Mortgage Modification
If you are a struggling homeowner, there are many options available to help you avoid foreclosure. Keep your house at a payment you can afford. Often, bankruptcy and real estate needs overlap, making it critical that your bankruptcy attorney, and your real estate broker, have shared competencies and open channels of communication.
Doan Real Estate and Doan Law Firm – A Strategic Relationship
Doan Law Firm (DLF) has a strategic relationship with Doan Real Estate (DRE) – owned and operated by former DLF partner, Stephen N. Doan, Attorney at Law. Licensed Real Estate Broker. We at DLF handle any and all bankruptcy related matters. And DRE manages loan modifications, and all other non-bankruptcy real estate matters. Bankruptcy clients of DLF are also clients of DRE for a loan modification. While DLF and DRE are two separate legal entities, our strategic relationship, and shared competencies allow us to work together. To find best case solutions for our respective clients.
Government Sponsored Programs
There are many federal and state government sponsored programs to help you modify your home loan, reduce principal, eliminate liens, and refinance. Doan Real Estate will help you sift through your options and find the best solution.
- HAMP (Home Affordable Modification Program)
- PRA (Principal Reduction Alternative)
- 2MP (Second Lien Modification Program)
- HARP (Home Affordable Refinance Program)
- FHA2LP (Treasury/FHA Second Lien Program)
- UP (Home Affordable Unemployment Program)
- EHLP (Emergency Homeowners’ Loan Program
- FHA Special Forebearance
- HAFA (Home Affordable Foreclosure Alternatives)
- CalHFA Programs – CMP2.0
- Keep Your Home California
- Federal Mortgage Assistance
Private Lender Programs
Some homeowners with private mortgage lenders may be able to find help through alliances sponsored by private lenders, such as Hope Now.
Bankruptcy Options
Chapter 13 bankruptcy may also be an option to cure mortgage arrearage and strip liens, or eliminate second deeds on your property. Certain judgment liens can also be removed in Chapter 7 bankruptcy through lien avoidance motions.
Sell the Farm
If none of the foregoing foreclosure alternatives is possible or feasible, you may have to bite the bullet and sell your property. It’s not the end of the world if you’re forced to sell your home – via a standard sale or short sale – after exhausting all possible alternatives. But foreclosure should be your last option, absent specific and strategic reasons for the contrary. Short-Sale expert Stephen N. Doan, Attorney at Law and Real Estate Broker from Doan Real Estate has years of experience as both a bankruptcy attorney and real estate broker.
Litigating Against a Lender
Sometimes litigation is necessary to effectuate a loan modification. This often happens when the lender has violated federal or state law in some way. Nobody wants to be involved in extended litigation as it is usually very stressful and expensive. However, when appropriate, litigation may be the only option. The following describes what might happen if you choose to litigate a valid claim. Keep in mind this is not legal advice, but only an illustration of how things might play out.
Pre-Litigation
The Pre-Litigation Mortgage Modification process could take several months, or even a year or more, depending upon the lender, present stage in the foreclosure process, and arrearage on the property. Chances at a significant principal reduction at this stage are low. Lenders will often offer “glorified workouts” by shifting the arrearage (late payments) to the end of the mortgage and temporarily modifying the interest rate or payments.
If all you need is a temporary band-aid, then this may work for you. On the other hand, it is generally not advisable to be too eager to negotiate the loan in these early stages. As market conditions continue to deteriorate, better terms and higher principal rate reductions will likely follow. Here’s what often happens:
1) If you are behind on your mortgage payments and your house is upside down as to equity, it doesn’t make much sense to send in partial payments, as that generally won’t help your cause.
2) Legal correspondence is sent to the lenders (first mortgage and all juior lienholders):
– Informing them of our representation,
– Requesting contact information for legal, loan modification, and risk management departments,
– Demanding that no further communications take place with the borrower(s) (phone calls, billing statements, etc),
– Requesting that any foreclosure process cease pending loan modification negotiations (a proposed stipulation is sent), and
– Other substantive legal requests as provided under Federal law via a Qualified Written Request (QWR).
3) An appraisal is ordered on the subject property.
4) A preliminary forensic audit takes place on the origination documentation to spot lending abuses.
5) A “Demand Proposal for Loan Modification” is sent to the lenders proposing loan modification. Such a Demand typically demands the following of lienholders:
– First Mortgage: New loan balance at fair market value less $40,000, 5% interest, 30 year fixed.
