Loan Modification, Foreclosure Avoidance

& Debt Mitigation

Most of the United States uses notes & mortgages to evidence a real estate debt, but a deed of trust may also be used.*** When a note and mortgage is used, the note creates the debt. It is the actual IOU from the borrower. The mortgage pledges the real property as collateral (called hypothecation) for debt. It is the mortgage that allows foreclosure when the borrower defaults. Unlike the, usually, unique note, the mortgage may exist in many copies and is recorded into the public records. After recording, the original mortgage has limited value as the recorded version is considered indisputable. By requiring a lender to produce the one, and only, original note, a court ensures that the lender who is requesting authorization to foreclose IS the actual creditor, the true owner of the debt. Unfortunately for lenders, in these days of loans being sold and resold, it is often difficult for lenders to put their hands on the notes...up to 1/2 of the time, or even more. What happens is that when a lender "sells" the right to service (and foreclose, when appropriate) a mortgage loan, it is supposed to pass the note to a new "owner" of the loan. But the lender often neglects to do so. The assignments may be valid, but the paper trails become broken in the mad rush to complete the assignments in exchange for the price of the sales. The notes may not actually be lost...but only misplaced and difficult to locate. Many lenders seem to be routinely taking the easy way out. That is, they are asking the courts to agree to substitute a replacement of the note even though they are, in reality, simply unable to track down the original. In many cases, the courts are having nothing to do with that. When the lender cannot produce the original note upon demand, it will usually stop or postpone the foreclosure, at least for awhile. It is a good delaying tactic and could, if nothing else, cause an intransigent lender to take a friendlier attitude toward a borrower who is seeking a loan modification.  So, always demand that the lender produce the note!

*** GEEK NOTES: The "Produce the Note" tactic is a good example of why you need an attorney when trying to fight a foreclosure. States may be "title theory" or "lien theory". In the former case, a mortgage, or equivalent document, is considered to transfer title to the lender or a third party. In the latter states, only a lien is created by a loan on real estate. Furthermore, some states are "judicial" and some are "nonjudicial". Nonjudicial" which means that a lender seeking to foreclose, need not appear in court first.  Even though you still have the right to demand that the lender "produce the note", you won't have the chance to make that demand unless you force the court action! Click HERE for some further explanation. Click HERE for a website with brief notes on United States Foreclosure Law, ie: the foreclosure laws in the various states. In the western United States, and some other states, a Deed of Trust is often used instead of a mortgage. The Deed of Trust conveys title to the property to a third-party trustee until the debt is paid in full. In nonjudicial states, a borrower may have to file suit against the lender in order to force a court proceeding at which the borrower will have the opportunity to request that the court require that the lender produce the note.  This all gets complicated and you need professional advice for your situation. You should also know that the "produce the note" tactic is just one of many available to an attorney who, as expert Neil Garfield, Esq terms it, "gets it". You need a legal expert who can help a judge "get it". Representing yourself may result in a judge "shutiing you down" after a few words. You need a supporting expert who speaks "legaleze" and has more than one bullet in his gun! The tactics and concepts used to fight foreclosure are way more complicated than you might think. We are not lawyers. You probably aren't either. Remember that, "A person who represents himself has a fool for a client." Don't be a fool and risk losing your property, when you might otherwise have prevailed. Get a lawyer!

Unfortunately, as the above clip points out, some lenders are making more money from defaulting borrowers than they made while the borrowers were in good standing with the lender. But, soooner or later, the lender must foreclose and, after a foreclosure, no-one wins if the home ends up in a lenders portfolio of non-producing properties. The borrower lost their right to repay the loan, and their home, and the lender, generally being terrible managers of property, is put in peril as well. As a matter of fact, loan modification professionals often spur lenders into giving loan modifications by providing the lender with calculations detailing the high cost of a foreclosure to the lender.

Truly, it is usually to everyone's benefit to restructure the financing and keep borrowers in their homes...and keep the mortgage payments, even if reduced, rolling into the lenders' coffers. The trick is to get the lender to actually negotiate, in good faith, with the debtor rather than taking the drastic action of foreclosing on the borrowers' right to repay the loan over time. HAMP is the newest attempt by the government to encourage modifications over foreclosures. Whether is will succeed in that goal, or not, in not yet clear.

