LISTEN closely! According to the National Consumer Law Center, mortgage servicers have found that is actually much cheaper and more profitable to foreclose on your property rather than offer you a loan modification. The reason is that servicers in charge of modifying distressed loans are separate from the lenders (in case you didn’t know that) and in most cases, they are more interested in pursuing their own financial interest, not the lender’s best interest. In other words, the mortgage servicers really don’t care what happens to the loan in the end. They only care about how much they can gain financially for themselves.
A loan modification, apparently, costs the servicer more upfront money in fixed overhead costs and out of pocket expenses. On the other hand, the servicer can make a bigger profit in foreclosure by way of servicing and foreclosure fees. Thus, they have more financial incentives to pursue a foreclosure instead of doing a loan modification or even a short sale.
Of course, this is no surprise. No wonder these servicers drag their feet when it comes to processing loan modifications. If you’ve been getting the run-around on your attempted loan modification and you have no idea why they’ve made the process so difficult, now you know why. It’s all about money and greed.
What about the Obama loan modification plan? From what I’ve seen over the last few months, there has been some difficulty in implementing this program and homeowners are complaining that the process is taking way too long. In the meantime, a lot of banks are not willing to postpone foreclosure so most people are simply hoping that they will get an approval before losing their home in a trustee sale. In other words, just take a deep breath and cross your fingers while you wait for an answer.
Recently, the Obama administration announced that it will start cracking down on mortgage companies that are not doing enough to help borrowers. They identified the 71 companies who agreed to take part in the government’s 75 billion effort to stem the foreclosure crisis. Apparently, mortgage servicers have also been finding it difficult to get borrowers to complete needed documentation for the administration’s loan modification program. At this time, it is estimated that approximately 60% of the 375,000 borrowers who qualify for the government’s loan modification program have either submitted incomplete or no documentation at all. As of early September, only about 1,700 borrowers had finished all paperwork and received approval. At least 30% of borrowers who have submitted completed applications are still waiting for a decision.
I always tell people that it is probably not a great idea to put all your eggs in one basket. What would you do if you find out after long months of waiting that your proposed loan modification is not approved? Do you have an alternative plan to keep your home? Would you even keep your home unless the loan is modified? What are your legal or tax liabilities, if any, if your house ends up in foreclosure? These are important questions to ask NOW, not later, so you can do some advanced planning. See a competent and knowledgeable attorney who may be able to provide you some guidance.
If you need help, we would like to help you understand your options. Call Toll-Free 1-866-477-7772 to schedule a free office consultation. We have offices in Glendale, Cerritos and West Covina.
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None of the information herein is intended to give legal advice for any specific situation. Atty. Ray Bulaon has successfully helped over 4,000 clients in getting out of debt. For a free attorney evaluation of your situation, please call Ray Bulaon Law Offices at TOLL FREE 1-866-477-7772.
( Published December 9, 2009 in Asian Journal Los Angeles p. B2 )
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