– Second and Junior Mortgages: Reconveyance of lien in exchange for $1,500.00 nuisance payment.
5) Additional follow up correspondence and phone calls continue to be sent until a path of communication is established with the lender(s). This demand stage and establishing the path of communication generally takes 10 to 60 days, although each month we continue to notice improvement as lenders gear up for the nation’s foreclosures.
6) The Lender(s) will typically then make a request for documents (hardship letter, authorization form, proof of income, etc).
7) Additional information is then requested from the client, depending upon the lender, and then forwarded.
(8) The lender makes an offer. Generally it contains no principal balance reductions. The negotiations then commence. Eventually, both sides hit stalemate, unless the lender makes a rare principal reduction or the client accepts the token modification.
9) Case then either resolves or moves to Litigation. NOTE: Case may hit Litigation also at any stage above depending upon when the sale date is set.
Throughout the pre-litigation stage, our clients are also requested to keep track of all communications they have had with their lender(s) since each one is technically a violation of state and federal creditor abuse laws such as the FDCPA and RFDCPA. These violations then serve as causes of action against the lender in the Litigation Stage and also help in negotiations.
Litigation Stage
If the lender(s) are not willing to negotiate to terms acceptable to our client(s), the sale date is within 30 days, and/or, the lenders refuse to respond, the file moves to litigation. This stage generally requires additional fees and takes place at the client(s)’ request or within 30 days of Sale Date. Our clients may also request that we commence the litigation process at any time, although, as mentioned above, a better deal is usually accomplished with the passage of time and delaying the foreclosure date as long as possible.
1) The litigation stage commences with the filing of a lawsuit against the lender. Generally, there are 5 or more causes of action. Such causes of action typically are for 1) origination fraud, 2) inability to enforce the note under California Negotiability laws, 3) violations of the RFDCPA for contacting the debtors despite our representation, 4) request for injunctive relief under recently enacted CC 2923.6, and 5) failing to timely respond to the QWR. Many of these causes of action contain an attorney fee provision, wherein if the lender loses, they must also pay all our attorney fees, which means reimbursement or all our clients fees!
2) Motions for Temporary Restraining Orders, Preliminary Injunctions, etc., prohibiting the foreclosure from going thru.
3) Recording of a Lis Pendens with the County Recorder, such that the property is now noticed to all that there is presently litigation taking place on the property. This creates a cloud on the title and dramatically interferes with the marketability of the property by the lender(s).
4) Discovery commences. Each side sends the other Interrogatory Requests, Production of Documents, Requests for Admissions, etc. Depositions are also noticed.
5) Various hearings then take place, attempting to resolve the case. Most principal balance negotiations will also start to take place on modifying the loan at this stage, although it can happen sooner. Also, depending upon the egregiousness of the causes of action in the complaint that Discovery produces, the modifications could now be very significant, even to the extent of eliminating the mortgages entirely off the property, although this is very rare.
6) Trial if negotiations fail, Modification if negotiations are successful.
The Litigation Stage
The Litigation Stage generally lasts anywhere from 4 to 18 months, depending upon the case and court docket. All the while, the property remains in our client(s)’ possession and mortgage payments are not made.
No Case is Guaranteed
No case is ever guaranteed any specific result. Sometimes, a lender might rather take their chances and take the matter to trial. The jury may decide against the client(s). Some clients may decide to let the property go after a year of negotiations. Sometimes a deed in lieu might be the preferred result. Sometimes a short sale is required. Other times, a Bankruptcy may be the best option. Some clients might even prefer to do a loan workout and simply put the arrears at the end of the mortgage, selling themselves short(this is pretty much what every broker is doing outside of here and what we previously mentioned were “glorified workouts” since they have nothing to do with principal reductions).
Each Lender Has Different Modification Policies
Accordingly, each case is different and may take a different path. The time frames could vary from 3 months to two (2) years. Each lender has different modification policies both before and after litigation. Clients have differing expectations. Mortgage Modification is not for everyone. But if you are already considering surrendering your property and meet the forgoing 5 qualifications, you will want to seriously consider contacting the Doan Law Firm to explore the Mortgage Modification process in saving your home.
Resource Links on Foreclosure:
IRS questions and Answers on Home Foreclosures and Debt Cancellation:
Sample 1099C Cancellation of Debt for issued by lenders to borrowers: (Download file 1099f)
Advanced Reading:
How did we get to this Subprime Mortgage mess (Download Subprime files)
Understanding Securitization (Download Securitization files)
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