Why banks do not want to modify loans

Question: What is the reason why it is hard to deal with the banks when requesting a loan modification?
Answer: The main reason why it is hard to deal with the banks when requesting loan modification is that they will lose money in modifying loans. Although the government is sharing with the banks in the losses incurred in loan modification by about 50%, the banks share of the cost is the other half. Unless the bank is convinced that the borrower’s only option is to have the property foreclosed, they will not modify the loan.
Question: Are banks required to reduce the loan principal to current market value?
Answer: No. Banks are not required by the Making Home Affordable Program of the government to reduce the loan principal to current market value of the property. Some banks reduce the principal loan by 20% when the property value has gone down significantly. Other banks do not reduce loan principal at all. The banks believe that property values will recover within 5 years. The Making Home Affordable Program is aimed at reducing the interest rate and the monthly payments so that the borrowers can save their home. Question: Some television and print advertisement showed sample reduction of principal to current market value. Is this true?Answer: The best way to verify this is to ask the author of the television or print advertisement a proof of the claimed reduction. If that is not supported by evidence then you may file a complaint to the
Attorney General of California who handles all loan modification scams. In my practice I have reduced loan principal by 20% but again this is not an automatic reduction for everybody. The bank consider factors such as location of the property, how significant has the property declined in value, length of residence of the owner in the property and other factors that the borrower has that will convince the bank to lower the loan principal. Question: Are the sample loan modification advertisements in the mail accurate?
Answer: No. Many of the sample loan modification advertisements in the mail are not supported by evidence or proof. You need to verify the proof of the sample loan modification and ask them if you can really get those terms. You need to put those terms in your contract and ask for refund policy if these are not achieved. Be careful when the company is located out of your area of residence or you have difficulty in communicating with their office staff and attorney. The Attorney General issued warnings on loan modification scams.
Question: May a borrower request loan modification while in foreclosure?

Answer: Yes. Aforeclosure process starts when you received a Notice of Default (NOD) registered with the county recorder’s office. It ends when the property is sold in a public auction at a Trustee Sale. Upon receipt of the NOD you should immediately contact an attorney to do a loan modification. It is important to do this immediately because the Loss Mitigation Department of the bank is very busy and it will take sometime before they finally look at your case. In the NOD you are given 90 days to come up with the payment for all missed payments. If you cannot come up with the payments within 90 days, the lender will send you a Notice of Trustee Sale and will publish the property for sale at a public auction within the succeeding 20 days. After the 20 days of publication and no loan modification is agreed upon, the property will be sold to the highest bidder in a public auction.

Note: This is not a legal advice. You need to talk to an attorney about your specific case. Our office offer FREEinitial consultation on Loan Modification only.

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Crispin Caday Lozano is an active member of the State Bar of California and he specializes in immigration law. His offices are located at 17057 Bellflower Blvd. Suite 205, Bellflower, CA 90706 and 1290 B Street, Suite 205, Hayward, California 94541 and at 777 N. First St., Suite 333, San Jose, CA 95112. You can contact him at telephone (562) 461-1355 and (510) 538-7188.

( www.asianjournal.com )

( Published on September 3, 2009 in Asian Journal Northern California p. B2 )

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