California Loan Modification

What to Expect from a California Loan Modification Attorney

What to Expect from A California Loan Modification Attorney

With all the misinformation floating around out there, many people are uncertain what to expect from a loan modification attorney. While it is possible to conduct a successful loan modification by yourself with your lender, many people find the delays, poor communication and lack of information frustrating and overwhelming. This article is aimed at giving others a basic outline of what a loan modification attorney can and cannot do for you.

To start with, the Attorney will schedule a time with the client for an interview. During the interview the Attorney gets to know the client and their situation. This helps the Attorney get a sense of where the client is personally and financially, allowing them to begin forming a Letter of Hardship which will be used by the Lender later on in the process.

After this preliminary interview, the Attorney will request information from the client. This information includes the principle balance of the loan, interest rate, monthly payment amounts, and the equity of the property, to name a few items. Mortgage documentation like the loan application, Good Faith Estimate and Final Closing Statement will also be requested by the Attorney in an effort to fully understand the terms and status of the client’s loan. The client is also expected to submit to the Attorney past paystubs, W2’s, pension payments and other documentation that supports the client’s income and current financial situation. All of this information is gathered and processed by the Attorney’s office so that they will be able to accurately represent the client’s situation to the Lender through a Letter of Hardship.

After assessing the client’s case, the Attorney will prepare a Qualified Written Request to the Lender and then submit a loan modification request with a complete package of supporting documents prepared from the information gathered from the client. During this time the Attorney will usually be in constant contact with the bank in an attempt to do several things. First of all, if the client is in danger of foreclosure, they will take steps to stop or postpone the foreclosure while the bank reviews the loan modification request. They may also try to postpone an acceleration clause in the mortgage. All of this will take place as the Attorney attempts to renegotiate the original mortgage. If that is not possible, they may work with the bank to arrange a short sale or deed in lieu of foreclosure. In negotiating a loan modification, the Attorney may try to change the loan from an adjustable interest rate to a fixed rate, lower the interest rate, change from interest only to fully amortized or have the principle on the mortgage lowered.

Before being approved for a permanent loan modification, many borrowers may be placed in what is known as a trial loan modification. This is a preapproval of the borrower’s loan modification request and an attempt by the Lender to see if the borrower will be able to make their new payments should a permanent loan modification be approved. Failing to make a trial payment will usually disqualify the borrower from a loan modification. It is important to note that the loan modification process can take anywhere from 60-90 days, which may discourage some borrowers. However, an Attorney will try to halt the foreclosure proceedings while the loan modification process is underway.

Since the introduction of the federal programs Making Homes Affordable (MHA) and Home Affordable Modification Program (HAMP), Lenders have been switching many clients over to these programs since the banks receive government subsidies for processing borrowers through these programs. This has resulted in delays from both Attorneys and the Lenders since they are forced to refile documentation for the new programs and start the process over again. These programs are beneficial for the borrower however since these programs generally result in lower payments and interest rates on a permanent loan modification.

It is important for the client to remember that both Attorneys and Lenders are extremely busy with the large volume of loan modifications being processed at this time, so communication times may not always be ideal. Generally the Attorney will contact the borrower ever week or so to give the client an update on the process, but sometimes the update may be no more than ‘the file is still being reviewed by the Lender’. However, the Attorney is usually in constant contact with the bank ensuring that they are responding to the Attorney’s requests in a timely fashion. During the negotiation process the Attorney may require additional information from the client, and it is important to get that information to the Attorney as soon as possible. Additionally, Attorneys to not usually include any litigation that should arise during the negotiations as part of their loan modification fees, and clients should expect additional fees should they decide to use the Attorney for litigation.

As of October 11, 2009, Attorneys in California are not allowed to collect advanced payments for their services. This includes retainers and monies placed in trusts to be dispersed to the Attorney at a later date. Attorneys may only collect payment for services as they are performed, so the client will be notified what has been done and how much it cost from the Attorney every step of the way. Be wary if a loan modification Attorney asks you for upfront payment, as it is a sign the Attorney is engaging in unethical practices.