LOAN MODIFICATION PROCESS
Helping You with the Loan Modification Process in Los Angeles
Obtaining a loan modification may seem like a difficult, if not impossible task that gets harder each month as property values rise and interest rates do, too. Even with legislation designed to assist homeowners, lenders and loan servicers still find ways to make it difficult for borrowers to obtain a reasonable modification. This is because loan servicers make more money when you default and even more money when they foreclose. They don’t want to lose money by helping you catch up and avoid default and foreclosure
Although there is no law that entitles you to a loan modification, there are times when a mortgage servicer violates your rights during the loan modification process. When lender violations occur during this process, Advocate Legal can help you identify these violations and hold your lender accountable even before a lawsuit is necessary. For over a decade Advocate Legal attorneys have fought these violations aggressively and been highly successful at securing modifications during, or as a result of, litigation. Now we can help you protect your rights and achieve the same results for a fraction of the price through Advocate Legal. At Advocate Legal we can help you use the law as leverage to force lenders to give you what they won’t give you fairly.
Who doesn’t qualify for a loan modification and who does?
Borrowers who can afford their mortgage but simply want a lower interest rate don’t qualify for a loan modification and should simply refinance. Borrowers with equity in their property also don’t qualify and must refinance instead of modify since equity negates the concept of hardship.
Homeowners with a high interest rate or a principal balance that is more than the value of the property will qualify for a loan modification if they can’t afford their monthly house payments, although this situation arises less and less as home values raise. Homeowners will also qualify for loan modification, or forbearance, if they have faced significant financial hardships that make it difficult or impossible to make timely payments on their mortgage.
The definition of financial hardship is loose and includes such things as job loss or salary reduction, a decrease in property value, the loss of a wage earner, unexpected medical costs, or payment shock when an interest rate suddenly adjusts. Contrary to what you may be being told, you don’t have to be behind on your mortgage payments to qualify for a loan modification.
Never pay upfront for a loan modification
Since 2009, California has prohibited any party, attorney or otherwise, from charging up front for a loan modification. [Cal. Civ. Code §2944.7(a)(1).] An attorney might get around this by filing sham litigation, or by having you pay a litigation retainer, to protect themselves from violation of this statute. Always be suspicious when a retainer says something different than what you came in for and never pay up front for someone to work on a modification for you.
The Home Affordable Modification Program (HAMP)
- You may qualify for HAMP if the following criteria apply:You obtained your mortgage on or before Jan. 1, 2009.
- You owe up to $729,750 on your primary residence or single-unit rental property.
- You owe up to $934,200 on a two-unit rental property; $1,129,250 on a three-unit rental property; or $1,403,400 on a four-unit rental property.
- The property has not been condemned
- You have a financial hardship and are either delinquent or in danger of falling behind on your mortgage payments (non-owner occupants must be delinquent in order to qualify).
- You have sufficient, documented income to support a modified payment.
- You must not have been convicted within the last 10 years of felony larceny, theft, fraud or forgery, money laundering, or tax evasion, in connection with a mortgage or real estate transaction.
Additional Loan Modification Programs
Even if a borrower does not qualify for a HAMP modification, there are other options to pursue with your lender based on the strength of the new foreclosure statutes designed to aid consumers and reduce foreclosures. Options may include an application for federal and state government loan modification assistance and other programs:
- Lower interest rates — Borrowers in variable-rate loans that are higher than the current interest rate may apply for a fixed-rate mortgage that will be lower than the variable rate through the Making Homes Affordable Refinance Program. This is a good option for homeowners who are not (yet) behind on payments but cannot get traditional refinancing because of a decline in the value of their homes.
- Mortgage principal reductions — When homeowners have a second mortgage and the principal balance on both loans is less than the value of their property, they may be able to negotiate a settlement for their second lien and thereby reduce the total principal balance. Reducing the principal on a second or third mortgage, and first mortgages in certain cases may make it possible for homeowners to make timely payments and avoid foreclosure.
- Forbearance (recapitalization) — When homeowners have missed mortgage payments, lenders may consider adding the unpaid months to the balance of the mortgage instead of foreclosing, or temporarily suspending monthly mortgage payments because of hardship to allow the homeowner to catch up. Sometimes suspension suffices to help the homeowner stay current.
- Extended loan terms — Extending the number of years a homeowner has to pay back a mortgage allows homeowners to reduce their monthly payments.
Contact Attorneys Who Care About Your Home and Your Future
Bad advice when it comes to loan modification may come cheaply, but the cost can be great. The attorneys at Advocate Legal are devoted to keeping our clients in their homes and will always respect the value of what is at stake.