The five minute blurb about loan modifications that you hear on the radio is only a very small piece of the story.  Reading an article in the newspaper about local Real Estate is a very small piece of the story. Reading a blog post about short sales is a very small piece of the story.

Your friend/mother/sister/uncle has different financials than you do and their situation is different from yours. Just because something worked for them does not mean it will work for you.

Be informed. I am not saying that you shouldn't. However, make sure you have the advice of a Real Estate attorney when it comes to your Real Estate investments. 

There have been a significant amount of articles written on this topic recently. You can view some of them here:

1. Flawed Paperwork Aggravates a Foreclosure Crisis

2. Bank of America and Chase implicated in foreclosure ‘robo-signing’ scandal

3. Bank of America to Freeze Foreclosure Cases

4. JP Morgan Chase halts foreclosures: second large bank to do so

5. GMAC Mortgage Stops Foreclosures in 23 States

What does this mean for me?

Here is my thinking…this is NOT a good thing for a lot of people involved. The people who bought foreclosed homes from the banks (known as REO’s – Real Estate Owned) will have to defend their purchases. The banks that lent money to these borrowers will have to defend themselves. The title companies that insured these properties will have to defend themselves. All of this is expensive and will clog the courts.

For the people whose homes were foreclosed upon, if it is determined that they were foreclosed upon “wrongly”, now what? Lawsuit. Suing the bank can be an expensive proposition. In most states, there is no right to give them back their home. (For good reason, the people who bought the foreclosed home had the right to buy it. They cannot get thrown out of a home that they rightfully purchased). Each one of these banks are going to have more lawsuits against them than they can handle.

However, for the people who are in pending foreclosure may have a silver lining to this situation. While the banks may not proceed with the foreclosure at this time, they will eventually. So the banks may be much more willing to grant loan modifications. Really grant loan modifications. Not just putting people on trial modifications indefinitely.

This is not a free pass to borrowers who are struggling. Once the banks get through this, they will begin the foreclosure process again and probably more efficiently. Applying for a loan modification now may be the best plan. If borrowers take advantage of this situation, there may be a lot of people who get to keep their homes and have a much more affordable payment.

My paralegal and I were just talking about this situation and what we think is going to happen. She and I realized that last week, we had over 6 permanent modifications come through for clients from 2 of these 3 banks and 5 more trial modifications.  That made me wonder…are the banks going to process the modifications and approve modifications more readily?

Only time will tell. What I can tell you is that now is the time to apply for a loan modification.

Related Posts:

1. I Don’t Want My House Anymore

2. When Is It Ok to Walk Away From My Mortgage?

3. Foreclosure: The Bank Must Prove They Own The Note

4. The Loan Modification Process: Why Doesn’t It Work?

Recently, there was a great article on Moolonamy, about this topic.  The article entitled, “Is It Better to Buy or Rent?“, gives some excellent facts and figures.  There is an wonderful chart outlining the costs and benefits of renting vs. owning a home.

In this economy, with the uncertainty that comes with your job and your financial stability, buying a home is a big decision and renting may be a better option.

Some points to remember when choosing your Realtor:

1. Make sure you like them

Like I said above, you are going to spend a lot of time with them. If you are buying a home, you are going to go with them to open houses and showings. You are most likely going to be in a car with them driving between homes and then with them at the homes. You have to like them and trust them. If you are not happy with your Realtor, find another one. There are plenty to choose from.

2. Ask Questions

You should feel comfortable enough with them to ask any and all questions you have. If you are selling your home, you should ask them questions such as “Will my home be listed on the Multiple Listing Service?” and “How long will my house be listed with you?” If you are buying a home, you should always ask whether the Realtor is working for you or the seller. Many times the Realtor is the Listing Agent and is working on behalf of the seller to help them sell the house. Any questions you have you should get an answer that is clear and concise. You should not be left wondering what is going on.

3. Referrals

If you ask your Realtor for a referral, remember that it is just a referral. You are in no way obligated to use the attorney, appraiser, or mortgage broker that they recommend. You are always free to choose whomever you wish to represent your interests. However, Realtor’s can usually give you a referral to someone in the area and most likely, they have a relationship with them.

Remember that buying or selling a home is a lengthy, complicated process that requires you to be involved in every step. Make sure that you are choosing someone that you are comfortable with to have a relationship with for a few months.

