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Doing a loan modification is a
relatively simple process, one that a person can do on his own
without the need of professional assistance.
Senate
Bill 94 was enacted into law in October 2009. That bill amended and
added a number of statutes, to include California Civil Code §§2946
and 2947. Those sections forbid demanding the payment of any kind of
upfront fee by any “loan modification professionals” to engage in or
handle a loan modification on your behalf. These sections
effectively shut down the various loan modification people, many of
whom were nothing more than ripoff artists, the same folks who roped
people into bad loans prior to 2008. The “forensic loan auditors,”
however, are still on the prowl offering worthless and illegal loan
evaluations for $700 and up.
A loan modification is
not for everyone and anyone. It is intended for those persons who
can pay a reasonable monthly mortgage, but who also need a reduction
in the monthly mortgage amount due to a loss in income or inability
to pay the current amount. It is not so much intended to cure the
upside down (greater debt on the house than the value of the house)
value but rather to make the payments affordable, and the interest
rates lower. The banks are most willing to engage in loan
modifications on an individual’s home, not investment property.
The sooner you engage in
loan modification efforts, when you begin to experience financial
hardship, the better. You must document all contacts you have with
your lending institution or servicer. If you speak to a
representative over the telephone, you must keep a log of your
telephone contacts with the bank or servicer with a brief note as to
what was discussed. The general rule is that if it is not in
writing, it does not exist.
California Civil Code
§§2923.5 and 2923.6 require that the lending institutions engage in
loan modification discussions with you if you so desire. California
Civil Code §2923.5 requires that the bank or servicer assess your
financial condition and explore options with you to avoid
foreclosure of your home prior to recording a notice of default on
your property. California Civil Code §2923.6 precludes the bank from
going to foreclosure sale when the anticipated recovery under the
loan modification or workout plan exceeds the anticipated recovery
through foreclosure on a net present value basis (amount that the
house will bring at a foreclosure auction). These laws were enacted
as emergency legislation on July 8, 2008.
The first step in
pursuing a loan modification is to determine what you can really
afford as a monthly mortgage payment. You need to be realistic and
not say whatever you think the bank will want to hear. Realistic
means establishing how much you can really pay as a monthly mortgage
payment on one hand, but not looking for a Christmas present on the
other hand. Approach the loan modification process with integrity.
To assist you in formulating what you can objectively afford as a
monthly mortgage payment, the Spielbauer Law Office is offering the
following service, without charge. This service will be
provided only once per homeowner. If you will complete, truthfully,
the Financial
Statement and then
email it to the Office,
the Office will promptly return to you by email or fax an evaluation
of what you can realistically afford, and how your ability to pay
and otherwise qualify for a loan modification falls under the
requirements of California
law
and under HAMP. You can then submit this evaluation to your
financial institution, or its servicer, as a part of the loan
modification process.
Once you establish how
much you can realistically afford per month, gather together the
following documents. The bank will require some or all of them.
1.
Loan Modification Financial Statement (Application).
2. Paycheck stubs for the
last two months.
3.
Bank statements for the last two months.
4. Last two years tax returns (some institutions
want these, some do not).
5. Last two Years of W-2 Forms, 1099’s
if your receive commissions.
6. Hardship letter of no more than one page. In
the letter, set forth your economic hardship but bear in mind that
this letter is not a confessional and that you are dealing with a
business entity interested in finances, not a live human being.
7. Optional, the evaluation from the Spielbauer Law Office.
8. It is important to write your
loan number on each page of every document you send the Lender.
You should also number sequentially each page (i.e., bates number). Lenders receive
thousands of documents daily, and it is easy to lose documents when
they cannot be referenced to you as a borrower through the loan
number. Bates numbering will insure that the document package
can be restored if pages become separated.
Put these items aside,
in a safe place, where you will be able to retrieve them in the near
future. Your next step is to write a letter to your
institution advising it that you would like to engage in a loan
modification. The introductory letter should be brief and to the
point. This letter should be sent to the bank and to the servicer of
your loan. You can obtain the addresses from your billing
statements. If you are in foreclosure, you can obtain the addresses
from the Notice of Default as California Civil Code §2924c(b)(1)
requires that the Notice of Default contain the name, mailing
address, and telephone number of the beneficiary (the owner of your
loan). If MERS is listed as the beneficiary of the deed of trust,
you should send the introductory letter to MERS as well.
