There may come a time when you will suddenly realize that it has become difficult if not impossible to make the required payments for the home mortgage. A deed in lieu of fotreclosure may be your ticket to exit safely and a good California real estate attorneys is just wht you need.

If this is your situation, then you might be facing the possibility of a foreclosure. You lose your home and some of your self-respect, and you discover later that it is much more difficult for you to take out a loan.

Don’t despair because the Law Offices of Fransen & Molinaro, LLP may be just what you need to lend you a helping hand because one of their primary areas of expertise is mortgage law and predatory lending.

But first, why don’t you have some quiet time with yourself and ask yourself a couple of questions?

The threat of a foreclosure may be so frightening that the fear could prevent you from making a wise decision or it could spur you into making a move that you will later regret. Many people just want to walk away and give the keys back to the bank. That is perfectly fine, but make sure you are educated about the “legal” risks that you may face because of that decision.

Here’s a secret that you might find interesting: your lender is just as reluctant as you to go ahead with the foreclosure.

Why would he want to pay for legal expenses that could average $10,000 per month? Why would he want to lose the monthly income during the time interval when it is foreclosed and when it is sold? 

So, calm yourself a bit and look at your situation from the point of view of another person who is not worried about foreclosure. Ask yourself (or this imaginary person) if the current incapacity to pay is permanent or temporary. If your financial situation is temporary, then why don’t you workout a solution with the lender?

If it is permanent, then you might have to give up your home but you must try to protect yourself from being liable beyond what the lender could get when he sells the property.

If Your Situation Is Temporary, You Might Get to Keep Your Home

A possible alternative here is loan modification, where the current agreement with the lender is renegotiated for an adjustment in the interest rate, especially for adjustable-rate mortgages (ARMs) and the teaser rate is no longer in force.

The teaser rate is lower than prevalent rates so that the lender would, of course, want to increase the rate. However, in this alternative, you are depending on the principle that the lender might find it more appealing to permit you to continue to pay the teaser price for a longer length of time instead of getting zero monthly payments with you out of the house.

If You Have to Leave Your Home, Do So without Fear

If you have been honest with yourself and found that the situation is permanent, there is no choice but to hand over the keys to your home. But it is not as simple as that. In some states, your liability as debtor will not be totally erased if the house sells for less than the unpaid amount. The lender might force you to make up for the difference! So, how do you protect yourself from this possibility?

An option that you might consider is the short sale, where it is possible for the lender to free you from being responsible for any deficiency in the amount collected from the sale.

But wait!

A potential problem here is that there must be a willing buyer and the lender must agree to the proposed price. The challenge here is looking for the buyer who would be able to offer an amount that is not too low that the lender would not be interested. 

Another option is the deed in lieu of foreclosure, which simply means that you just hand over the keys of your home to the lender and in return he forgives and forgets any difference in the amount you had not paid and the money he would get from selling it. Just make sure that the agreement is in writing and, of course, having a lawyer to guide you in the process would be better. 

It is important to remember with the short sale and the deed in lieu of foreclosure that they are quite complex in their requirements. One critical requirement here is that you must be able to prove to the lender that you are no longer capable of keeping up with the payments but that you were indeed capable during that time that you took out the loan.

Loan modification companies now occupy countless blogs on the internet, almost every commercial break on the radio and now even television commercials. Some are lawyers, some are not. Both groups seem to be spouting the same message to the same people.

Is this “boom” caused out of a legitimate need, or is it perhaps overly opportunistic individuals?

First, to preface, I am a licensed California Attorney and Real Estate Broker. I have respect for both professions, though I realize, like any profession, there are bad seeds among us. As an additional disclosure, my practice is geared towards consumer representation, specifically with respect to mortgage issues.

I am a partner in a relatively small firm, there are currently six attorneys. We have several dozen federal and state cases, primarily against lenders. We handle numerous debtor bankruptcy cases, and yes we also represent borrowers in loan modification/resolution services. Now, with that out of the way, let me say that I think too many people are paying too much money for a service that they may not need. Let me explain.

It is likely that the single biggest financial transaction a person is involved in, is the purchase or refinance of their home. A home is also an extremely personal asset, one that invokes significant emotions. Because of this, homeowners have been a prime target for numerous “predators”.

We are currently living through a housing deflationary period unlike any other in recent history, and at least in part, due to predatory lending practices. Borrowers were, and are, often asked to sign a stack of documents binding them to a long term agreement, filled with conditions and consequences seldom explained properly, if at all. In some cases the borrowers probably knew better, but not all. Regardless, facing the potential loss of their home is cause for a fair amount of desperation.