There are so many options out there is you are struggling with paying your mortgage:

1. Loan Modification

I have written many blog posts about loan modifications and there is a ton of information out there about them. This is an option for you whether or not you are qualified under the MHA. Most banks have their own internal loan modification program, if you do not qualify for the MHA.

2. Refinance

Qualifying for a refinance is your biggest obstacle here. If your house has some equity in it, you want to talk to a licensed mortgage broker or your bank about the possibility of refinancing. Refinancing does have costs associated with it; however, with interest rates as low as they are, the costs may be worth it. You will also need to have a good credit score (620 or higher).

3. Streamlined Refinance

A Streamlined Refinance is a refinance of your existing loan with the same lender and the costs are significantly lower than in a traditional refinance.

4. Deed-in-Lieu of Foreclosure

If you are already behind on your mortgage, a deed-in-lieu of foreclosure may be an option. Under this option, you will need to contact your bank and determine if they are willing to take back the house.  You will turn over the deed back to them. The banks are sometimes willing to do this to avoid the foreclosure process and the fees that are associated with it. There is some negotiating that will have to be done here. You want to make sure that the bank releases you from the mortgage and any deficiencies. You do not want to turn your house back over to the bank to then find out that you still owe the balance of the mortgage.

5. Short Sale

A Short Sale is where you sell your house for less than you owe on it, pending approval of the bank. You will need an attorney to negotiate the short sale for you but here, there is also the opportunity to make sure that you do not owe anything to the bank. Your attorney should be able to help you negotiate this and make sure that any deficiencies in the sale price and mortgage amount are “wiped” away.

6. Cash for Keys

Some banks are now offering a program called “Cash For Keys.” This is a program where the bank pays you to move out of your home.  You are released from the mortgage and most of the time, any deficiencies between what you owe on the mortgage and what the bank sells the house for. Once again, all terms of this need to be negotiated before it is finalized.

There are so many options if you are in danger of losing your home.  Don’t just walk away. There are scams out there so you need to be careful, but you do have options.

Related Posts

1. Should I Stop Paying My Mortgage?

2. Streamlined Refinance As An Alternative to A Loan Modification

New York State law requires that anyone who charges an upfront fee to handle a loan modification be either a license attorney in the State of New York or a licensed mortgage broker in the State of New York.  There is a very good reason for this. New York State wants to make sure that you are receiving the best advice about your mortgage as possible. A loan modification is not always the best option for someone and an attorney can help you to determine what other options are available to you. A loan modification company only handles loan modifications and therefore, they are not in the business of telling you that they cannot get you a loan modification. 

There are no guarantees with a loan modification. The are many factors that are in play when a loan modification is submitted to a bank. The bank, your financials, the investor that holds your loan, the negotiator and many other factors will determine if your loan modification is approved. Further, if you do not qualify for the Making Homes Affordable Act, your lender has internal programs that you may qualify for and those internal programs change constantly.

There can be no guarantees. Anyone who offers you a guarantee is only setting you up for disappointment.

Related Posts

1. The Top Five Loan Modification Myths!

2. Should I Stop Paying My Mortgage?

3. Streamlined Refinance As An Alternative To A Loan Modification

1. The Fight Against Destructive Spin  by Gini Dietrich

Gini is the CEO of Arment Dietrich, a Public Relations firm in Chicago, Illinois. I LOVE Gini. I think she is fabulous. I truly look forward to her blog posts and feel a little disappointed when there is not a new one. She makes it all seem so easy. You want to learn how to use a certain Web 2.0 tool, she is your woman. You want some advice on how to market yourself, she is your woman. Her blog posts are always useful and she is a wonderful person. Follow her on Twitter at: @ginideitrich.

2. Legal Marketing Blog.com by Tom Kane

Tom is a former attorney who has an excellent blog all about marketing for any size law firm. His blog has some excellent tips and tricks that help focus your marketing efforts. Presently, he is running some older blog posts due to a death in the family. Even these older posts have given me some new ideas.

3. Outspoken Media by Rae Hoffman, Rhea Drysdale and Lisa Barone

These three ladies have a great blog that covers topics such as blogging, branding, SEO, and social media. Their blog posts are entertaining and informative. They are definitely one of my favorites to read. You can find them on Twitter at: @OutspokenMedia.

4. Mark Merenda’s SmartMarketing Blog by Mark Merenda

Mark’s blog is awesome. He is funny, informative, and his insight on many different topics is always entertaining to read. Mark is number one on my list of people to hire next year. His work on marketing for attorneys is incredible and his work always speaks for itself. He is active in a numerous list-servs and always willing to help. You can follow him on Twitter at: @markmerenda.

