SECRETS TO RENEGOTIATING YOUR HOME MORTGAGE
Over the past year I have been asked by many clients about renegotiating their home mortgage. They assume that because I specialize in bankruptcy and real estate that I possess the secrets that will help them get a good deal from their lender. Unfortunately this is not true for the average case. You need a lawyer only if there is a real dispute.
Lenders are as interested avoiding foreclosures as are borrowers. I recently spoke with the regional head of the renegotiation department of a major bank. He said that he was expected to renegotiate as many loans as possible. He only heard from upper management when his department was not renegotiating enough loans. He found that most loan renegotiation consultants got in the way, and they never negotiated a deal better than the homeowner could have received had they dealt directly with his department. Lenders know what they are willing to do and what government help might be available, better than anyone else. They are the experts on their own loans and truly want to work with you. If you meet the requirements for a renegotiation, they are more than happy to let you do it. Renegotiation is good for everyone.
If you do not meet the requirements, the Lender is not going to budge. Lawyers and threats of litigation are unlikely to help get the best deal. Thus, a borrower in trouble is best advised to consult directly with the lender. There may be some issues dealing with the lender’s bureaucracy, but most with some patience, can cut through a lender’s red tape. The most often complaint I hear from clients is the trouble they are having getting the lender on the telephone or getting any response.
For those who cannot deal directly with their lender, there are consultants who are less expensive than lawyers. They can assist you in getting your financial information together and making calls, but that is about it. If you really need a consultant, finding a good one is very difficult. There are many people who profess to be experts and make promises. They ask for advance payments of $3,500 or more. At best consultants get the borrower the deal they could have received had they simply called the lender. At worst the consultant does nothing and takes the money. Personally, I do not have anyone to whom I can refer a client. I usually talk my clients into dealing directly with the lender. Bank representatives tell me that any consultant that is charging more than $1,000 is probably not earning the money.
Fraudulent mortgage renegotiation consultants have become such a problem that the legislature recently passed an emergency law that was signed by Governor Schwarzenegger on October 11, 2009 and went into effect immediately. It prohibits anyone from claiming any compensation for negotiating or arranging a loan modification until after that person fully performs each and every service as promised. Aimed at combating loan modification scams, this ban applies to upfront fees collected by real estate agents and attorneys. The ban expires on January 1, 2013. Also effective immediately, anyone who negotiates or arranges a loan modification must give the borrower a specified notice that paying a third-party for loan modification services is unnecessary.
These new requirements apply to mortgage loans secured by residential property up to four units, with certain exceptions for lenders and loan servicers acting on their own behalf. Violations can be penalized by, among other things, a $10,000 fine plus one-year imprisonment for individuals, or a $50,000 fine for businesses. Real estate brokers with existing Advance Fee Loan Modification Agreements reviewed by the Department of Real Estate can no longer, as of October 11, 2009, enter into these agreements or collect advance fees. Agreements entered into and advance fees collected before October 11, 2009 are not affected.
