HOW TO DO YOUR OWN LOAN MODIFICATION 



         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 §2944.7. 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 Senate Bill 900, the "Homeowner's Bill of Rights," became the law on January 1, 2013.  It requires the loan servicer (which could be also the beneficiary) to have a single point of contact.   In other words, no more speaking to a new representative who knows nothing about your past conversations when you call to speak to your lender or its representative.

         Of significance to the issue of a loan modification, however, is the fact that this law requires that your lender (or servicer) conduct a loan modification prior to initiating foreclosure.  The law, however, does not require that any kind of loan modification be approved.  The law further requires that you have a right to appeal a denial of a loan modification, should you be denied.  (You must appeal within 30 days of notification of the denial.)  The appeal, however, is to the servicer or beneficiary, i.e., the entity conducting the loan modification. 

         The loan modification appeal process is analogous to an appeal in a civil or criminal matter.  It awaits to be seen, however, whether the same impartiality, fair play, and sage judgment will be exercised in these loan modification appeals as is exercised in the judicial appellate process.


         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 making available a sample the Financial Statement.  This will help you evaluate 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, or simply transfer the information onto your servicer's form if the servicer prefers using its own forms.

         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 §1500

        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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