Loan Modification Law
Loan Modification Attorneys in Pembroke Pines, FL
There was a time only a few years ago when I was one of the few lawyers that actually knew about such terms as “loan modifications,” “loan workouts,” “short sales,” “deed-in-lieu” and many others. Now, as a result of our national economic recession and the housing crisis, these terms have become very common for many lawyers and the public in general. However, I have noticed that some people still don’t fully understand the available foreclosure avoidance options, any one of which may be powerful solutions to mortgage debt problems.
As you consider or pursue these options, extreme caution should be used if the bank has already filed a foreclosure action. As rational human beings, many people believe that, if the homeowner is diligently pursuing one of these foreclosure avoidance options (such as a loan modification or short sale, for example), the bank’s attorneys will stop a foreclosure sale. It is very logical to assume that if you are working with the bank to settle your case, the bank should not pursue a foreclosure. THIS IS NOT ALWAYS TRUE. Many banks legally can (and often do) proceed with a foreclosure despite the homeowner’s actively pursuing other alternatives.
It is absolutely important that the homeowner seek proper legal counsel where a foreclosure is likely to happen so that efforts can be made to avoid it, especially in cases where the homeowner is actively resolving the foreclosure. (See our tab relating to “Foreclosure Defense”)
While there are many programs and options available to the homeowner, I am providing a summary of some of the more common strategies. Any one of these strategies (or combination of these strategies) can successfully avoid a foreclosure, especially when used in conjunction with foreclosure defense and/or bankruptcy.
(also known as “Mortgage Modification” or “Loan Mod”)
A Loan Modification is basically the process where a borrower, who is experiencing a financial hardship (such as a reduction in family income or increase in mortgage payments), requests a lender to reduce mortgage payments to affordable levels. This usually involves the reduction of either the interest rate on the loan, the principal balance of the loan, the term of the loan, or any combination of these. These efforts usually result in a lower mortgage payment to the homeowner, thereby allowing the borrower to afford to retain the home.
Our experienced staff has successfully obtained thousands of loan modifications for homeowners nationwide. Most people know that South Florida was one of the areas of the county that was hit the hardest by the housing crisis. As a result, our law firm gained unique and vast experience with most lenders throughout the nation.
You can also access these valuable skills for your advantage. Through our affiliate law firms throughout our national network, we can offer these legal services in the following states:
- - Alabama
- - Alaska
- - Arizona
- - Colorado
- - Connecticut
- - Delaware
- - Florida
- - Georgia
- - Idaho
- - Illinois
- - Iowa
- - Kentucky
- - Kansas
- - Louisiana
- - Maine
- - Maryland
- - Massachusetts
- - Michigan
- - Minnesota
- - Mississippi
- - Missouri
- - Nebraska
- - New Hampshire
- - New Jersey
- - New York
- - North Carolina
- - North Dakota
- - Ohio
- - Oklahoma
- - Pennsylvania
- - Rhode Island
- - South Carolina
- - South Dakota
- - Tennessee
- - Texas
- - Utah
- - Vermont
- - Washington
- - Washington D.C.
- - Wisconsin
Reinstatement of the Loan
By “reinstating the loan,” the homeowner simply pays the amount of the payments that are owed to the bank (arrearages) in a lump-sum payment, and thereafter continues with their regular mortgage payments. Of course, this option sounds very simple in theory, but is often unattainable in most cases, especially when the bank adds other fees and costs to the amounts owed. However, banks often consider waiving certain fees and costs to hold a struggling homeowner, especially where the client experiences a hardship that prevents them from paying the mortgage temporarily, but later comes across a substantial amount of money (such as a new job, legal settlement, or inheritance).
A repayment plan is similar to the “reinstatement of the loan” (see above), whereby a homeowner negotiates with the lender to reach an agreement to pay “missed payments” (i.e., arrearages) through a payment plan. The homeowner typically makes their current mortgage payment in addition to a scheduled payment that helps the homeowner “catch up” on their missed payments. As with “reinstating loans” (see above), we assist the homeowner by negotiating with the lender a new repayment plan at a reduced monthly amount.
