Scotsman Guide - April 2011 Residential Edition

By David Galanter President FreeMortgageFix.com

How to Help with Loan Mods

Lead borrowers to better days by learning modification basics

Mortgage brokers around the country have been receiving phone calls from troubled borrowers seeking advice about loan modifications. In some cases, brokers feel clueless about how to help. at the same time, they don’t want to turn down new business.

If this situation sounds familiar, the following tips and guidance can help.

1. know the law and stay compliant. For example, anyone other than a lawyer is prohibited from charging upfront fees in reference to loan modifications. This rule was implemented by the Federal Trade Commission (F TC) and took effect earlier this year. Under the law, fees can’t be collected until homeowners receive and accept a written offer from their lender.

2. know the home affordable modification program (hamp) guidelines. read about the program and educate yourself about its intricacies, advantages and critics. For starters, visit hmpadmin.com.

3. develop a complete understanding of what constitutes a loan modification. put simply, a loan modification is a restructuring of an existing loan. When considering loan modifications, lenders will re-examine borrowers’ current financial picture.

In some cases, lenders may reduce a loan’s interest rate, extend its terms, forgive unpaid late fees or grant a principal reduction. The point of modifying mortgages is to reduce a borrower’s monthly payment in response to some kind of economic hardship.

4. know what kind of hardships warrant a modification. The HaMp regulations provide guidelines on what types of hardships will be considered for financial assistance. The list includes loss of income and death of an income earner. Interest-rate increases resulting from adjustable-rate loans also may be cause for a modification.

5. Learn how to begin helping troubled borrowers and understand what they must do to get on the right path. In most cases, you’ll want to know the lender’s process for considering and approving modification requests.

as you begin helping borrowers with their problem loans, you’ll get a better grasp of the process and its steps. These include the following seven steps.

1. call the lender and inquire about how it would like your client to proceed. Don’t divulge any details about borrowers’ financials at this point.

2. if they qualify for hamp, have clients fill out an official request-for-modification affidavit.

3. help write a letter of hardship. This should clearly describe why and how the client fell behind on their payments. Include a timeline of all events related to the mortgage’s delinquency and previous on-time payments. This letter should be no longer than one page.

4. collect supporting documentation. This includes paystubs, bank statements, tax returns and the hardship letter.

5. if a lender requires your clients to fill out a separate modification-re-quest form — one specific to their company — make sure your clients do so in a timely fashion. also, make sure to ask specifically if such a form exists.

6. consult an attorney. This might not
always be necessary, depending
on how far behind your clients are
on their payments. In many cases,
clients should be able to receive a
free initial consultation from an at-
torney. If your clients have received
a sale date — indicating when the
lender intends to sell the property
to the highest bidder — recom-
mend they speak with an attor-
ney immediately. Sale dates can
usually be postponed if your cli-
ents are in review for a loan modi-
fication. attorneys can plead for
additional time or use other legal
tactics to help.

David Galanter, president of FreeMortgageFix. com, is a veteran lawyer with a practice concentration in the areas of real estate finance, development, title and foreclosure, joint ventures, acquisitions, dispositions, commercial leasing, equity restructurings, and mortgage-loan workouts for residential and commercial loans. His work ranges from residential to commercial transactions. past clientele include commercial banks, developers, investors, equity participants, private lenders and others. For more info, visit www.freemortgagefix.com. Contact him at info@freemortgagefix.com.