5. Ducttape Marketing by John Jantsch

John is a small business marketing expert. He has a list of credentials to back up everything that he says. Many of his blog articles are collections of information that is full of useful information.  I like that his blog links to so many other sites, where I can find new people to connect with and learn from. You can follow him on Twitter at: @Ducttape.

What are you reading? What am I missing?

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My Favorite Attorney Blogs

One Lovely Blog Award

1. My Law License by Brian Tannebaum, Esq.

Brian is a Florida Criminal and Bar Admission/Grievance Defense Lawyer in Miami, Florida. Brian has no problem saying what many people are thinking. He asks the hard questions of people who don’t want those questions asked and makes no apologies for it. He is also a great person to follow on Twitter. You can follow him at: @BrianTannebaum.

2. TaxGirl by Kelly Phillips Erb, Esq.

Kelly is a Tax attorney in Philadelphia, Pennsylvania. Her blog is awesome. I learn something every time I read it and she is so entertaining. I find her information anything but boring to read. Accordingly, her tagline for her blog is “Because paying taxes is painful… but reading about them shouldn’t be.” She is on Twitter and her tweets are always amusing. You can follow her at: @taxgirl.

3. Construction Law Musings by Christopher G. Hill, Esq.

Chris is a Construction Law Attorney in Richmond, Virginia. His blog is always full of information that pertains to the construction industry and he knows what he is talking about. He also talks about social media as it pertains to his area of the law and green building and its impact. He is also on Twitter and always has some really informative tweets. Follow him at: @constructionlaw.

4. Massachusettes Wills, Trusts, and Estates by Danielle G. Van Ess, Esq.

Danielle is a Wills, Trusts, and Estates Attorney in Hingham, Massachusettes. Her blog posts about Estate planning are fabulous. She makes me want to update my will all the time. Her information is so complete and she is an excellent source of information. If you do not learn something about Estate planning after reading her blog, you weren’t reading carefully enough. She is on Twitter and can be found at @dgvelaw.

5. Build A Solo Practice @ SPU by Susan Cartier Liebel, Esq.

Susan is the founder and creator of Solo Practice University™. Her blog discusses many issues that new solo attorneys have and how to fix them. She is amazing. Her innovation in creating Solo Practice University™ has helped so many attorneys, both new and experienced, make their practices better and their lives easier. She can be found on Twitter at @SCartierLiebel.

6. The Lawyers Video Studio by Gerry Oginiski, Esq.

Gerry is a Medical Malpractice and Personal Injury Attorney in Great Neck, New York. Gerry’s blog teaches attorneys how to make interesting, informative and watchable videos for their website and other locations on the web. Gerry’s videos are so easy to watch and my number one priority for next year is to implement his tips and get some videos up and running. He is an excellent resource for attorneys. You can follow him on Twitter at @GerryOginski.

7. South Florida Estate Planning Law by David Shulman, Esq.

David is an attorney in South Florida who practices in the area of Wills, Trusts and Estate and Tax Planning. His blog always has some great information and his commentary on news stories is worth reading. He can be found at @SoFlaEstatePlan on Twitter.

8. My Shingle by Carolyn Elefant, Esq.

Carolyn is an attorney who practices in the area of energy, renewable resources, and Civil Rights claims. However, that is not what this blog is about. Her blog, My Shingle, was created to help solo, small firm, and aspiring solo attorneys. This is an incredible resource for any attorneys that fit into those categories. Carolyn is well regarded and very well respected. Her blog is always informative and she is not afraid to give her opinion. You can find her on Twitter at @carolynelefant.

What are you reading? What am I missing?

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The Lovely Blog Award

Are people just better off walking away and starting again?

This discussion began to get heated in October, when there was an article published on the Wall Street Journal blog written by an economics professor that stated that homewoners should walk away from their mortgages, in certain circumstances.  In “It’s OK to Walk Away, A Law Professor Argues“, there is an argument that walking away from your mortgage is more of an emotional or moral issue than a financial one. People feel as though they have a moral or ethical responsibility to stay in a home they can no longer afford or is “underwater.”

Today there was another article published by WalletPop, called “Is It Immoral To Walk Away From An Upside Down Mortgage?”, which discusses this topic one more time. The author discusses the issue as not so much a financial one but more of a moral and ethical decision. Homeowners need to accept the fact that they cannot afford the house any longer and make a decision to walk away.

