lenders, who have more buying power, would more aggressively seek the lowest price for real estate settlement services.

While both the HUD-1 and HUD-1A serve to disclose all fees, costs and charges to both the buyer and seller involved in a real estate transaction, it is not uncommon to find mistakes on the HUD. Both buyer and seller should know how to properly read a HUD before closing a transaction and at settlement is not the ideal time to discover unnecessary charges and/or exorbitant fees as the transaction is about to be closed. Buyers or sellers can hire an experienced professional such as an attorney to protect their interests at closing.

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Truth in Lending Act (TILA)

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For information about luxury Los Angeles real estate, Orange County CA homes, and coastal San Diego homes in Southern California, call Bob Cumming of Keystone Group Properties at 310-496-8122. Keystone Group Properties services buyers and sellers of distinctive Southern California real estate— Manhattan Beach and Hermosa Beach, to Dove Canyon, Ladera Ranch, San Juan Capistrano, and Redondo Beach; Marina del Rey, Santa Monica, Venice, Beverly Hills to La Jolla homes and more.

Truth in Lending Act (TILA)

The Truth in Lending Act (TILA) of 1968 is a United States federal law designed to promote the informed use of consumer credit, by requiring disclosures about its terms and cost to standardize the manner in which costs associated with borrowing are calculated and disclosed.

TILA also gives consumers the right to cancel certain credit transactions that involve a lien on a consumer’s principal dwelling, regulates certain credit card practices, and provides a means for fair and timely resolution of credit billing disputes. With the exception of certain high-cost mortgage loans, TILA does not regulate the charges that may be imposed for consumer credit. Rather, it requires uniform or standardized disclosure of costs and charges so that consumers can shop. It also imposes limitations on home equity plans that are subject to the requirements of Sec. 226.5b and certain higher-cost mortgages that are subject to the requirements of Sec. 226.32. The regulation prohibits certain acts or practices in connection with credit secured by a consumer’s principal dwelling.

The Truth in Lending Act was originally Title I of the Consumer Credit Protection Act, Publication .L. 90-321, 82 Stat. 146, enacted June 29, 1968.

The regulations implementing the statute, which are known as “Regulation Z”, are codified at 12 CFR Part 226. Most of the specific requirements imposed by TILA are found in Regulation Z, so a reference to the requirements of TILA usually refers to the requirements contained in Regulation Z, as well as the statute itself.

From TILA’s inception, the authority to implement the statute by issuing regulations was given to the Federal Reserve Board. However, as of July 21, 2011, TILA’s general rulemaking authority is transferred to the Consumer Financial Protection Bureau, which will be established on that date pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act which was enacted in July 2010. The Federal Reserve will retain some limited rulemaking authority under TILA for loans made by certain motor vehicle dealers, and for certain provisions related to real estate appraisers.

Organization

The regulation is divided into subparts.

Subpart B relates to open-end credit lines (revolving credit accounts), which includes credit card accounts and home-equity lines of credit (HELOCs).

Subpart C relates to closed-end credit, such as home-purchase loans and motor vehicle loans with a fixed loan term. It contains rules on disclosures, treatment of credit balances, annual percentage rate calculations, right of rescission, non requirements, and advertising.

Subpart D contains rules on oral disclosures, Spanish language disclosure in Puerto Rico, record retention, effect on state laws, state exemptions (which only apply to states that had Truth in Lending-type laws prior to the Federal Act), and rate limitations.

Subpart E contains special rules for mortgage transactions. Section 226.32 requires certain disclosures and provides limitations for loans that have rates and fees above specified amounts. Section 226.33 requires disclosures, including the total annual loan cost rate, for reverse mortgage transactions. Section 226.34 prohibits specific acts and practices in connection with mortgage transactions.

Several appendices contain information such as the procedures for determinations about state laws, state exemptions and issuance of staff interpretations, special rules for certain kinds of credit plans, a list of enforcement agencies, model disclosures which if used properly will ensure compliance with the Act, and the rules for computing annual percentage rates in closed-end credit transactions and total annual loan cost rates for reverse mortgage transactions.

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MERS Mortgage Electronic Registration Systems

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For information about Southern California luxury homes in Los Angeles County, Orange County and San Diego County real estate, call Bob Cumming of Keystone Group Properties at 310-496-8122. Keystone Group Properties services discriminating buyers of coastal Southern California real estate in Malibu to homes near the waterfront in Newport Beach to La Jolla.

