0.1 Loss Mitigation
Loss mitigation is used to negotiate mortgage terms for the homeowner that will prevent foreclosure and help make the terms more affordable. These new terms are typically obtained through any of the following: loan modification, repayment plan, forbearance, short sale, deed in lieu of foreclosure, cash-for-keys, or other loan work-out options. In general, any loan can be modified. A mortgage modification is the most commonly pursued option for homeowners that want to keep their home and get back on track. This process allows the terms of a mortgage to be modified outside the original terms of the contract. This is agreed to by both the lender and borrower. Generally speaking, any change to the mortgage terms is a modification, but as the term is used, it refers to a change in terms based upon either the specific inability of the borrower to remain current on payments as stated in the mortgage, or more generally a mandate to lenders. A loan modification will typically result in the change to the loan's monthly payment, interest rate, term or outstanding principal. The borrower can be late, in default or in foreclosure at the time the application for loss mitigation is made.
The lender is motivated to offer better terms to the borrower because of the expectation that the borrower might be able to afford a lower payment, and that a performing loan will be more valuable ultimately than the proceeds obtained from a foreclosure sale. The state and federal government may structure a mortgage modification program as voluntary on the part of the lender, but may provide incentives for the lender to participate. A mandatory mortgage modification requires the lender to modify mortgages meeting the criteria with respect to the borrower, the property, and the loan payment history. Programs will vary according to lender.
Why An Attorney Makes The Differenece
Self-representation has the lowest success rate when it comes to achieving positive results. The loss mitigation process can be an involved, detail-oriented and complicated process. Homeowners should be cautioned of attempting to get help by working directly with their lender. Not only are attorneys qualified and experienced at working lenders, but are on top of the issues that surround the programs and eligibility requirements. There are a number of resources that claim that it is easy to submit an application and receive help by working free directly with your lender. Many homeowners are under an illusion. They believe that their lender is going to help them, simply because they are speaking with them. Lets be very clear, the last thing the bank wants to do, is reduce monthly payments, lower interest rates or take any type of financial loss. The high payments and high rates are very lucrative and obviously preferred by your lender. All you need to do is look at your monthly mortgage statement and see the breakdown on how much of your monthly payment dissipates right into profit.
Attorney representation is vital when you do not have knowledge of mortgage law. You do not want to be in a position where you are at the mercy of your lender. It's imperative to understand guidelines, submit documents properly or you will often fall right into common tactics used by the banks. These strategies are designed to frustrate you, get you to lose hope and than give up on the process. It is a fact that lenders trying to foreclose on homes have high-powered, experienced lawyers doing this work for them. When you deal directly with your lender its common for them to continually ask for the same sets of documents over and over again. They will claim they were "never received" or that they were simply "incomplete". You will speak with agent after agent and remain in a perpetual cycle of being "under review". If you do manage to get a decision, it's all to common to hear some incomplete reason why you are being denied. Except now you are much further behind on your monthly payments and at imminent risk of foreclosure.
You have rights. Retaining legal counsel who understands those rights will help ensure that your interests are protected. Whether you simply want a lower payment or if you are already far behind on payments, it's very dangerous to rely on your lender for help. They will almost certainly do what's in the best interest for them and not for you.
Relevant Laws & Regulations
Mortgage Assistance Relief Services - (MARS) Any attorney who provides services to help consumers avoid foreclosure is covered by the Federal Mortgage Assistance Relief Services (“MARS”) rules, and must comply with all requirements regarding mandatory disclosures, misrepresentations, and the prohibition against collection of advance fees. [16 CFR 322 et. seq.] The Federal Trade Commission has enacted guidelines governing the activities of persons offering mortgage assistance relief services to homeowners. The MARS rules apply to attorneys who negotiate a short sale with a lender on a residential dwelling (1-4 units). Attorneys who provide services as a way to help consumers avoid foreclosure or other mortgage assistance relief services that are within the scope of the MARS rule. This includes negotiating, obtaining, or arranging a loan modification, deed-in-lieu of foreclosure, loan forbearance, or postponing a trustee sale. The link below will provide a full summary of this law and details all of the relevant requirements for attorneys providing these services. Please click here to review: Federal Trade Commission MARS Information