Seeking a trusting ally to guide them through the troubles ahead, homeowners often jump at the chance to call an 800 number spouted on the radio in hopes of saving them from the perils and loss of something so important. Enter loan modification companies…

One aspect of the housing bust, that does not seem to get enough press, is the displacement of so many industry professionals. There was a time when everyone either was a loan officer, or had a friend that was. People entered the industry in mass with hopes of making it rich, and some did. In a moment, this lucrative profession was stopped cold. The loan modification, at least on its face, provides a means of putting a virtually extinct skill set to use, and make a healthy profit in doing so. A couple nagging problems seemed to surface.

First, California, along with many other states, prohibit, or at least strictly regulate, the charging of fees to homeowners in foreclosure. (Cal. Civ. Code Section 2945). This law is essentially to protect the homeowners most susceptible to those of questionable motives. Second, representing a client in a negotiation of a contract sounds an awful lot like practicing law. Most, if not all states prohibit the unauthorized practice of law. As it turns out, lawyers are not bound by these same restraints.

For this reason, lawyers have also jumped into the arena in droves. In some instances, a “partnership” is formed, whereby the non-lawyers engage the services of a licensed attorney creating a seemingly ideal mix. This arrangement however has several serious flaws that are beyond the scope of this article.

Regardless of the intricacies facing the market participants, the consumers must first answer the question Do I need to hire someone to get a loan modification? The most honest answer I can give, having worked with all major lenders and hundreds of homeowners is, no. Modifying your loan is something you can do on your own. In fact, in some cases you are better off doing it on your own.

Aside from cost associated with hiring someone, no one will care more about your home than you. Additionally, there are some fantastic non-profit agencies that actually provide free assistance. Yes, they are swamped, and therefore not always able to meet the needs of everyone, but for some, it is a fantastic option.

So, why would, a practicing mortgage attorney say you may not need an attorney? Because some people do, and for those people, an attorney can be extremely beneficial. I am of the belief that sometimes the best thing an attorney can tell you is that you don’t need legal assistance. In fact, for every client my firm takes, we probably turn away at least two clients. Here’s how I determine whether or not a homeowner needs my service.

First, is the homeowner in a situation, that without a modification, they will not be able to afford their home? If this is true, the homeowner may need counsel on issues pertaining to deficiency judgments, tax consequences and bankruptcy. Although California is a non-judicial state, a foreclosure proceeding is a very real legal problem. The required Notice of Default sent to a homeowner echoes this notion stating that they should talk to an attorney.

Second, has the homeowner considered other options? In many instances, the homeowner needs guidance and counsel. This is a cornerstone of the practice of law, well at least it is supposed to be. Can a lawyer give competent and skillful advise that objectively examines the homeowners position and counsel’s accordingly? This may also fall under the category of selecting the right attorney, but for purposes of this point, let’s assume that is the case. Put another way, some people are in situations that frankly are pretty straight forward.

A borrower with a steady income that has not changed since the inception of their loan, who now faces an increase in their interest rate based on the adjustable nature, probably just needs to have a frank discussion with their lender.

Third, even if an attorney can provide value, does it require more than a one hour consultation? In short, does the homeowner really need to pay thousands of dollars for representation in a loan modification, or do they just need to be steered in the right direction? I would submit that to charge for unnecessary services, is probably no less egregious than taking a client that does not need legal services at all.

Now, let me address two of the most persuasive counter points to my position. First, Loan Modification companies (law firms included) can utilize contacts at lenders developed through their numerous clients to expedite the process and increase the likelihood of success. This may be true in many cases. Although lenders often say that they would prefer the homeowner to just call them direct, they are often ill-equipped to deal with individuals. There are certain efficiencies when a channel is created, whereby a company can act as a conduit to the lender. Still, in order for this point to have effect, the loan modification company must have the structure in place to handle both the volume, and the uniqueness of each client. As stated, previously, no one will care more about your home than you do.

A critical mistake is assuming that you can cast all of your troubles onto a profit based company, and all will be well. Before allowing this argument, albeit a potentially valid one, to persuade you to hire a loan modification company, call your lender. Find out just how difficult it is, or is not, to reach the appropriate department and discuss your situation.

Second, Loan Modification companies know how to complete the paperwork and navigate the system better than the homeowner. In certain cases, this also may be true. However, great caution should be exercised when considering this point. Do not allow anyone to lie on your behalf. Filling out paperwork “appropriately” (i.e. stated income) is at least one cause as to why we are in this mess.

Telling the truth is always the best policy.

Still, there are varying perspectives on certain items. What should I focus on in my hardship letter? Can I include other household member’s contributions, even if they are not on the loan? If I am not paying my credit cards, do I include them in my expenses? These questions and many others, can be asked of a loan modification company, although some of the answers can, or at least should, only be given by a licensed attorney.