MERS Mortgage Electronic Registration Systems

MERS’ primary function is to act as a document custodian. Major players in the mortgage lending industry created MERS to simplify the process of transferring mortgages by avoiding the need to re-record liens – and pay county recorder filing fees – each time a loan is assigned. “Instead, servicers record loans only once and MERS’ electronic system monitors transfers and facilitates the trading of notes …” Currently over half of all new residential mortgage loans in the United States are registered with MERS and recorded in county recording offices in MERS’ name.

This has reduced transparency in the mortgage market in two ways. First, consumers and their counsel can no longer turn to the public recording systems to learn the identity of the holder of their note. Today, county recording systems are increasingly full of one meaningless name, MERS, repeated over and over again. But more importantly, all across the country, MERS now brings foreclosure proceedings in its own name – even though it is not the financial party in interest. This is problematic because MERS is not prepared for or equipped to provide responses to consumers’ discovery requests with respect to predatory lending claims and defenses. In effect, the securitization conduit attempts to use a faceless and seemingly innocent proxy with no knowledge of predatory origination or servicing behavior to do the dirty work of seizing the consumer’s home.

Consumers, who are facing foreclosure, that try to assert predatory lending defenses are often forced to join the party – usually an investment trust – that actually will benefit from the foreclosure. As a simple matter of logistics this can be difficult, since the investment trust is even more faceless and seemingly innocent than MERS itself. The investment trust has no customer service personnel and has probably not even retained counsel.

Inquiries to the trustee – if it can be identified – are typically referred to the servicer, who will then direct counsel back to MERS. This pattern of non-response gives the securitization conduit significant leverage in forcing consumers out of their homes. The prospect of waging a protracted discovery battle with all of these well funded parties in hopes of uncovering evidence of predatory lending can be too daunting even for those victims who know such evidence exists. So imposing is this opaque corporate wall, that in a “vast” number of foreclosures, MERS actually succeeds in foreclosing without producing the original note – the legal sine qua non of foreclosure – much less documentation that could support predatory lending defenses.

A critique of the effect of securitization lies in the impact it has on civil procedure. Discovery, negotiation, and litigation in general is more expensive for consumers with securitized loans than it is for loans funded by the traditional secondary market. Legal scholars have made a compelling case for the serious potential consequences for consumers when businesses use procedural dispute resolution costs as a hedge against enforcement of substantive law.

Moreover, an extensive literature demonstrates the great vulnerability of our civil justice system to manipulation of procedure in general, and discovery in particular. For example, a federal district judge’s remarks from the late 1970s seem equally resonant today:

The civil justice system in the United States depends on the willingness of both litigants and lawyers to try in good faith to comply with the rules established for the fair and efficient administration of justice. When those rules are manipulated or violated for purposes of delay, harassment or unfair advantage, the system breaks down. There continues to be abuse of the judicial process. Abuse of the judicial process occurs most often in connection with discovery. Unjustified demands for and refusals to provide discovery prolong litigation and drive up its costs. Fabrication and suppression of material facts are regrettably common occurrences, although lawyers and judges are often reluctant to admit it.

Given these observations, we should not be surprised to find a business system that derives its revenue from creating procedural roadblocks in the way of consumers litigating from the brink of homelessness.

One characteristic of structured finance is the erection of such barriers. In traditional two and three-party mortgage markets, consumers and their counsel had a clearer idea of whom they were borrowing from and who might seek to foreclose upon them if they failed to repay. Service of process, interrogatories, depositions, and negotiations could be expected to involve only one company which was responsible for all, or nearly all, the relationship functions associated with the loan.

By comparison, selling a loan into a contemporary structured finance conduit can force consumers to communicate with and litigate against many more business entities. Even simple litigation tasks, such as service of process, interrogatories, and requests for production of documents, can become much more complicated in structured finance. One could serve one party years’ ago. Today, one might need to serve ten or more different parties or businesses.

This is a major challenge as the consumer will almost always have no knowledge of the name, address or other contact information for many of these firms. Legal counsel for the foreclosing party most likely does not know which businesses were involved in performing the various functions associated with the loan. Phone calls to the loan’s servicer are frequently ignored, subject to excruciating delays, and typically can only reach unknowledgeable staff who themselves lack information on the larger business relationships.

