Tag Archives: mortgages

Lender attorneys don’t want to know about loan modifications

At my last foreclosure defense settlement conference, the lender’s attorney attended with me and my client.  His lender client is out of town, and the attorney didn’t even know who to call, although he had previously suggested to me a contact and phone number.  So no phone call was made, and nothing was done at the settlement conference.

I was given a new phone number to call, with a different lender representative than had been previously suggested. I offered to follow up, so the next time we met we could all be more organized.

The lender’s attorney became angry that I wanted to continue the conference, since his client did not attend.  He claimed that we had completed the settlement conference, and now he was entitled to continue the foreclosure.  The danger, as I suggested to him, was that nothing had been discussed; nothing had been put in writing.  My clients were in danger of losing their home if the foreclosure proceeded.  We needed written reassurances from the lender that they intended to follow federal law in modifying this mortgage, and we wanted that agreement reinforced by a court order in this foreclosure proceeding.

But the lender’s attorney was resolute:  he is filing a report with the court that the settlement conference has been held, and we have no further right to impede his goal of taking away my client’s home.  Unfortunately, under Indiana state law, he was right.

Now we must file objections, and process more paperwork asking for a hearing before the judge on the question: “Does the lender have the right to continue foreclosure, without meeting federal guidelines for mortgage modification?”

Well, someone has to solve this stupidity.  I will end up having to cut the deal with the lender, and the new contact I was just given.  I will also have to make sure the paperwork is right.  Unfortunately, the apathy of attorneys and lenders makes what should be a simple transaction an uphill climb filled with delays and “hiding the ball”.  Hopefully it will get easier over time.

Recent news on mortgage modifications

As of July 1, 2009, Indiana now allows homeowners to contest the foreclosure process.  They may ask for a “settlement conference” with a lender representative to work out foreclosure alternatives.  The diligent homeowner will make sure he asks for this conference, as soon as the foreclosure is filed.  At that hearing, the homeowner can present his gross monthly income for the household, asking the lender to consider 31 to 38% of this figure as an appropriate payment to keep the home.

Unfortunately, the state law does not require the lender to use gross monthly income for fixing the appropriate payment, even though he is encouraged to look at the documents which establish that income.  Sadly, the lender can refuse this common sense solution, and demand the homeowner surrender the home.  Of course, this is not good for anybody including the town with vacant homes and unpaid real estate taxes, and the neighbors who see their property values go down because of too many homes vacant and unmaintained.

Of course, for most homeowners the desired result at a settlement conference is a change in the mortgage payment, allowing the homeowner to keep his home.  The federal “Make Home Affordable” plan has been active since March of 2009, and is referred to in this post as “MHA”.  MHA specifies that regardless of Indiana law mentioned above, the homeowner can insist that household gross monthly income is the only criteria relevant to setting a new mortgage payment.  This right under MHA applies in 75% of the foreclosures filed in the country today.

But lenders are slow to admit that MHA applies in any particular foreclosure.  My experience has been that lenders must be forced to admit that MHA applies.  Even when they admit that it applies, they are not willing to admit that gross household income determines the mortgage payment, right down to the penny.  In short, it is simply an issue of power and control.  Lenders are not used to consumers and their lawyers knowing what their rights are.  Lenders are very reluctant to give in to consumer demands, even if the law requires them to do so.

What a happy surprise I had last week.  At a scheduled settlement conference, a large regional mortgage lender admitted that gross income would indicate that an adjustment in the loan terms was best for both lender and homeowner.  Indeed, the lender even offered to reamortize the loan to 30 years at 5%, without any demand for back payments.  They also offered to start at the new payment two months from now, with no payment until then!  I was shocked, especially since this loan was one of the 25% not covered by the MHA guidelines.  NOW THAT IS WHAT I CALL A SMART LENDER!  And all is well that ends well.

In other cases, lenders are still unwilling to admit they are covered by MHA, even though I know they are.  The foreclosure process drags on, with unfruitful settlement conferences and lender demands for judgment.  Just today, I talked to a lender lawyer who admits that MHA is becoming the standard, but his lender clients are taking their time in understanding what is required of them.  Let’s hope for the future: less time in foreclosure, less legal fees, more results outside of the courts.  The foreclosure mess needs to end immediately.  We need to move forward with financial recovery, as homeowners and as a country.

What is going on with Mortgage Modification?

You really want to know?  Well, you better allow a few months for the market to “catch on” to the concept….

In essence, the Obama administration has published a plan which should apply to 75% of the mortgages in the country. The “Make Home Affordable” initiative is designed to assist the homeowner who is delinquent in payments, and cannot afford 100% of his normal payment, based on current household income.

In theory, the monthly mortgage payment is adjusted downward for 5 years.  The hope is to save homeownership, a stable tax base, cash flow to the lender, and neighborhood values.  There are many obvious advantages for all.

But most lenders don’t understand the details.  In 5 recent foreclosures where I have represented the homeowner who is trying to keep his home, lenders didn’t know program specifics (nor did their attorneys).  Their approach was the basic “we win, you lose;  see you at the foreclosure sale”.

I have had to continue hearings while giving the lender personnel time to research what they are legally obliged to do:  offer loan payment modifications for a 5 year term, if the homeowner does not have the money to make the contractual payment.

Stay tuned for further developments………

A radio show…….why bother?

Most Saturday mornings, I start the day with a warm cup of coffee while I read the newspaper, or maybe several different newspapers, if I haven’t yet caught up with the news of the week.  After immersing myself in reading for a while, I take some time to peruse the articles that I’ve arranged on the kitchen table in front of me.

As the “theme of the week” becomes clearer, I’m typically lost in thought while I organize the main “themes” and my presentation.  And before you know it I’ve got the topic for my weekly radio show.

Once done, I critique it. Was it compelling?  Lucid?  Relevant?

Why bother?  Just for the thrill of thinking out solutions to everyday problems in a world where people need someone to trust.  In the practice of law, communication is everything.  Let us start with building trust, based on reliable and solid advice.