Generally, to qualify for "conventional" relief, the borrower must have experienced a qualified financial hardship, the home must be owner-occupied, and the borrower must demonstrate sufficient income to make monthly payments. The proposed workout must be more financially advantageous to the servicer than foreclosure. If it makes better financial sense for the lender to foreclose" it will. That's why we need to immediately overhaul how our nation's financial giants are responding to our foreclosure nightmare. Hell. We need to change the entire system to an economic democracy!
I recommend clients play the loan servicers' game by faithfully submitting all requested information in a timely fashion. Keep all FAX transmission verifications, and all correspondence should be in the form of certified mail with return receipt requested. Assume your documents will be lost, or be declared "stale" several times during this process, so never send originals, and be prepared to send multiple copies multiple times. I recommend borrowers whose lenders have refused to accept payment set up a separate savings account and make deposits weekly or biweekly. Do not make any withdrawals. You'll need this money for legal expenses, loan reinstatement, or moving expenses.
Don't get upset with any lender rep you speak with.. Don't make promises you can't keep, don't threaten to abandon the house or you will file bankruptcy (unless you mean it). Lenders love when borrowers file for bankruptcy because they can use the bankruptcy court as their collection agent in the case of Chapter 13, or to expedite the foreclosure process in a Chapter 7 (unless a borrower wanting to keep the home reaffirms personal liability). It is important to understand your poor treatment isn't personal. It's designed to keep you frustrated, off balance, and grateful for any relief that may be offered to you.
Recently I had a client disregard my advice After working with him for almost six months seeking a loan modification which sought a reduction of principal, and reamortization of the 30 year loan at a 2.5% fixed rate of interest consistent with an attractive FDIC loan modification model. I had documented the predatory characteristics of the original loan" and had gained some leverage. The favorable workout was within our reach.
My guy panicked. The loan rep circumvented speaking to me (a seasoned professional), and instead called the (frightened and ill-informed) homeowner directly and told him he would never qualify for the government-sponsored plan we were seeking. Instead, the lender offered my client an in-house loan modification which would tack the missed payments, foreclosure fees, attorney fees, and accumulated late fees onto the end of a new loan which was reamortized from 30 years to 50 years at an interest rate of 10% (down from 11.5%). He was told he had to accept the deal right then and there for it was a one-time offer. If he didn't accept the proposed workout, the loan would be referred to the foreclosure attorney. The new loan was 200% of the home's as-is, fair market value. What a deal! I can't tell you how disappointed I was when I learned what he had done.
There are ways to slow the process, and gain some leverage, but the homeowner must be proactive, and willing to challenge the lender and foreclosure every step of the way. Most folks don't. Unfortunately, most housing counselors don't publicly encourage the borrower to dig in their heels and fight by challenging the lender's practices. Privately, though, they might.
For example, if your mortgage loan was originated within the last seven years and had exotic terms including interest only payments, pay option arms, negative amortization, adjustable rates, chances are your loan has been bundled with thousands of other mortgages, securitized, and then split into various income or benefit producing tranches. There is a good chance the mortgage became separated from the mortgage note (promise to repay).
Consequently, mortgage holders may not be able to produce the note necessary to establish it has the right to foreclose. When indicated, I recommend my clients demand the lender "produce the note" and a history of lawful assignments. If the lender does produce a note, or a record of assignments, make certain they haven't been forged. I recommend my clients carefully examine and understand their mortgage loan documents including the origination application, appraisal, closing statement, and any records of transfer or assignment of servicing rights. Carefully understand any collection or foreclosure notices, and pay attention to timeliness and deadlines.
My advice? Play along with the servicers' game as you mount a separate challenge to fight foreclosure. Don't assume the workout you may be offered is the best one you can get. The servicer is trying for the best deal for itself - not for you. The fight may not be easy, and you may not win. But there are some folks willing to help you in the fight and I recommend you consider help from several sources. Not all non-profit organizations are acting in your best interest, and, conversely, not all independent consultants are looking to screw you. SPOCH offers free for the asking telephonic advice. You can contact SPOCH via email at: NJSPOCH@aol.com and provide as little or as much information as your comfort allows.
I'm glad to
know that SPOCH exists. Readers should encourage anyone facing foreclosure to
contact SPOCH before tossing in the towel. Thanks so much for talking with me,
Dave. It's been a pleasure.
****
Part one of my interview with Dave
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