Securitization trustees are not in the business of counseling the thousands of mortgagors pooled in each of the many real estate trusts they oversee. Policy makers must not underestimate the staggering difficulty of reconstructing the facts involved in only one loan. Securitization creates an opaque business structure that consumers have great difficulty forgathering.

Securitization also complicates the paper trail for a given mortgage by facilitating frequent permutations in the servicing and ownership history of the loan. One of the benefits of securitization is that it allows trustees to shop for the most efficient servicer, reassigning servicing rights for loan pools when a better deal comes along. And, depending on how the securitization conduit is structured, a loan may undergo several assignments in route to its destination pool. While these changes may help ensure that the pool securities pay out on time and otherwise manage risks to the businesses involved, they also raises costs for the consumer attempting to piece together who did what to them.

Mortgage loan documentation has become more complex, the organizational technology of securitization has displaced older, more transparent, public systems for maintaining records. Nowhere is this more apparent than the use of the Mortgage Electronic Registration System, or MERS, to circumvent county recording offices.

It is suggested the consumer consult with a legal firm that is most experienced in working with MERS and the multiple issues.

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Take Steps To Avoid Foreclosure On Your Southern California Home

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Real estate foreclosure is a court action initiated by a lender or a lien holder for the purpose of having the court order the debtor’s real estate sold to pay the loan or other lien (mechanic’s lien or judgment). It is a legal process. There are specific steps the lender or lien holder must take to force the sell of the property. These steps are governed by various state and Federal laws.

The lenders do not want to foreclose on the real estate. They are in the lending business not the real estate management business. The worse thing that can happen to them is that they foreclose on the property. With the way the economy is now, it is very likely that they will receive the property back instead of receiving their money.

The lender WILL foreclose on a person’s home if they feel that this is the only way the situation can get resolved. This is also their last choice. They prefer to work with home-owners to help get them back on track. Here are the steps you must take to avoid foreclosure:

  1. If you are unable to meet your obligation, call the lender immediately.
  2. Do not ignore letters from the lender. Your failure to respond will make the situation worse not better.
  3. Assess your current financial state to find out where you can cut expenses and raise money to pay back your delinquency.
  4. Talk to friends and family to help you cope with the added stress.
  5. Take the time to relax. Do something you enjoy.
  6. Contact a professional to solicit their input.

If you’re behind on your mortgage payments or facing foreclosure, receive a hassle-free offer on your property.
There are options you may have when you talk to the lender:

1. Forbearance – The lender may postpone any foreclosure action against you if you can repay the delinquent amount you owe within a short period of time.

2. Forgive the payment – If you can convince the lender you experienced a temporary setback and you will not miss a payment again, you may be able to have the delinquency forgiven. They may waive the amount.

3. Spread the payment over a longer time frame – Sometimes the lender will allow you to repay the delinquent amount over a longer period of time. They prefer to have the money sooner than later, but they also do not want to foreclose. For example, you may have a normal mortgage payment of $1500 per month. You may be four months behind. The lender may allow you to pay back the $6,000 plus interest over say five years by adding approximately $100 per month to your payment. You will now pay $1600 per month for five years and then $1500 per month after fives until the mortgage is paid.

4. Loan modification – If you have an adjustable rate mortgage, the lender may agree to freeze the interest rate or change the interest rate to an amount that is mutually beneficial. They may also increase the term of the loan to lower the payments.

5. Move the amount owed to the end of the loan – If you have some equity in your property, the lender may move the amount owed to the back of the loan. There may be a balloon payment at the end or larger payments for a few months.

6. Make an additional loan to you – Some loans that are backed by the government contain provisions to help home-owners who are in trouble. Check different government web sites such as those for the Department of Housing and Urban Development (HUD) and the Department of Veteran Affairs (VA) for more information.

As stated, the lender does not want to foreclose.

Foreclosures cost the lender BIG money and hurts their ability to borrow money.

After the lender has filed a formal lawsuit against you, your options become more limited. Additionally, time is of the essence. All parties of the lawsuit must adhere to a certain timetable.

