A friend asked me recently if I know of any “for real” loan modification assistance for homeowners. I get this question often, even from lawyers that desperately want to refer friends and clients to a good loan modification agent. This was my answer—“There must be a qualified agent or lawyer out there who does a good and honest job… but I have never heard of one!” Let me explain.
In the last couple of years, since the federal government started the Home Affordable Modification Program (HAMP), I have talked to literally hundreds of clients that have applied in various ways for loan modifications. I have concluded that the process is like panning for gold. It’s hard work. Most will strike out, but every once in a while someone hits pay dirt. HAMP says:
..that home loan always needs to be evaluated in the context of a borrower’s entire financial situation as well as the borrower’s legal rights and remedies under the bankruptcy laws. That is the starting point for any borrower’s financial recovery. That recovery may not always involve bankruptcy, but it should always include an analysis of all of the borrower’s legal remedies.
Before I summarize my clients’ experiences, here are some industry facts.
According to ProPublica (an independent, non-profit news organization that tracks industry statistics)—
“Although Treasury Department officials and mortgage servicers claim the industry has gotten better at handling modifications, the average rate of modifications in the past two years is not significantly different than the rate before HAMP launched.”
It appears that only about one in five homeowners that apply for HAMP loan modifications actually end up with a permanent deal. And, according to ProPublica, the horror stories abound—
“About 1.3 million homeowners who have applied for a HAMP mod were denied without being placed in a [three-month] trial…. Meanwhile, getting placed in a trial is just the beginning of a disappointing process for many homeowners: More than half of trials were canceled, most of the time despite the fact that the homeowner had made all of the payments. Trials have also frequently lasted far longer than the three months they are supposed to last.”
And an additional 700,000 more had their trial programs cancelled, making a total of 2 million homeowners that were denied HAMP loan modifications as of December, 2010. ProPublica goes on to give some scary information about the reasons for homeowners having their loan mods denied—
“The most common reason servicers cite for denying a modification has been that the required documents are missing or incomplete. Almost a quarter of rejections were for this reason. This occurred against the backdrop of widespread reports of servicers’ inability to reliably keep track of documents.”
“Over 500 homeowners have told ProPublica via a questionnaire that the servicer lost their documents. At least 300 times, homeowners were told they hadn’t supplied required documents that the servicer had never actually asked them for.”
Ready for bankruptcy advice?
Call Bayer, Wishman & Leotta, at 800-477-3111.
Established in 1989, and more than 15,000 bankruptcy cases handled.
These industry-wide reports confirm what my clients have told me consistently over time. And these industry reports only cover the homeowners who participated in HAMP through their loan servicers or banks. I’ve also heard plenty of horror stories about loan mod scams and disreputable agents that take money from homeowners and do little or nothing to follow through on a negotiated modification.
I’ll summarize my clients’ loan modification experiences into three categories:
- RIPPED OFF: Virtually every single client who hired someone (be it an attorney, real estate agent, or a non-professional), was ripped off. Some very small percentage of these clients did get a mod, and paid exorbitant fees to the negotiator. However, these modifications were always so insubstantial as to be worthless and unaffordable to the client. Example: A $2500 monthly payment reduced to $2,425 would be a typical “success” that the client paid someone $3,000 – $6000 to obtain.
- SUCCESS: Every client who got a meaningful loan mod did it on their own, without anyone’s help. It was always a very long, frustrating process with lots of hurdles and hoops. For the persistent few, good deals were obtained. They usually had to try several times, and face numerous turn downs.
- NO LUCK: Most folks had no luck at all. While 10% of loans are in default, that leaves 90% that still pay! Despite HAMP and the government efforts to encourage and even force lenders to give loan mods, the lenders don’t play ball. Last summer, the three largest mortgage servicers—Bank of America, Chase and Wells Fargo—were punished by the Treasury Department for failing to meet the standards of HAMP. The Treasury Department set aside $37 billion for these loan modification programs, but only about $1 billion of that has been spent. The lenders just aren’t cooperating!
Keep in mind that these folks have been my clients because they typically have other financial problems and stresses besides a bad home loan. But that home loan always needs to be evaluated in the context of a borrower’s entire financial situation as well as the borrower’s legal rights and remedies under the bankruptcy laws. That is the starting point for any borrower’s financial recovery. That recovery may not always involve bankruptcy, but it should always include an analysis of all of the borrower’s legal remedies. Then, if you want to pan for gold, be my guest!
Bayer, Wishman & Leotta is a full service bankruptcy firm. We have offices in Downtown Los Angeles, the San Fernando Valley and Long Beach. Our attorneys are Certified Specialists in consumer and small business bankruptcy and you may reach us at (800) 477-3111. Check us out on AllExperts.com.