If a decision is ultimately made, to hire a loan modification company, or a law firm, the next question is, How Do I Know Which Company or Law Firm To Hire For My Loan Modification? Coincidently, that happens to be the title of my next article…

Nathan Fransen, Esq.

Original article posted at LoanWorkout.org

Manita Dadil :

How do you know if a company is legit?

Paul Molinaro Esq.

We fully understand the dire financial situation our clients face. EVERY one of our loan resolution or Bankruptcy clients is having money problems (or they would not need us). Thus, we have made our pricing affordable to people with very limited funds.

That said, we need to make sure we are paid, and we do not want to be just one more creditor of the many seeking to collect from our clients. We ask for full payment up front.

As to guarantees.

Lawyers do not guaranty the outcomes of their cases or matters. We are lawyers and zealously represent our clients. That is how we earn our fee… through the actual work we do.

If a loan modification does not work out (it happens), that is when we are of even more value to our clients. That is when they need help with a short sale, deed in lieu, advice on the foreclosure process, or bankruptcy. We are paid to provide legal services, not to “shoot for a loan mod, and see what happens.”

Ellen Jones on February 28th, 2009 8:31 am

Is the Better Business Bureau and good reference to check the legitimacy of one of these loan modification companies?

TJ Roberts on March 2nd, 2009 6:59 pm

Well said Paul,Im in a fix myself,and Ive been a REALTOR for 17yrs.There are a lot of angels,on the loan mods,some want money up front,? and there is no guarantee a loan mod will be approved even with a rep co.and you’ve loss 2 months to find out a no

The problem is when most of these people dont have any equity,so I have a different mindset,on chap 13 or sell

PaulMolinaroEsq on March 2nd, 2009 11:07 pm Re: “Better Business Bureau”

Well, the BBB seems to be giving all loan mod companies lower than expected ratings due to the fact that the field is getting filled with corrupt businesses. The legitimate companies are being spoiled by being in a bunch of rotten apples. That said, it is one of the sources you should examine, but not the only source.

PaulMolinaroEsq on March 4th, 2009 12:08 am

No way around it, many potential clients who call my office want to hear that we guarantee their loan modification. They have read promises of balance reductions and super low fixed rates on the websites sites of loan modification companies, heard the radio commercials, and opened their junk mail (both email and U.S. Mail).

We know what people have heard. But when one thinks it through, a guarantee is just plain ridiculous. Each loan modification is unique. Some of the factors at play are the borrower’s ability to pay, the hardship, the location of the property, the amount of equity to loan balance, the lender’s financial situation, the attitude of the negotiator at the lender, the timing (whether the month was bad for real estate sales or really bad for real estate sales).

So many things affect the outcome. One of the hardest parts of advising people on loan modifications is making sure that a person really wants to stay in their home. Sometimes, the home is just unaffordable, no matter how low the rate.

When someone makes $3k a month and they bought a $700k home with no money down, it might be time to face the facts. Letting the house go through short sale or otherwise and then renting might really be the best choice. This is a discussion I have with my clients, and I make sure they get an education on all their options. The decision is left to the client, but I make sure it is an informed decision.

Mike on March 5th, 2009 3:48 pm

My neighbor had a guy call him about a loan modification and said he was a lawyer. He said it would cost 3,000 dollars for his fee and he would take the cost of his house from 310,000 to 233,000 and bring his interest rate from 6.5 to 5, plus 3 months off from paying his mortgage. Now this sounds too good to be true.

Is there anyway this could be for real?

PaulMolinaroEsq on March 6th, 2009 12:43 pm

Well, I guess it could possibly under some special set of circumstances if the stars and planets are all in alignment… be true… but… how the heck would someone know exactly what interest rate and exactly what balance a person would get. Any such claims should be examined for misleading statements very carefully and then? Examined again.

Marvin Opiyo on March 10th, 2009 9:43 pm

If a scammer has already taken my money, then failed to modify my mortgage, can your firm sue them? How much?

2. Is there a statute of limitation when suing my lender for predatory lending? That is, if it has been more than three years since the loan closed, do I still have a case?

Paul Molinaro Esq on March 11th, 2009 11:19 am (Edit)

In general, California law prohibits a non-licensed attorney or a non-DRE approved company from taking money up front to handle a loan modification IF THE BORROWER IS IN DEFAULT. Violating California law on this matter might result in the illegal act-doer being hit with THREE times the charge for the service as a penalty. As to statutes of limitations, each statute sets its own limit and the same holds true for non-statutory laws.

(All my posts are for general information purposes only, and are in no way providing specific legal advice for any person or entity.)