Loan modifications change the terms of mortgage or other loan debts to make the payments more affordable with current income or to eliminata arrearages or delinquencies or mitigate the effect of a foreclosure. There are a number of options available to lenders. There can be many variations, but here are the main options:  

Loan Modifications Which May Reduce Payments:

• Forbearance: Permission of the lender to postpone one or more payments to allow escape from a temporary crisis. The skipped payments, or their interest portion, will have to be made at some point
• Reduce Principal &/or Forgive all or part of arrearage, late fees, etc
• Reduce Interest Rate
• Convert Adjustible Rate to a lower, Fixed Rate loan
• Convert a high interest rate, Interest-Only loan to a lower rate, Amortizing loan
• Increase the loan term
• Short Refinance:*** Reduce Princiapal by means of a new refinance for less than the existing balance, with the difference forgiven as if it had been paid off.

• Add Arrearage to the Principal Balance
• Roll Arrearage into a New Second Mortgage
• Increase the term which keeps each payment the same but, in effect, "tacks the arrearage onto the end" of the mortgage.
• Pull Cash Out of Mortgage with a Refinance to Pay Off Arrearage from the Sale Lender
• Refinance the Loan with Cash-Out from a Different Lender to Bring to Pay Of the Current Mortgage and Arrearage

• Short Sale:*** A sale of the property for less than the mortgage balance. The difference is not pursued by the lender in the form of a deficiency judgment.
• Sale of the property to a third party who pays your mortgage; allows you to continue to live in the property as a tenant and agrees to sell it back to you, in the future, for a pre-agreed price. This is sometimes a feasible solution, but CAUTION!!! This option is often offered by outright crooks. Do NOT consider this option without consulting an attorney. 
• Deed in Lieu of Foreclosure--Defaulting owner voluntarily deeds property back to lender in exchange for the foreclosure being dropped. Loss of ownership can be tempered by any of the following:
  • Deficiency judgment forbidden (mtg debt is fully cancelled regardless of present home value)
  • Provision allowing continued occupancy, by former owner, as a tenant
  • Former owner, now a tenant, is given a future buy-back provision, at a stated, fixed price
  • Cash for Keys: Cash out to help the foreclosed owner pay for a move
• Outright foreclosue tempered by one or more of the above provisions

• You must have, or convince, a lender to be willing to modify your loan rather than pursue a foreclosure
• You must prove that you will be able to affored the mortgage payments after a modification. You will also need to convince the lender that your financial hardship is not likely to recure.
• The documents you need will be a credit report which shows your periodic debt payments; a hardship letter that explains how you ended up "under water", what modification would work for you and why you believe that your financial hardship will not recur after the modification; pay-stubs or other proof of income; a budget (before and after modification) showing the steps you can take to make your mortgage, after a modification, affordable. 
• Obviously, an "after modification" budget must show a positive monthly "bottom line". If, no matter what changes you or the lender can reasonable accomplish, you are still short of cash each month, then a modification will make no sense and will not be offered.  See Further Detail Here.

• You have affordable payments and breathing room while the equity in housing markets stabilizes/rises
• Escrows may have been established so taxes and insurance are current; paid within your monthly payment
• Collections calls stop, comfortable communication with your lender is restored...you can sleep at night!
• There are no more late and missed payment reports to credit bureaus; your credit improves

• Become aware of unconscious spending by following every penny that comes in and out of your hand over the course of a month. Then, curb your spending to the essentials. Explore ways to increase your income. Prepare and follow a family budget, 
• Give any creditor the same courtesy you would want if someone owed you money...keep in touch with them. The worst thing you can do to a creditor is make them think you have disappeared.
• If you know you are going to miss a payment, it might help to discuss your options with the creditor before you do so. 
• The creditor may agree to forebear (allow you to skip) payments. If you can convince the lender that your financial difficulty is a one-time situation, that is not likely to reoccur, you may be able to arrange this deferral and repayment of a payment, or two. While the options can be similar to a loan modification, there may be less affect on your credit, and reduced penalties and fees, if you are straight and forthcoming with the creditor before you actually fall behind & miss payments without advance notice.

