Save Your Home

In today’s depressed economy, many struggling homeowners are seeking a way to protect one of their most valuable assets, - their home! For many homeowners, their home represents more than its tangible value. For many homeowners, their home is an extremely valuable “intangible asset”. Home ownership allows their children to continue their schooling and maintain existing friendships within the community without interruption. It also provides the entire family with a sense of security and comfort, especially in these difficult times. For most homeowners, their home is also the repository of a “lifetime” of memories.   

Today, many struggling homeowners find themselves with adjustable rate mortgages. In many instances, they are unable to get a new loan to payoff their existing loan, either because of severely tightened lending restrictions or their current credit standing. In some instances, homeowners are in default, and are significantly behind in their mortgage payments. In other instances, homeowners are current with their mortgage payments, but are desperately struggling to make payments they can no longer afford. 

How Does a Loan Modification Work?

In a Loan Modification, the lender modifies your existing loan by changing the terms of the original note. This may result in the modification of various terms of your mortgage loan, including reducing your current interest rate, changing your interest rate from an adjustable interest rate to a fixed rate loan, changing your monthly mortgage payment, waiving or deferring late charges and attorneys fees, bringing your loan current and allowing you to resume making your normal mortgage payment and, in some cases, permanently reducing your outstanding principal loan balance. In order to accomplish these modifications, it is not unusual for lenders to extend the term of the loan, so as to, in effect, “reset” the entire loan.
Obviously, loan modifications will depend upon the lender involved and the homeowner’s individual circumstances.  

Will a Loan Modification Avoid or Stop Foreclosure?

By entering into a Loan Modification agreement, you will be able to either avoid or entirely stop a foreclosure proceeding.

How Does a Chapter 13 Bankruptcy Case Work?

A Chapter 13 bankruptcy case is a valuable reorganization tool. It can be used to stop a house, condo or co-op foreclosure sale, make up missed mortgage or maintenance payments, and enable you to keep your home.

In order to successfully reorganize, you must be able to resume your normal monthly loan payments. In a Chapter 13 case, lenders cannot refuse your future loan payments. 

You are also permitted to repay all of your missed loan payments over a 5-year period pursuant to a Chapter 13 Plan. If you have unsecured debts, you may also be able to settle these debts for as little as “ten cents on the dollar”, or even less!  

You are also able to sell or refinance your home after you file for Chapter 13 protection.

Will a Chapter 13 Bankruptcy Case Avoid or Stop Foreclosure?

When you file for Chapter 13 protection, an “automatic stay” immediately goes into effect. The “automatic stay” prevents lenders from taking your home or any other property.

What is a Forebearance Agreement? 

In a forbearance agreement, the lender agrees to (i) not proceed with a foreclosure proceeding or (ii) suspend an on-going foreclosure proceeding, based upon the borrower’s agreement to become fully current within a certain period of time. This arrangement typically involves a borrower, who has experienced either a temporary loss of income or unexpected household or medical expenses.

Usually, the borrower negotiates with the lender, so as to enable the borrower to catch up with his loan payments over a certain period of time.

Forbearance agreements are usually of limited use, since lenders are often reluctant to allow a borrower to catch up with his loan payments over a significant period of time. 

What is a Short Sale?

In some instances, it may also be possible to satisfy your entire existing loan indebtedness by getting your lender to accept a reduced payoff amount. This is commonly referred to as a “short sale”.

Are You a Victim of Predatory Lending?

Predatory mortgage lending involves one or more abusive lending practices. If you are a victim of predatory lending, you may have one or more valid defenses to a foreclosure proceeding. Some of the more common examples of abusive lending practices are:

  • Excessive Fees Normally, the total amount of points and fees, which borrowers incur, is less than 1% of the loan amount. In a predatory loan transaction, the total amount of points and fees typically exceeds 5% of the loan amount. 

  • Abusive Prepayment Penalties

    Borrowers with high-interest subprime loans are usually anxious to refinance their loans, as soon as their credit situation improves. Unfortunately, most subprime loans require borrowers to pay significant prepayment penalties, if they wish to prepay their loans. In many subprime loans, there is a prepayment penalty for borrowers, who prepay their loans within the first 3 years. It is not unusual for such borrowers to incur a prepayment penalty equal to six months’ interest. By comparison, in the prime lending market, only 2% of these loans carry prepayment penalties of any length.

