Phoenix Arizona Real Estate Attorney

Millions of homeowners have fallen victim to uncontrollable economic issues such as the implosion of the housing market and record consumer debt. Individuals who once had great credit now find themselves in difficult financial situations, with adjusting interest rates and the inability to pay their mortgage. Compounding these problems are “predatory loans” - loans which were issued to consumers with terms many couldn’t understand. Adding insult to injury, Option ARM resets this year will exceed many homeowners’ expectations, as sharp increases are expected to occur in the indexes tied to adjustable-rate loans.

Obtaining what is called a “loan modification” is one of the better-suited options for many individuals. Homeowners who have fallen into some semblance of hardship but are still able to maintain a reduced mortgage payment could retain an attorney and potentially qualify for a loan modification. It is recommended that an individual consult a real estate law firm that can work directly with your lender to help obtain a loan modification.

It should be noted that loan modifications can be difficult to achieve for homeowners whom have experienced permanent job loss, or have experienced long-term income issues. In the end, the ability to still make reduced payments is the key to a loan modification. Homeowners who have had their interest rates adjust, have had a job loss, an illness, divorce or other short-term hardship can be considered good candidates for a loan modification. Every lender has its own criteria regarding which borrowers qualify, and the criteria changes from time to time. Consequently, nobody can guaranty to obtain a reduced interest rate. However, the attorneys of Tahan Law Office put a great amount of effort into achieving the best loan modification terms possible.

A Loan Modification is an all-encompassing term used when a borrower changes the terms of an existing mortgage note with a lender. These terms can be changed in several ways; and sometimes in a combination. A modification will oftentimes result in the lowering of a borrower’s monthly mortgage payment, with the goal of keeping a homeowner out of foreclosure. Lenders will examine various aspects of the loan when conducting and approving a loan modification. The most common changes to a mortgage note are as follows:

Modification to the interest rate. Modification of a borrower's interest rate is a common occurrence in a loan modification. Within the past few years, many borrowers have secured “Interest Only” or “Adjustable Rate Mortgages” which increase substantially at some point in time - thus making the borrower's mortgage payment beyond the borrower's means. When the borrower’s attorney achieves an agreement for the bank to modify the interest rate, a borrower’s lawyer negotiates with the lender to lower the rate on a borrower’s loan for either a specified period of time, or even the duration of the loan.

Change made to the term of the loan.Another common modification to a pre-existing mortgage note is called a “loan term modification,” and can occasionally be called a “Forbearance Mortgage.” A loan term modification occurs when the lender lengthens the period of time a borrower has to pay for their loan. This type of modification is a very common occurrence, however is not always the most beneficial to a borrower. In extending the loan terms, many lenders will tack on any payments in arrears, while the interest is accruing on the outstanding balance.

Decrease the overall principle balance of the loan. On occasion, a reduction in the total principal balance of a loan can be obtained by the borrower’s attorney. This is generally the most beneficial for a borrower, as it can have an immediate and profound effect on the monthly mortgage payments. Only through careful research and negotiation with your lender is it possible to determine if this option will be effective for your situation. When issues of predatory lending arise, a principal balance reduction and interest rate reduction can be effectively used to position the homeowner in a situation that is mutually beneficial to the lender and the homeowner while keeping the homeowner in their home. However, lenders very rarely agree to reduce the amount of principal owed.

Temporary short-term interest-only payment. Due to the current state of the real estate industry, Lenders have begun giving borrowers a short term interest-only payment, which will oftentimes give them an opportunity to catch up on their payments and get current. However, the borrower’s lawyer should explain that the principal will eventually become due and will become part of the payment obligation.

Why do banks agree to reduce the interest rate? In the many scenarios, it is more beneficial from a financial standpoint for a lender to modify a loan in one of the aforementioned manners than it is to proceed with foreclosing on the home.

Fannie Mae, Freddie Mac, Hope and the Federal Housing Finance Agency recently announced the new Streamline Modification Program (SMP). This program was created in an attempt to help homeowners stop foreclosure.

To qualify for this particular federal program through the U.S. government, the homeowner must meet certain criteria to be eligible for this loan modification program.

The loan must have been made prior to January 1, 2008;
The principal must be equal to – or greater than – 90% of the home’s market value;
The home must be a single-family residence (or condominium) and the homeowner’s primary residence.
The borrower must be three months (or more) late on the mortgage payments;
The payments must be greater than 38% of the gross monthly verifiable income;
The homeowner must be able to show financial hardship.

Adjustable Rate Mortgage Reset or an Option Arm Loan
Illness/ Medical Bills
Unemployment
Reduced Income
Job Relocation
Death of a Spouse or Co-Borrower
Incarceration
Divorce/Marital Separation
Military Duty
Damage to Property (natural disaster or unnatural)

What if a homeowner does not meet the aforementioned loan modification requirements in the federal government program?

If a borrower does not qualify nor meet the loan modification requirements, a “forensic loan audit” should be considered. A forensic loan audit is conducted by a law firm, and is a review of an individual’s loan documentation to determine whether they were placed in the right loan for their needs, and helps identify potential infractions and violations committed by your lender and/or broker when your original loan was funded. In the past, individuals were taken advantage of by predatory lenders, and on occasion, loans weren’t a fair match for a particular homeowner.

