Do you need a lawyer to get a loan modified?
Okay, I’d like to straighten this issue out… Do you need a lawyer to get your mortgage modified?
(This is being written in response to a homeowner in Arizona asking a question on ABC15.com.)
By way of introduction, I’ve never been paid a nickel having anything to do with performing loan modification services, I am not personally at risk of foreclosure, I’m not an attorney, nor have I ever been in the mortgage, real estate, banking or related industries. I’m a writer that has to-date written roughly 400 in-depth articles on the political, economic, social and legal aspects of the financial and foreclosure crises and loan modifications.
Over the last 2+ years, I’ve interviewed thousands of homeowners and hundreds of attorneys, along with numerous mortgage experts, real estate licensees, bankers and mortgage servicers. I’ve been a speaker on the foreclosure crisis at professional conferences held by the American Bar Association, Committee on Consumer Financial Services, and a judicial conference for 9th Circuit judges. I am an outspoken advocate for homeowners. For a more extensive bio covering my professional career, click here.
Now, as to your question: Do you need a lawyer to get your mortgage modified? No, there’s certainly no requirement that you be represented by an attorney to get a mortgage modified. But, what you’re really asking is: Should you have an attorney represent you when trying to get a loan modified, right?
The answer is… it depends on you, but quite possibly… yes.
First, understand that there are only three kinds of mortgage servicers: 1. Unbelievably Annoying. 2. Unbearably Frustrating. 3. Infuriating to the point that you daydream about setting your own home on fire before letting them have it. (And I’m not recommending that, it’s a joke, okay?)
Servicers make more money foreclosing than they do modifying loans, so that’s what they’re likely to try to do if they can, but not only that… before they try to foreclose, they’ll make you wait on hold forever, lose your paperwork three or four times, send you the rudest letters ever written, call you at 8 AM to ask why you haven’t made your payment… whatever obnoxious things they can do, they will do… count on it.
The mortgage servicers in this country don’t follow HAMP rules often, they lie often, they are wrong in what they tell homeowners often… AND I DO MEAN ALL OF THEM… Chase, BofA, Wells… yes I mean you guys specifically… and should any of the servicers want to sue me for saying that… you know, defamation or whatever… please file your damn suit TODAY! I’m easy to serve… Just remember, I’m not folding, settling or anything remotely close… file it and let’s see if we can get an expedited trial date… because we’re definitely going all the way to trial and I’m certainly ready to proceed… just say when.
But, you might want to read this before you file… Chief Judge Gonzalez calls WaMu’s Conduct “Immoral, Unethical, Oppressive, Unscrupulous or Substantially Injurious to Consumers” (You go, Your Honor.)
Or who could ever forget this… INSIDE CHASE and the Perfect Foreclosure
I can go on like this forever, by the way… I’m not proud… or tired.
People stress out terribly during the modification process, they can’t sleep… they’re emotional, unknowledgeable, afraid and ashamed… not exactly the best position to be in when negotiating with a bank the size of Australia and Canada combined. And, Bank of America, JPMorgan Chase and the rest don’t care about you threatening to sue them… besides you’re talking to a minimum wage person whose last job was asking people if they wanted fries with that… or darn close.
All of that being said… people do get their loans modified on their own, although many times they end up with terrible terms because by the time their bank offers them anything they’re so grateful they say yes to whatever is offered. Running a REST Report and submitting it to your servicer, assuming it shows that you do in fact qualify, helps a lot… but it’s not a substitute for a good lawyer.
Qualified (and of course ethical) lawyers are infinitely better than the vast majority of homeowners for the same reason that I’m afraid of my wife, but I’m not afraid of yours… do you know what I mean by that? Lawyers aren’t emotional, afraid, unknowledgeable or ashamed, and they deal with the banks every day on modifications, so they know who to call and what to say. Nine times out of ten… they get much better results than any homeowner does flying solo.
By the way… I recently wrote an article on how to tell a good loan modification law firm from a scam, and you can find it online by searching: How to Tell Legitimate Loan Modification Firm from an Illegal Operation or Scam… The FTC’s New Bright Line MARS Rule. You also might want to read: Mandelman’s Uncommon Advice for Getting Through the Loan Modification Process Without Losing It. And you also might check out: How Banks View Loan Modifications, which I wrote about a year ago.
And for sure, all homeowners should read this… Reporting on Ongoing Outcomes Using the REST Report.
Now let me address what Joe Duffin of Blue Roof Realty said in his answer to your question. With all due respect to Mr. Duffin, it’s not so much that he’s wrong in what he’s said, it’s more that his advice is nothing more than the same generic stuff you’ll get on thousands of Websites written by people with very little real life experience with loan modifications. I’m sure he’s a good guy who is trying to help, and for that I applaud him.
- Shop around? NO! Don’t “shop around.” Every company you call will have great sounding sales people and that’s not how you want to make a decision.
- If you don’t know any local lawyers you can ask for a referral, call Legal Aid in your hometown. They probably won’t be able to represent you… you have to be very low income to get free legal help, but the lawyers that work there know who the good private practice attorneys are that are representing homeowners and helping with loan modifications.
- Negotiate? NO! Okay, let’s face facts here… you don’t mind paying the fee, you just don’t want to get taken advantage of by some scammer, right? So, concentrate on finding someone you’re sure of and stop trying to save $500.
- Forget about the whole “performance based” idea. There’s no legitimate attorney anywhere that wants to work on your loan modification for months in the hopes of earning a $500 bonus, and besides it’s like a hospital bill… no one thinks you’ll pay it anyway. You only hire a lawyer when the outcome is uncertain and you pay them for their time, knowledge, experience and effort… and they hate losing someone’s home. How would you feel if you lost someone’s home? Well, them too.
- Clarify define results? Assuming you qualify for HAMP, your lawyer or servicer will pretty much tell you what your modified payment will be, there’s a formula.
- Mr. Duffin’s quite right when he says to be “patient and positive” when calling the firm for updates, but even better… ask them how often they update, and whether they’d prefer to be contacted through email or phone of you have a question. Just know this… they on your side.
- Mr. Duffin’s also right when he says there are alternatives, and because he’s a Realtor, he mentions a “short sale,” but that’s not really an alternative because that means you don’t keep your house. Short sales are the same uber-headache as loan modifications and you can end up losing the home to foreclosure anyway. You want your home? Then fight for it and don’t stop.
One more thing…
The FTC’s new MARS rule essentially makes it impossible for anyone but lawyers to handle loan modifications… any other kind of company is not allowed to charge you a dime until you approve a written offer from your servicer… and no one could operate a business like that. So… it’s a lawyer you’re looking for… not a company that plays one on TV.
In closing I just want to say take your time and read up on everything to do with loan modifications. You can email me at mandelman@mac.com. I see homeowners get permanent loan modifications every single day… HAMP has only modified a little under 500,000 loans according to Treasury, but in-house modifications are in the 3+ million range.
It’s not easy, but it’s not Mt. Everest either… and start saving money everyday… see how much you can possibly save… get a big jar and save your change… you may need it to save your home… pay off credit cards, or whatever. And if you don’t end up needing the money you’ve saved, you can use it to go on vacation after your loan gets modified… you’ll need a vacation by then for sure.
Heck, just having to write all that once again tired me out…
Mandelman out.