There are many arguments on both sides of the argument. There is no right answer for everyone. There is no one who can make a decision of this magnitude for anyone else. There are definite financial consequences if you walk away from your mortgage. There will be severe damage to your credit score and your financial history. It will make it difficult to get credit or even rent an apartment for some time. However, there may be worse financial consequences if that homeowner stays in the house and lives off their credit cards to get by every month and ends up in foreclosure anyway.

The moral and ethical consequences can also be severe. People associate their homes with their families and their self-worth. They think that walking away means they are a failure. They have failed their families and themselves. However, walking away may help them save their families.

Before anyone walks away from a mortgage, there are many different factors that need to be considered. If you feel as though this may be something you are considering, you need to talk to a professional, either an attorney or a financial advisor, who may be able to help you make the right decision.

I know that this is a topic that people feel very strongly about.  What do you think?

Get in Front of It!

If you have the ability to foresee financial trouble, call your lender and get on a temporary modification or forbearance plan. You are not the first person to experience financial difficulties in your lenders portfolio and they have plans in place for short term help. You will need to document the problem and prove to the lender this is a real issue that will resolve in a short time, but they are typically willing to help.

Too Late

If you are already behind on your mortgage, the battle is more difficult but not altogether lost. Lenders do not want your home, they want your money! Therefore they are willing to help in most circumstances. The trick here is start as soon as possible, do not wait until the lender is calling you and begins the legal process. Try to be proactive and get a resolution. If you are unable to resolve the problem then you may need professional help to deal with the lender and try to help get things back on track. The further behind you are, the harder it is to get a resolution.

How it Works

Lenders work on a DTI (Debt To Income) ratio, this is your provable income verses your provable debt. The rent you get from the illegal garage apartment that you don’t claim on your taxes and the money you borrowed from Aunt Marie don’t count here. The further behind you are the more money you need to get out, plus you need fees, late payments, interest, principal and the all important but often overlooked escrow shortage.

Lenders will not help you unless you can afford to be helped. That means, if a lender has predetermined repayment plans and the longest plan adds more to the mortgage payment than you can afford then the repayment plan will not be offered to you. Lenders also feel like they are helping you, so if they offer a plan and you fail to make the payments they will not offer you a new one without extenuating circumstances.

Can’t afford repayment… Help

Next step is a loan modification or bankruptcy. Loan modifications offer a borrower the ability to rewrite the loan in terms that are affordable to the borrower and still give the lender some benefit of the mortgage. The Government Guidelines call for a lender to lower interest rates and extend the term of the loan so that the borrower is paying out 31% of their gross monthly income to mortgage payments. The issue here is that not all lenders are mandated to follow the guidelines and private modifications have been offered in many cases. These are typically shorter in duration and don’t offer the same relief, but some relief is better than none. Some investors will not offer modification terms and others require that the borrower be late before a modification may be offered. The Federal Guidelines specifically state that a borrower does not need to be late to obtain a loan modification and all participating lenders must abide by that rule.

Bankruptcy

There are two types of bankruptcy available to homeowners, Chapter 13 and Chapter 7. Homestead exemptions are different by state; however most states allow a debtor to keep their home if they do not have too much equity and can prove the ability to make the payments. The newest trend is the Bankruptcy Court’s willingness to move secured second mortgages and even portions of first mortgages from the secured creditor side to the unsecured creditor side. If a property has lost so much value that more is owed on the property than it is worth, then that portion that is no longer secured has beed seen by the Courts as unsecured and dischargeable debt.

Help is out there! It is not always easy to obtain and results vary. Professionals are available to help you meet the demands of this new and floundering economy but we are all wondering around in the dark a bit. Participating lenders are not obligated to help their borrowers unless forced to offer loan modification plans to their borrowers by the Government. However there is no rule that the banks have to make obtaining a modification easy. Delay, confusion and collection tactics are often used by lenders. It seems counter-intuitive for lenders to act they way they are acting because it is not profitable for a lender to own thousands of nonperforming loans or distressed properties. Although workout plans, temporary modifications, permanent modifications, and forbearance agreement are not ideal for the lender, it is good business sense to make some money than none at all.

Related Posts

1. How Long Does A Loan Modification Take?

2. Streamlined Refinance As An Alternative To A Loan Modification