*** CAUTION...the reduction in amount owed from a short sale or short refinance could be considered to be a taxable profit, like income, by the IRS. Be sure to discuss any related tax breaks that may be available to you with a competent tax advisor. CAUTION:  Deficiency Judgments - Be aware that a lender can sometimes legally pursue you, even after you lose a home, for the portion of the mortgage, interest, fees &/costs that the lender is unable to recover through a resale of your former property. Talk to your attorney to determine how you can protect yourself. In the opposite situation, be aware that a lender may owe you any profit they make if they sell the property for more than the total amount you owed when you lost ownership. CAUTION:  Mortgage Servicing & Related Fraud - Be aware that, while lenders often lose when they foreclose, they often make more money on defaulting owners than before the default. It is often to their benefit to prolong the defaullted loan interminably, because of the outrageous default costs and fees that they may charge. Few defaulting owners have any idea whether the late fees and penalties are legal and appropriate. Obviously, the defaulting owner is concerned with other matters. CAUTION:  The Loan Mod Scam - High Fees, Advance Fees, No Results:   The sad & ironic thing is that many loan modification "experts" are the same unethical, ex-brokers who got their present customers involved in unaffordable, adjustable or sub-prime loans that they now offer to fix. They are roping those same borrowers, who are now in an even more precarious position, into high, advance-fee loan modification, debt mitigation or credit improvement schemes. At the heart of the scam are large fees, often due in advance, with no guarantee of success. The worst of the scammers take the fees and run, without no attempt to get results for their customers. But, most advance fees charged by loan modification, credit debt mitigation or credit repair firms are illegal. We urge you to KNOW who you are dealing with; know your rights and realize that you can do your own negotiations (IF you have the knowledge or persistence to get results). You can also find low-cost, or no-cost, agencies that are available to help you. For many people, professional help would not be useful. But, you should make sure that the “professional” has your interests at heart; and you should be cautious before handing over any advance fees before services are received. In some states, such as NJ, the only state-authorized loan modification consultants are non-profit (licensed) agencies; attornies and HUD housing counseling agencies. DO IT YOURSELF?  You can do your own loan modification or debt reduction, though it will take some knowledge, time & persistence.  Click HERE for brief notes for do-it-yourself loan modifications. When you get into the process, be sure to be aggressive in pursuing your goal, keep records of who you speak or write to and keep copies of all correspondance and attachments. Contact us if you need a package of forms and more detailed instructions, which we have available at a very modest cost. LOAN MODS/DEBT MITIGATION FOR A FEE:  If you have any doubts that you can do this yourself, do not hesitate to use the services of an attorney or an approved agency. If you do not know who to contact for help with debt, credit or loan modification counseling or services, please do not hesitate to contact us. CONTACT US IF WE CAN BE OF SERVICE

Caution: Forensic Mortgage Audits: What Are They and Are They Worthwhile? The government crackdown on bogus, expensive and unprofessional loan modification firms has given birth to the newest scam - forensic mortgage auditing. This is an examination of mortgage documents and disclosures to determine if they were prepared accurately, fully and correctly, as well as provided in accordance with the controlling laws; AND, if they were amended when appropriate, were they provided to the borrower as required. There is no doubt that many, perhaps most, mortgage documents contain, sometimes serious, errors. There is the possibility that the threat that a lender may be sued for violations of the TILA, RESPA, and other laws intended to protect borrowers. The threat of a lawsuit may cause the lender to take a more favorable attitude toward a loan modification. There have even been lawsuits, on the basis of such violations, that have been so successful that the borrower's mortgage was completely rescinded and they wnded up mortgage-debt-free. The problem, however, is like the loan-mod scams: First, the audit fees may be exhorbitant, even many thousands of dollars. The fees are often required to be paid up-front. A scammer may take the money and do nothing. The auditors may not know what they are doing. They may have no legal or underwriting experience, and simply be using off-the-shelf software and lenders quality control checklists in which they merely plug information into.  The auditor may be one of the same brokers who originated the bad loans and then, out of work, began to offer to obtain a loan modifications until the government cracked down on this There is no guarantee that the mortgage audit will accomplish anything, even if errors are found and the report was prepared by a "certified" auditor. The audits mostly look for violations of federal law, but any litigation will most likely take place in a state court...courts which each interpret laws differently. There is can be no guarantee that the present debt owner will not successfully deflect a lawsuit if the court agrees that the creditor is merely the "Holder in Due Course". In other words, the innocent possessor of the debt, who is not responsible or liable for the errors or violations when it was created. Even if the audit can be the basis of a lawsuit, or the possible means to force a lender to consider a realistic loan modification, no results are likely to be achieved unless a knowledgeable attorney is brought into the matter. It is extremely likely that, both, the court and the lender will challenge the credentials of most auditors, as well as the validity of the audit reports that they present. Any audit you pay for should be ordered under the auspices of an attorney who is representing you, in this regard, and is familiar with the possible legal defenses that violations of TIL, RESPA, HOEPA or securities regulations may provide. Do we recommend a forensic mortgage? Yes, but only because any and all means should be taken to protect your rights, and force good-faith negotiations, from lenders. BUT, we stress that there is no guarantee that errors will come to light or that documenting the errors will save your home. We remind you that a basic audit need not cost more than a few hundred dollars. We also remind you that the auditor may or may not know what they are doing. You should know that this type of audit will not be inclusive of securities law violation investigations, as few auditors have knowledge or experience with the complicated world of securities law. You should know that an audit requires a complete set of documents that was presented to you when you applied for, and settled on, your loan. If the paperwork has been misplaced or lost, a thorough audit is not possible. Finally, we remaind you that an attorney - a really knowledgeable one, with experience in foreclosure defense - is necessary if any chance of success is expected. Your goal, with an audit, should be to have another "iron in the fire" to force your lender to negotiate an affordable loan modification. That's all. There is no guarantee of success but, if the costs are reasonable, and the results are substantive and accurate, it can't hurt to have all the "ammunition" that you can get. For Further, Honest Advice on Forensic Mortgage Audits, CONTACT US