Here are some of your options after the lender has filed a notice of default:

1. Reinstate the loan – You may pay the lender the back payments, interest, penalties, legal expenses, and all other expenses associated with the collection of the debt and reinstate the loan. This action will stop the foreclosure.

2. Sell your house – This is fairly straight-forward. There are three ways that you can sell your house– through a real estate agent, for sale by owner, or to an investor. There are pros and cons to the three ways. Sign up to receive updates to this blog. We will post an article about the pros and cons of each.

3. Seek a “short sale” – If your house is worth less than what you owe, you may convince the lender to accept a “short sale”. A short sale is when the lender accepts less than what you owe as full payment of the loan. There are various laws and criteria involved. Additionally, there may be paperwork that must be completed before the lender even agrees to ponder a short sale. If you are interested in pursuing a short sale, submit information about your property to us. We have relationships with various firms that negotiate short sales.

4. Sign a “deed-in-lieu of foreclosure” – When you sign a deed-in-lieu of foreclosure, you are effectively giving title to the property to the bank. It helps to cut down on the added expenses of the foreclosure. Your credit will be affected. Contact a national credit restoration law firm today to help with your credit.

5. File bankruptcy – Bankruptcy should be a last resort. Please keep in mind that the bankruptcy will not stop the foreclosure. It will only postpone it. Contact our firm and we will provide a list of some bankruptcy attorneys you may wish to contact.

6. Loan Modification – Have you been hearing a lot about loan modifications? The term seems to pop up everywhere these days. But what really is a loan mod, and who can qualify for one? A loan modification is an agreement that is negotiated with your lender that changes the terms of your current loan. It can alter the characteristics of the loan term, rate, balance, and penalties. Lenders can be willing to negotiate when you are facing financial difficulties and can not find other financing alternatives. You must be able to show your lender why it would be in their best interest to agree to a modification.

A lender may be willing to reduce the interest rate, monthly payment or change other terms. It is important to understand that a loan modification is not reported to the credit agencies and will not have an adverse impact on your credit scores. Today let’s take a look at what characteristics the banks are looking for when reviewing your loss mitigation case with the lender. Every lender is different, so there is no exact science to determine if you truly qualify for a loan modification. Some of the potential reasons why the lenders allow a loan modification are as follows:

  • Someone who no longer qualifies for a refinance
  • Someone currently in an adjustable rate mortgage (ARM)
  • Someone who is behind on their mortgage (it is always recommended to make all mortgage payments as agree when able)
  • Someone whose mortgage payments have become high
  • Someone who has experienced a hardship
  • Someone who is self employed during tough economic times
  • Someone who has no equity in their home or is "upside down"
  • Someone who is about to go into foreclosure

Do one or more of the above categories apply to your situation? The government is forcing the lenders to negotiate and modify Thousands of these loans, so they are picking and choosing who get a mod, and who doesn’t. So why are the lenders doing this? With the housing market in total disarray, the lenders loosing money, and the economy on a huge downturn, the banks would rather modify your loan terms then take on another Foreclosure. Equity in homes has all but disappeared and in many area’s become negative, leaving homeowners upside down on their loans. Banks would rather reduce the payments and/or balance than foreclose on another property. The banks and lenders are not in the real-estate business, and they don’t want to start now. The fact that banks are willing to negotiate lower payments brings about this part of the real estate cycle know as “The Modification Period”.

Although extremely rare, during these periods, both the bank and the borrowers are deemed powerless. Both face tough times ahead and only as a team can the banks and borrowers pull out of this deep real-estate tailspin. They must work together to keep Americans in their homes but also to begin to turn this recession around. Loan modification often equates to immediate financial losses for our banking institutions, but the long term gain will well outweigh the short term loss.

By slowing future foreclosures through loan modifications, the banks will begin to firm up soft markets. This in turn will offer relief to the homeowner’s upside down on their loans. Slowing the foreclosure crisis right now is the first step to jump starting the housing markets again. So if you think you are a potential customer for a loan mod, the time to act is now!!! You can attempt a loan modification yourself, or you can hire a company. California law dictates that a company cannot charge you money in advance to attempt a loan modification. It is suggested any agreement you sign with such a company be specific as to what fees would be paid based up definitive levels of success. Reducing monthly payments as the result of lower interest rates is one thing; getting lower interest rates plus a reduction in the principal loans is another not to mention the amount ($) of the loan reduction.