Thursday, January 28, 2010

Forensic Loan Audit - scam or useful modification service?

Even before the passage of SB94, real estate agents, consultants, and lawyers were offering to perform a forensic loan audit. Since SB94 went into effect, there are many companies and law firms doing this service to avoid the advance fee provisions of this new law. It seems to me that the majority of these are people who are desperate since they can't charge large up front fees to do loan modifications. It is hard to determine based upon the way they structure these services whether they violate SB 94, but there are things a consumer needs to know before paying any up front fees.

Forensic loan audits are where someone reviews the documents that were used to originate your loan(s). Under state and federal lending, banking, credit, and consumer protection laws, there are required disclosures that have to be provided and certain limits on fees and other things that happen during the loan process.

Someone who does a loan audit will often tell the consumer that if they find Truth In Lending Act (TILA) violations or Real Estate Settlement Procedures Act (RESPA) violations, that your lender will suddenly just change their tune and give you a loan modification. That is far from the case. While these violations can technically be legal claims, your lender will usually not even pay attention to them until a lawsuit is filed in court. Even then, it does not mean that they will just try to settle by giving you a modification.

There is a time and place for a review of the loan docs, but just finding violations is not a real service. Anyone who is not a licensed attorney may not realize that there are complex issues involved with lender litigation. Many banks are protected under federal laws such as the national banking act and the only claims that can be brought against them are with a regulatory agency, not a basic lawsuit. Lawsuits are often dismissed on this basis. Also, there are time limits within which you must bring your claims against the lender, many of which are within one year of the original loan date. Even the right of rescission's 3 year time limit is complicated as you often have to give back the property and loan proceeds in order to move forward with that remedy.

All in all, the majority of loan audits will not help you get a loan modification and are just another way people are trying to take your money. Only if you have very serious claims will it potentially make a difference and usually you have to go after the bank for monetary damages which doesn't guarantee you will keep the home or get a modification.

If someone claims all kinds of success in getting modifications or that their loan audit will push your mod through, take a look at this link with the minimal amount of permanent modifications in 2009 nationwide under the Making Homes Affordable Plan (66,000). Clearly, no one has a magic bullet that will guarantee modifications.

Friday, January 22, 2010

Loan Modification = Frustration & Delay

The numbers announced last week by the administration show that some progress is being made on mortgage loan modifications. Approximately 66,000 final modifications nationwide were completed in 2009 under the Obama Making Homes Affordable Plan. That is a very small number since the number of eligible homeowners is somewhere in the millions. However, only 33,000 had been completed through the end of November, so the lenders completed an additional 33,000 in the month of December alone. This tends to show that lenders might finally have the infrastructure and processes in place to get modifications done.

There is also the thought that the servicing companies doing the modifications don't really care if they get them done or not. In fact, servicing companies can often make more off fees to foreclose than just servicing a loan or getting it current. The holder of the note/investor may not even be the one making the decision that can have drastic impacts on them. It seems that banks have already taken the accounting hits for dropping homes to fair value, so they don't have a problem letting them go to auction or selling at a short sale for current market price.

In any event, we will soon see how much can get done in 2010.

Chris Barsness, Esq. MBA

Thursday, January 14, 2010

Bankruptcy- do it yourself or hire an attorney?

Many people question whether they should save money by filing their own bankruptcy case or hiring a petition preparer or other online source that puts the forms together. Bankruptcy is a federal court case that can have long term implications on a person's credit, finances, and their life in general. People pay for health insurance and pay to see a doctor when anything might affect their health long term, yet they fail to seek expert advice when it comes to their financial health.

Many of our cases come from people who did their case on their own and now have to pay significant fees for us to correct what was done improperly in the first place. The bankruptcy code is a complex set of laws and procedural rules, many that vary by court location with local rules. Many petition preparers do not have access to the local forms that need to be filed. Petition preparers or doing it yourself does not give you the proper guidance and legal review of which bankruptcy case is best for you, how to prepare for bankruptcy, how to list assets and debts, how to go through the process, which exemptions to claim, how to save your home or other assets, and how to minimize the long term impacts. If you fail to properly file the required forms, including required local forms, the court can dismiss your case. At that point, you would have to pay the filing fee again to refile and have lost weeks or months that your case could have been moving forward.

If you fail to list a debt, you can still have liability for it after the case. Our firm runs checks to be sure we are aware of all debt that may be out there, even some that you may have forgotten about or didn't even know was there.

Bottom line, be sure to investigate all the possible consequences before deciding to do your own bankruptcy. It may sound better to save the money and not get expert advice, but realize that you are eliminating all kinds of debt, so paying a little up front to be sure you are protected and getting rid of hundreds or thousands of dollars a month in payments can be worth the investment.

For more information, go to our website or call for a free consultation 888-881-6591.