On March 4, 2009 President Obama has released his Home Affordable Modification Program, commonly known as HAMP. This modification program is designed to force banks to make homeowners monthly mortgage payment affordable based strictly upon income. Any bank that took TARP (Troubled Asset Relief Program) offered treasury secretary Henry Paulson in September 2008 is required to participate in this program. A vast majority of banks took this bailout money, meaning there is a good chance that your bank must comply.

Bullet Points of HAMP
Bank brings your payment down to 38% of your front end ratio at their cost. The government matches dollar for dollar to get you to 31%. Lowest rate is 2%, longest amortization is 40 years. Principal balance reduction is an option, but not required. Back end DTI over 55% required Debt Counseling. Owner occupied residences only, no investment or second homes. You can only modify once. If you go delinquent at any point, there is no second chance. Accepting the modification waives all rights to predatory lending litigation. 2nd not holders are offered a buyout by the government when the property has negative equity. Payment fixed for 5 years, afterwards switches to the lowest published Freddie Mac 30 year conforming rate at the time of modification. Industry Reaction and Expectations
Banks despise this program. When they took the TARP money, they were basically allowing the government to impose their will with future policy. Now that the programs are rolled out, they are attempting to give the money back. These modifications are too extreme for the banks to keep their target margins. When compared previous modifications that banks are granting, the TARP payments will be 15% – 50% lower. While this means huge losses to the bank, it produces great benefit to the borrower.

To add to the banks dismay, homeowners who are current can take part in this program. This means that homeowners who have been making their high payments to the banks on time can also greatly lower their payment. Before this program, homeowners who were current had little chance of getting modified. Banks were practically forcing homeowners to go delinquent to even consider a modification application. Homeowners who were recently late (30-60 days) were being offered modifications with very little benefit to the homeowner.

All signs are leading to banks resistance. Many lenders who took TARP money are trying to give it back to avoid these requirements. But, the Obama Administration is blocking banks from giving the money back until they pass a recession/depression Stress Test. They have to prove that they would be able to remain in business without the money to a certain depth of recession. Big banks, such as Wells Fargo and JP Morgan Chases, currently failed that stress test and must keep the money. They are running numbers to find a reasonable date and figure to give the money back and be back under their own control. Since banks are looking for ways out, it is imperative that homeowners act fast before banks are able to devise an alternate plan. This is not a socialist country so banks are able to separate from the government.

Banks Looking to Deny Homeowners?
For reasons previously discussed, banks do not want to grant HAMP modifications. Therefore, what seems to be happening is that banks are aggressively approaching troubled homeowners for the over the phone with the intent to deny their application. Nowhere does it say that the bank has to allow the homeowner to resubmit if denied, only stating that denied for HAMP the bank must attempt to modify them under traditional means. This gives the control back to the bank. There is no shortage of press regarding how obstinate banks are to this program, leading to the recommendation of hiring legal help when applying for this modification. Being that the bank cannot advance with the foreclosure proceedings during the application process, appropriating the money for a real estate attorney is the smart homeowners move. If you only have one shot for a superb modification, it makes sense to ensure that you get it.

Mahalo to “The Modification Squad” for this information

1. Is my service fee guaranteed? Are there any hidden costs? Can I get it in writing?

2. Is your company a civilian based model or an attorney based model?

We are an attorney based loan modification company. Civilian based loan modification companies are essentially offering you the same results that you are able to achieve yourself. Without the clout of an attorney on your side, it is likely that the loss mitigation department of your lender won’t cooperate with you and further, won’t offer you the most aggressive terms. They may simply address the problem in the short term but not provide a long term solution. Their results include lowering and fixing your interest rate for a short period of time and often adding an interest-only option or stretching your amortization to 40 or 50 years. While they claim to offer better results than you could achieve yourself, the benefits they produce are drastically less than what our law firm will produce.

An attorney based loan modification is the most beneficial option to the homeowner. The major difference is that we find predatory lending violations in your recorded loan documents and will use that information to threaten a lawsuit in the event they do not comply with our modification request. Some of our requests include, but are not limited to, a balance reduction in the event you owe more than your property is worth, an interest rate reduction, fixed and adjustable rate, first payment deferment for a few months, and, if requested, a change in the terms of the loan (i.e. stretching out the repayment period to further lower the payment). When we find a violation that is a fine plus attorney fees, we break down what it is going to cost the bank over the cost of the lawsuit versus our modification proposal. The numbers work so heavily in our favor that lenders have no choice but to comply. Do not be fooled by a non-attorney based modification company or those that that may overcharge.

Lenders and servicers are currently very busy with desperate homeowners trying to save their homes from foreclosure. Unfortunately, they simply do not have the man power or the capabilities to save everyone and many people are getting lost in their system. As a result, these homeowners suffer from an unnecessary foreclosure. With an attorney involved, you have an important ally in your corner to get you the mortgage help you need. This can make the difference between saving your home and losing your home because our attorney understands State and Federal laws as well as lending regulations.

A civilian based loan modification company simply submits a package similar to a loan submission to have the lender review and render a decision. This DOES NOT achieve the best results for the homeowner. This route could actually make matters worse due to the possibility of improper exposure to the lender without a comprehensive, accurate evaluation of the entire situation.

3. Is the attorney a Real Estate attorney? Does he/she personally work on the file?

There are a lot of loan modification companies that have circumvented the law by renting an attorney’s license to do loan modifications. In this case, the Attorney does not even review the file nor are they involved in the negotiation. In other instances, there are personal injury Attorneys or workman’s compensation Attorneys who have little to no experience in handling negotiations with Investors/Lenders. You need expert advice in order to not fall victim to a scam. A great way to determine this is to ask yourself, who are you making your payment to? Whose name appears on the contract? The answers to both should be the attorney.

4. If you are a civilian based model, are you approved by the Department of Real Estate?

Depending on the State in which the property is located, there are certain laws that a civilian based loan modification company must adhere to. All civilian based model modification companies must have a designated trust account set up and an advance fee agreement on file with the Department of Real Estate. A list of current companies approved by the DRE is provided here. http://www.dre.ca.gov/mlb_adv_fees.html. We cannot stress enough home important it is to altogether avoid companies that are not approved by the DRE to modify loans.

5. How long does it take for you to complete the loss mitigation process?

The timeline depends on the stage of foreclosure you may be in, your financial position, and your lender. Typically it takes several weeks to complete a work-out agreement and stop foreclosure proceedings. We start working on your case as soon as we receive the commitment from you. Again, we understand that time is of the essence. More importantly, we have developed the Rapid Response Guarantee (R2). During your introductory compliance call, a personal loss mitigation specialist will prepare your documentation for review by our in-house Attorney. This person will be your main point of contact throughout the process. During this call, you will have the opportunity to communicate to your Case Manager how you wish to be contacted with updates, by what means, and at what times. You are not going to have to chase us down for status on your case. We will keep you informed every step of the way.

6. Are there any references that you have or samples of approved loan modifications that your company has done?

How do you know you are making the right choice when choosing a loan modification company? After all, you are entrusting them to save your American Dream. Trust and verify. Ask for samples of negotiated loan modification terms. A legitimate company will also be willing to provide you with the necessary documentation needed to make an informed decision.

Mahalo to the “Fairon Group” for this great information