Misc. Loan Modification Links:

Making Home Affordable - Information about refinancing and loan modification options available under the Home Affordable Refinance Program.

Fannie Mae Loan Lookup - The Fannie Mae Loan Lookup enables mortgage borrowers to quickly determine if Fannie Mae owns their loan by providing a street address, unit, city, state, and ZIP code.

Freddie Mac Loan Lookup - The Freddie Mac Loan Lookup enables mortgage borrowers to quickly determine if Freddie Mac owns their loan by providing borrower and property information.

LOSS & DEBT MITIGATION:  

Loss Mitigation is the negotiating process that disputes incorrect non-mortgage credit debts or balances, or attempts to work out payment plans or payoffs of such debt for less than the current balance. It can be a frustrating process but can result in significant reductions in the amounts owed...often about one-half. 

We Recommend Credit-Aid Software - Click here for a free demo download & more details

HELP WITH LOAN MODIFICATION AND UNSECURED DEBT REDUCTION NEGOTIATIONS:  We can understand if decide that you need an advocate to help you negotiate a loan modification or negotiate a reduction of your unsecured credit debt...If you choose not to attempt this yourself, CONTACT US for inexpensive information about mitigating your own debt negotiating a loan modification. We may be able to suggest a legally compliant counselor who can work with youwith no upfront fees. They may guarantee results, or you pay nothing. Before you make an agreement for with any loan modification, credit or debt counselor, we suggest that you investigate the laws controlling them by contacting your state banking administrator or state attorney general's office.

annualcreditreport.com - The one and only website established by the three major credit repositories to provide consumers with the annual free credit report mandated by the federal government. Any other similarly-named sites are commercial sites. Caution! While the credit reports are free, credit scores are not.

HAMP - Making Home Affordable - Information government website regarding loan modification and the HAMP program which the US government administers offering help for delinquent home borrowers.

Eye on the Bailout - Statistical Information from Propublica

Eye on Loan Modifications - Statistical Information from Propublica

Attorneys Who Specialize in Foreclosure Defense - Note: These are local lawyers who seem to be savvy about foreclosure defense, but at least some of the discussions and topics you find discussed on these websites will apply in other states. In any event, these sites could be a sourcre for ideas that your own attorney may wish to expand upon in the legal efforts on your behalf. The "Lawyers Who 'Get It'" are attorneys who have specifically been trained in foreclosure defense, and related issues. You can read the very basics of foreclosure defense HERE, but, as usual, we strongly suggest that you do NOT try to defend yourself ("pro se") against a foreclosure action. There is no harm in reading and learning some options, but we urge you to GET A LAWYER!

Rescindmyloan.net	Lawyers Who "Get It"	Livinglies
	Matt Weidner, Esq