The primary underlying purpose of an audit is to determine if there are any predatory lending violations performed by your lender. Statistics show that a high percentage of loans granted over the last five years have some semblance of violation of serious real estate laws – some of which include violations of the Federal Government’s strict lending laws, non-compliance with the Truth in Lending Act and Real Estate and Settlement Procedures Act, as well as Local, State and Federal Regulatory Lending Guidelines.

Violations by a lender or agent can work as leverage or your lawyer to argue your case against a lender. Generally, the more violations and the higher their severity, the better chance you have of obtaining a loan modification with long term positive results. Loans with illegal terms or conditions are not enforceable, and nor are the foreclosures resulting from these loans. The foreclosure process ceases when litigation on a questionable loan begins.

FICO scores were not properly disclosed;
Broker disclosures not made;
Risk factors for credit undisclosed;
RESPA booklet was not received on time, if at all;
There is no ARM disclosure or the ARM disclosure is inaccurate;
There is no Final Hud-1 in the file or the Final Hud is inaccurate;
Some documents were not signed or notarized properly;
Notice of Right to Cancel (two copies) were not given to each borrower;
Truth in Lending Notice of Right to Cancel is not filled out properly by the lender;
A good faith estimate was not provided within three days of taking the application;
No payment schedule is included in the loan documents, or the payment schedule is inaccurate;
Truth in Lending info was not received (or mailed) within three days of taking the loan application;
There is no copy of the promissory note;
The three-day rescission period was not provided for clients who sign and loan funds on same day (non-purchase money loans);
Truth in Lending Statement does not accurately disclose the finance charges, APR, amount financed, or total of payments.

Because it is far more expensive for any lender to engage in litigation than modify a loan, when violations in the lending terms or process are found, the negotiation process for a loan modification with the lender is much quicker and the borrowers position is much more powerful. Lenders will choose the most fiscally sensible response when presented with legal facts: loan modification.

FREQUENTLY ASKED QUESTIONS:

How long does the loan modification process take?
As you can imagine, lenders are currently inundated with work. A loan modification process can take anywhere from 30-120 days. Keep in mind that while lenders are well equipped to lend and service your loan, they are not typically well-staffed to perform modifications. In most cases, even if your lender wanted to enter into a loan modification with you, they couldn’t…as they no longer own the mortgage or are able to make decisions concerning your loan. Rather, they have to present their case to the entity that currently owns your loan: Wall Street investors.

Are there any guarantees the lenders will offer a loan modification?
Unfortunately, no. There is no statutory or constitutional right to a loan modification, which is why a mortgage loan audit can, at times, be integral. The lender is not required to give you a loan modification as long as they have the legal ability to enforce the contract.

You can put your house up for sale
You can pursue a short-sale with the banks
You can hand over your deed (called deed in lieu of foreclosure)
You can pursue a chapter 7 or chapter 13 bankruptcy (if you qualify)
You can quickly find some tenants to help you pay the mortgage
You can see if you are eligible to refinance
There may be other government programs available which you can explore

I am current on my mortgage. Can I still qualify?
Yes; not all banks require you to be behind in your payments. Due to extenuating factors affecting you financially, you may be qualified. Depending on circumstances, a forensic audit could also assist in providing the leverage needed to obtain a modification.

What exactly is “Predatory Lending?”
Predatory lending refers to various illegal and immoral activities many lenders have engaged over the past several years. These practices have led to wave of foreclosures and poor credit now burdening the United States. Predatory lending is not a simple case for attorney to prove, and few borrowers fall into this category.

Why should I use a real estate law firm for my modification?
There are loan modification companies (also known as “loss mitigation companies”) who prey on homeowners and advertise high success rates, money back guarantees, client testimonials, or promise large principal reductions. We believe it is in a homeowner’s best interests to work with a professional real estate law firm with an upstanding reputation. Loan modification is an emerging practice area within the world of real estate contracts, which has yet to have tight, controlled regulations imposed upon it. Real estate attorneys and paralegals have years of experience working with mortgage documents such as deeds of trust and promissory notes. Rather than offering "attorney backed" or "attorney assisted" modification services, Tahan Law Office allows the borrower to be represented by an experienced real estate lawyer, rather than going through a loss-mitigation service.

Many lenders are more willing to assist a homeowner with loan modification if that borrower has legal representation. Why is this? Because of the following:

1. They realize your needs. A real estate law firm often knows the most effective manner in which to speak to banks. When a loan modification application is presented, the firm is essentially “armed” with all the documents and knowledge of laws governing financial institutions, and can provide them along with the application of effective negotiation techniques to obtain the best result possible.

2. They can the best Loan Modification Settlements. Some lenders tend to take borrowers more seriously when they hire an attorney to be by their side. It shows the borrower has serious intentions. Because a law firm can use legal information as leverage, law firms may get better offers than one can usually get on your own.

3. A law firm has established relationships. A good loan modification law firm establishes contacts with major lenders, which assists them in securing the most attractive modifications.
The loan modification process can be complicated and time consuming, but with a capable loan modification law firm, you can be assured you will obtain the most successful outcome for your situation.

In this market, a lender’s goal is to keep financial losses to a bare minimum. This is often best accomplished for the lender by keeping a borrower in the home, with payments coming in - even if reduced – which is usually better than foreclosure, wherein lenders can take a great loss. Thus, the goals of our clients often meet those of the lenders.