The
address for MERS (Mortgage Electronic Registration Systems) is:
MERS
1818 Library Street, Suite 300
Reston, VA 20190
In other words, you
should send your introductory letter to everyone that has their
fingerprints on your loan. That includes the beneficiary of the
note, the beneficiary of the deed of trust, the current servicer,
MERS, and the foreclosure trustee if you are currently in
foreclosure.
You can additionally obtain mailing
addresses by going to the California Secretary of State website and
obtaining the address for the entity’s agent for the service of
process. This is the best means to use if you are unsure as to the
mailing address of any particular business entity. All business
entities which do business in the State of California are required
to have an agent for the service of process registered with the
Secretary of State. I would recommend additionally sending the
letter to the entity’s agent for the service of process, even if you
send letters to the business' mailing address as reflected on
billing statements or other documents. As with flattery, there
is no such thing as excess in this regard.
Click here
to go to the Secretary of State website for this information.
You need to send the
introductory letter with proof of delivery. This will keep the
financial institutions from denying ever having received the loan
modification request (introductory letter). I recommend using the
United States Postal Service priority mail as you can track delivery
of the letter from the USPS.GOV web site. Each letter will cost you
about five dollars, something well worth the price. You should copy
the proof of delivery from the website as the information is deleted
after six months. I do not recommend certified mail or any mail that
requires a signature. While certified mail does establish proof of
delivery, the correspondence can be easily avoided if the recipient
refuses to sign for the letter.
After you send the
introductory letter with proof of delivery, I recommend that you
commence sending this same letter at least once a week for the next
three weeks by regular mail. This will help insure that the loan
modification request does not inadvertently fall through the cracks.
Be sure to record the sending of these follow up letters.
| What to Say in the
Introductory Letter |
Keep the letter simple
and to the point. Below is some suggested language. You can feel
free to copy and paste and modify as appropriate. Keep your
communications polite, but be persistent.
[Name of Recipient]
[Address of Recipient]
[City, State and Zip]
Re: [Property Address]
[Loan number]
[Name of current beneficiary of the loan]
[Account Identification Number]
[Trustee Sale Number if in foreclosure]
Dear [Recipient],
I am writing you this letter
to request that [Beneficiary/servicer] engage in a loan modification
with me for the above loan. Due to a downturn in my financial
situation, it is now difficult if not impossible for me to fulfill
the current monthly mortgage obligation as it currently exists.
Without a loan modification, I fear that foreclosure is inevitable.
I
am specifically writing to request that [Beneficiary/servicer]
assess my current financial condition and explore options with me to
avoid foreclosure.
I am also writing you to ask that you provide
to me a true, correct, and complete copy of the promissory note and
any other evidence of indebtedness, with any modifications or
endorsements thereto, as discussed in California Civil Code
§2943(b)(1).
Please provide to me a true, correct, and complete copy of the
deed of trust with any modifications and assignments thereto, as
discussed in California Civil Code §2943(b)(1).
Please also provide, pursuant to the Truth in Lending Act (15
U.S.C. §1641(f)(2)) the name, address and telephone number of the
secured obligation’s owner or master servicers.
You may contact me at [State your address].
Additionally, you may contact me by telephone at [telephone number].
Truly yours,
[Your
name]
The
responsible institutions will promptly respond to your letter and
send to you a loan modification package along with copies of the
requested documents. The package will contain instructions. You will
then need to retrieve the documents which you set aside, as
discussed above, and then complete the loan modification request,
returning it to the lender or servicer. Again, you should send your
completed loan modification request with proof of delivery.
Do not become frustrated or be tempted to give
up or assume that no one will help at the Bank or servicer if you do
not get an immediate response. They are working with thousands of
distressed borrowers. That said, also remember that your
persistence will be your salvation. The adage “the squeaky
wheel gets the grease” definitely applies here. Be polite, but also squeaky.
If the beneficiary/servicer
do not respond to your letters and a notice of default or trustee
sale is recorded on your property, you should contact the Spielbauer
Law Office for legal assistance.
