Mortgage Loan Modification Services
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Considerations In Seeking Mortgage Assistance
President Obama has announced a plan to assist many home owners in lowering their mortgage payments. While this will encourage many home owners to seek changes in their mortgages, it should be noted 1) that the President's plan does not cover all home owners and 2) the plan sets only minimum changes for lenders to participate in the plan. Even those covered by the President's plan would be wise to have professional assistance in dealing with their lenders.
Loan Modification
The current buzz phrase for assisting home owners with these problems is loan modification. In simple terms, a loan modification changes an existing mortgage in a way to make it more affordable to the home owner and keep a home from going into foreclosure. Loan modifications are actually complex changes to complex legal documents.
Beware of Lenders Offering Loan Modifications
Many lenders are offering unsolicited loan modifications to their current customers. The lenders have several incentives to do this. The foreclosure process for lenders is expensive and time consuming. Lenders need to pay attorneys for foreclosure work along with court courts and service fees. During the foreclosure process the lender is receiving no income and spending money on a process that may take a year or more.
Ultimately a foreclosed house is sold at an auction and in current market conditions likely to bring in less money from the sale than the value of the loan. With those considerations, modifying a loan so that the current home owner can afford it provides the lender with immediate current income and the long term prospect of realizing the mortgage’s full value eventually.
The lender thus has incentives to make offers to parties with troubled loans rather than foreclose. Since the lender is making the offer, the offer will be on terms that are in the best interest of the lender, with the terms drawn up by attorneys working for the lender. While the home owner may realize some relief, it is unlikely the relief will ultimately be in the home owner’s best interest.
Research Carefully Loan Modification Service Providers
Since lenders have professional legal staff working on modifications, it is in the home owner’s best interest to have his own professional representation. There are many providers offering such services on the internet and through other advertising media. Before a consumer gives such a firm confidential information thorough research should be done.
Consumers should be wary of those firms that say they will give your information to their attorneys for review. Loan modification companies that are not law firms are not bound by the same attorney-client secrecy rules as actual lawyers. Consumers should ask who the lawyers are and be able to directly contact the lawyers and law firm personnel, not work through another party.
Regulation of Loan Modification Service Providers
As loan modification activity has grown, many non-lawyers are trying to do this work. In response states are looking closely at individuals involved in this work, and many states have placed restrictions on who may engage in representing consumers in loan modification negotiations. A consumer should be certain that his choice of representation can legally operate in the consumer’s state.
Non-lawyers actively involved in representing a home owner in contractual negotiations risk being involved in the unauthorized practice of law. Such activity is prohibited in all states and a felony with significant prison terms in many. The non-attorney is not in a position to call to the attention of the lender faulty documentation or violations of the Truth In Lending Act (TILA) or the Home Owners Equity Protection Act (HOEPA). There were many so called “no doc” loans issued during the aggressive lending period of history and many of those are contrary to Illinois law.
Mortgages are complex legal contracts, requiring legal training to effectively modify. At Shestokas & Raines, we will provide you with a free initial consultation to determine if loan modification is right for you.
Elements of a Loan Modification
The following are examples of terms that can be altered in a loan modification and should be part of any modification negotiation:
- Principal Reduction
- Interest Rate Reduction
- Additional Years to Repay Loan
- Forgiveness of Missed Payments
- Forgiveness of Late Charges
- Low Fixed Payments
- Permanent Terms for the Life of the Loan
After the initial Consultation, and the client is identified as a good candidate for a loan modification the process proceeds as follows:
- Shestokas & Raines is retained by client
- Loan Documentation Collected
- Attorney Review of Documentation
- Letter of Authorization from client to lender provided to Shestokas & Raines
- Authorization Letter Sent to Lender
- Lender Acknowledgement of Representation
- Attorney Demand Letter of Modification Sent to Lender
- Negotiation
- Agreed Solution with Client Approval
- Modified Loan Documents Executed
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