Be Cautious When Dealing With Your Lender
One of the painful aspects of hearing from homeowners and borrowers is the horror stories we hear about unscrupulous-appearing misrepresentations made by lenders to distressed homeowners. News, media outlets, and congressional hearings have included such reports and testimony. While banks and lenders deny specific unscrupulous practices such as lenders claiming they are unable to provide assistance to the borrower homeowner, the evidence and testimony seem to indicate to government committees and hearings that the banks and their representatives are not telling true facts. Homeowners expecting assistance from the lender relating to government programs for loan modifications rely on what they hear and read regarding HAMP or HASP loan modifications, while the lender may be less than forthcoming or less than motivated to honestly assist the homeowner.
Many of our clients tell us stories of the struggles to even get in touch with their lender. Once they are able to get a customer service representative, that representative may seem to know very little except what he or she is reading on the computer screen — apparently a training script. Indeed, in our own consultations, we are amazed to find that representatives appear to be uneducated about the complex loan packaging and documents or servicing and pooling requirements. They seem to be less than knowledgeable about the long frustrating history the homeowner has had with the lender or bank, making inconsistent and contradicting allegations, impossible demands and broken promises.
Some of our clients come to us after being told by lenders to send in certain amounts of money while the loan modification is pending. Acting in good faith, these homeowners send in payments for several months, then they often get a notice from the lender that their loan modification is denied! Worse, however, is that the lender appears to have taken the distressed homeowner's money for months under pretense of a loan modification and failed to apply the payments to the loan. The homeowner may feel tricked by the lender into sending money to obtain a loan modification under false pretenses. Most of the funds provided by the borrower may even be taken for questionable and possibly illegal "fees" and "costs."
For a borrower to attempt to obtain a loan modification without legal counsel is risky. It could involve the loss of tens of thousands of the homeowner's dollars after which the lender still files foreclosure against the borrower anyway. Is this fair? It may even be illegal. Foreclosure case law is still rapidly evolving.
We strongly recommend a homeowner with a distressed mortgage loan to get legal counsel before sending funds to a lender when so many of them appear to be taking payments, leading the borrower to believe they are in a loan modification arrangement, keeping the large sums of money, then initiating foreclosure proceedings anyway. This causes borrowers and homeowners to have to surrender their homes or defend themselves in the foreclosure lawsuit in order to keep from losing the home — in addition to the tens of thousands of dollars they had already paid in order to keep their homes.
We also are especially heartbroken to hear of clients who spent all or most of their 401(k) and IRA retirement savings in order to salvage a home they may be about to lose anyway. These funds appear to have been a complete, futile waste. We discuss with our clients the possibility of legally protecting funds to which the banks, lenders and servicers have no legal right.
While many borrowers think loan modification may be their preference, we also recommend the borrower consider alternatives such as a short sale of their property if the borrower's situation warrants. Working with lenders can be frustrating in short sale negotiations and in the loan modification process. Loan workout solutions that include a short sale or a loan modification might better be conducted with the counsel of an attorney to advise and guide distressed homeowners through the process, helping avoid common pitfalls for the borrower. While most borrowers believe the deed in lieu of foreclosure is a common alternative, we have found that most lenders are not willing to accept a deed in lieu of foreclosure. For this reason, short sales appear to be a better option sometimes. We recognize a homeowner's emotional attachment to his or her home, but often a wiser financial decision means the borrower might need to recognize the house as really a big box that holds their stuff. We prefer to see our clients make decisions that will serve their best interests in the long term.
We generally advise our clients not to forward any financial statements, provide information over the phone to the lender, or submit additional "loan modification" future payments without consulting with legal counsel first. We want to assist the borrower in the preparation of financial statements because the lender may eventually seek to use these as legal evidence against a homeowner in foreclosure proceedings. We want to educate the borrower about the options available to them that will allow them to keep their homes or decide whether they should.
STRIPPING SECOND MORTGAGES (OR EVEN THIRD MORTGAGES): If a homeowner has a second, or even a third, mortgage, he or she may qualify to have the excess mortgages stripped away completely. This means, if granted by the court, the homeowner would no longer be liable for that second or second and third mortgages and be relieved of any legal obligation to pay off those mortgages or home equity loans (HELOCs). These remedies are provided for by law for the borrower's protection. Some might argue the lender took just as much risk, if not more, in making the loan as the borrower did and shares responsibility for the foreclosure crisis. We will work with you to help you save your home if possible or make the best decision for you by exploring your situation and your options.
THE BIG PICTURE: Because we practice foreclosure defense, foreclosure workouts, and bankruptcy, we do not guide you into one or the other simply for our benefit. Sometimes a choice for a borrower who seeks the assistance of only a bankruptcy attorney misses other potentially more beneficial options. For example, some homeowners who have already filed bankruptcy hoping to save their home lose it anyway. We will have a detailed consultation with you to get all the facts, explain the options, and clearly explain how we would proceed under each option. The client stays updated and involved in the decision-making process based on being informed of options and outcomes. If we can help you save your home, we will. If we can't, we will seek to minimize your losses and attempt to prevent the lender from seeking to recover a deficiency judgment from you by garnishment or wage attachment.
The worst thing you can do is nothing.
At the law offices of Howard H. Ellzey, P.L., we invite you to come to our office for a free CONFIDENTIAL consultation to let us seek relief for you or attempt to get you a fresh start. Contact us at 727-498-4397 to schedule a consultation.
We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code.