You must remember that the
recording of a notice of default and particularly the notice of
trustee sale are legal documents which declare the bank’s intent to
seize your home at a foreclosure auction. Do not be misled by the
bank’s sweet words, or comments to the effect that the Notice of
Default and particularly the Notice of Trustee Sale are merely
formalities. One nation does not issue a Declaration of War against
another nation as simply a mere formality, without an intent to
actually go to war. The Notice of Trustee
Sale as it pertains to your home carries the same kind of
significance. California Civil Code §1550
It is critical that
you set aside your monthly mortgage payments even if you disagree
with your lender, or its servicer, as to what the payment should be.
If your lender, for example, is demanding payments of $4,100 per
month on your mortgage, but you believe that the accurate amount of
the monthly payments is $1,980, you should set aside monthly
mortgage payments in the amount of $1,980. To do this, you must go
to a bank of your choice and open a special account into which you
deposit each month the mortgage payment in the amount you agree is
due. It must be a special bank account, not one in which you
co-mingle the mortgage payments with some other money, such as a
savings or checking account, or your kids’ college fund account. The
only money which goes in to this special account is your monthly
mortgage payment in the amount determined by you in an account
managed solely by you.
Under no
conditions should you give yourself a mortgage payment holiday.
Under no conditions should you use this mortgage money to pay off
other bills or expenses. If you do this, you will provide the
lending institutions their most powerful argument. That argument is
that you are a deadbeat who is looking for a free lunch, i.e.,
someone who has lived rent free for the last number of months and
wants to continue to live rent free, a free-loader who is looking
for a "sugar" bank to support him, and is willing to make up stories
to accomplish this. You will sell your most precious possession,
your integrity and your word, for less than thirty pieces of silver.
The legal system will treat you accordingly. If you have failed to
save these payments for the last several months, begin now. Better
late than never.
Prepare Your Papers and Your Story
You should begin the
process of compiling all of the papers surrounding the re-finance or
purchase of your property, the one which is in foreclosure. This is
particularly important if you believe that you were misled into this
loan or that things were not disclosed to you which should have
been. If you do not have all of your paperwork, you can contact the
title/escrow company and request copies of the documents which they
have. There may be a modest copying charge. These companies may not
have all of the paperwork concerning your loan, but what they do
have will be helpful.
Additionally, it is
important that you outline (or even write) a narrative of what
occurred with your loan if you believe that you were misled or mis-representations
were made to you. This narrative must be comprehensive, containing
factual details. The law requires specificity in those cases in
which wrongdoing and fraud is alleged. This narrative will be
critical in the event that litigation becomes necessary, and
certainly will be helpful in pre-litigation conversations.
Courts require that
actions alleging fraud be pled specifically. You must (1) state the
precise fraudulent representations; (2) how they were false when
made (3) clearly identify the speaker; and (4) state when and were
the statements were made.
Charges and Fees
You should IMMEDIATELY
obtain a breakdown, a detailed itemization, of the amounts the bank
is demanding. If you hope to reinstate your defaulted note, you
should submit a request for a Beneficiary Statement to your
foreclosing lender (the beneficiary) and the trustee. This statement
will tell you how much you have to pay in charges and fees in order
to reinstate the note. This statement must be requested within 2
months of the recording of the notice of default. Additionally, you
should obtain a Payoff Demand Statement. This demand must be
submitted to the lender and trustee within 3 months of the recording
of the notice of default. It must be submitted prior to the
recording of a notice of trustee sale. You will note that
these statements are a part of the request discussed above.
These statements will
allow you to detect inflated charges, particularly attorney and
trustee fees. The bank and trustee are not permitted to charge you
as much as they want (they would like you to believe that they can).
Their default attorney/trustee fees are limited by law and are based
on a formula set forth in
California Civil Code §2924c(d).
The fees increase if a
notice of trustee sale is recorded.
Discerning the amounts
that the bank is charging you is crucial, particularly if you
suspect inflated fees or overcharging. Inflated fees = theft =
fraud. This information alone can trigger other substantial legal
protections to delay or prevent this foreclosure.
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