A forbearance plan is an agreement that allows a borrower to either suspend making monthly payments or make less than the scheduled monthly payments for a specified period of time. If agreed to by all parties, the lender may agree to delay foreclosure or other legal action in return for the borrower’s promise to pay the arrearage or full unpaid principal balance by a specific date. Typically, special forbearance’s are for a term not longer than three months. Forbearance’s longer than three months are determined on a case-by-case basis.
Deed-in-Lieu of Foreclosure
This simply means that the homeowner “gives” their property to the bank, instead of going through the foreclosure process wherein the bank files a court action that results in a judgment and judicial sale of the home. The Lender’s approval is required for this option. Banks usually require that the homeowner first make reasonable efforts to sell the property and that there not be any other issues relating to the legal title of the property (such as other liens or other encumbrances). It is highly recommended that the homeowner seek experienced counsel who can negotiate for the bank to waive the bank’s right to later sue the homeowner for any deficiency. In other words, the homeowner should make sure that the bank promises not to sue the homeowner for the difference between the amount owed and the value of the home at the time of executing the deed-in-lieu. (For example, if the homeowner owed a total debt of $150,000, but the home was worth only $50,000, the lender may still sue the homeowner for $100,000, unless this right is waived by the bank.) This is one of many reasons you should have an attorney assist you through this process.
(Selling when the mortgage debt is MORE than the value of the property)
In today’s economy, many homeowners are finding that they owe more than the house is worth. This situation is commonly referred to as “being underwater.” In this scenario, the homeowner is obviously not able sell the property for a price that would be sufficient to pay off the existing mortgage, but needs to move or can no longer afford the mortgage payments. We help the homeowner request that the Lender allow the homeowner to sell the property, by accepting less than the amount owed. The bank requires an extensive application that is similar to an application for a loan modification, which is often a tedious, complicated and bureaucratic process where one mistake can cause the rejection of the entire application. The homeowner should seriously consider retaining a knowledgeable Attorney before pursuing this option.
Selling the Property
(Selling when the mortgage debt is LESS than the value of the property)
Of course, in cases where the homeowner owes less than the current fair market value of the property (i.e., the homeowner has equity), but mortgage payments have become unaffordable, the homeowner can consider simply selling the property. However, if the bank is already foreclosing on the property, the homeowner should consult an Attorney who can make sure you are allowed sufficient time to complete the sale of the home before the foreclosure process is completed, since the lenders for the buyers are often slow to approve a loan to the new buyers. (See our “Foreclosure Defense” page)
As stated above, these options are presented in a simplified format in order to let you know you do have options in avoiding foreclosure, but they are not simple to achieve. An application for a loan modification, for example, is a tedious and complicated process that requires the homeowner to provide a lot of their personal financial data, often several times. Then it requires aggressive, repeated contacts with the Lender to ensure the application is being evaluated properly. One small mistake can doom the entire application, and the home could be lost, in addition to facing a judgment for deficiency and paying taxes on the deficiency.
These options are often implemented in conjunction with other sophisticated strategies, such as with foreclosure defense litigation or in bankruptcy court — all designed to achieve the best outcome possible, so you can get back to what’s important to you.
My staff and I have extensive experience with assisting homeowners like you in pursuing these (and other) alternatives. We help you to PROPERLY complete the application, we assist the banks with processing the applications, and we help you negotiate and achieve the best outcome possible. That’s why it’s very important to find a knowledgeable Attorney who can: (1) analyze your situation; (2) understand your objectives; (3) develop the best strategy to achieve your goals; and finally, (4) carry out your plan in an effective and successful manner.
As I’ve stated elsewhere on this website, the fact that you’re reviewing this material shows that you’re already taking steps to overcome your financial obstacles. Our best clients are people like you, and it would be my honor if you would consider me as your Attorney. Please call us as soon as you can. I look forward to meeting you.
Sergio Cabanas, Attorney-at-Law