  • Kickbacks to Mortgage Brokers

    In the subprime lending market, mortgage bankers typically make loans to borrowers at high interest rates, and then “sell” the loans to lenders, who would ordinarily make similar loans for lower interest rates. Since the interest rate in the original loan document is higher than the lender’s then prevailing rate, the lender pays the mortgage banker an undisclosed “yield spread premium” upon the sale of the loan to the lender. This “yield spread premium” is, in effect, a “kickback” to the mortgage broker. 

  • Loan Flipping 

    “Loan Flipping” typically occurs with home equity mortgage loans. Homeowners like the ability to tap into the equity in their homes to make home improvements, pay college tuition bills and for debt consolidation. Homeowner’s “equity” generally represents the difference between the total value of a home and the amount that is owed to the first mortgage lender.

    “Loan flipping” occurs when unscrupulous lenders induce homeowners to tap into the equity in their homes by refinancing their home equity loan several times over. This “loan flipping” practice repeatedly occurs until the homeowner is no longer able to make his mortgage payments. 

    Whenever a home equity loan is refinanced, homeowners are usually required to pay closing costs and fees, including mortgage loan points, which equal 1% or more of the total loan amount. As a result, each successive loan winds up costing the homeowner thousands of dollars in extra charges.

    In some instances, lenders charged homeowners higher interest rates than the amount charged on their original home equity loan. Some homeowner loans also included prepayment penalties. As a result of these penalties, homeowners sometimes wound up paying thousands of dollars every time they refinanced the loan within the expiration of a specified period of time. In some instances, homeowners wound up paying even more in closing costs, fees, and interest then the amount of cash that the homeowner pulled out of his own home. As a result, many homeowners have wound up with a lot more debt, and now find themselves obligated to make mortgage payments for a much longer period of time than was initially expected.

  • Unnecessary Loan Products

    In the subprime lending market, borrowers are often sold unnecessary insurance, or other products or services, along with the loan. Since these unnecessary products and services are usually “buried” in the loan documents, the borrower is often unaware of the products or services that he purchased. 

  • Mandatory Arbitration

    Another abusive lending practice occurs when lenders insert waivers in subprime loan documents, which deny borrowers the right to file legal actions against the lender, based upon predatory lending practices or fraud. By waiving this right, many borrowers unknowingly signed mortgages that waived their legal rights, stripped them of their right to present their case to a jury of their peers, and provided unscrupulous lenders with substantial advantages should a dispute arise. Instead of permitting borrowers to proceed by way of a court proceeding, the mortgage loan documents provide that all such disputes shall be resolved by way of a mandatory arbitration proceeding.”

    The combined filing and administrative costs in arbitration proceedings routinely costs borrowers thousands of dollars. As a result, the magnitude and uncertainty of such costs deters borrowers from asserting meritorious claims. In addition, while borrowers have the right to retain counsel in arbitration proceedings, it is usually difficult to retain counsel, since there is no assurance that they will be awarded legal fees in the event that they prevail.

    In many subprime loan documents, lenders inserted restrictions on the kinds of damages, which borrowers can be awarded. These restrictions include the borrower waiving any claim for penalties, limiting the amount of any award, and denying the borrower’s right to attorneys’ fees. As a result, predatory lenders are able to conduct illegal, but highly profitable, business practices, without fearing the stiff penalties that courts assess for flagrant and intentional violations of law.

    In arbitration proceedings, lenders are usually able to control the outcome of the proceeding. In arbitration proceedings, repeat players, such as lenders, have an edge over individual homeowners, since the lenders and their counsel are usually familiar with the arbitrators. In fact, it is not uncommon for the directors and officers of lending institutions to also serve as directors and officers of the arbitration forum that is resolving a dispute involving the same lender! 

    In addition, since many arbitration proceedings are conducted “over the phone” and the proceedings are usually kept confidential, and without any public record, borrowers usually find themselves at a distinct disadvantage. Moreover, since there are no public standards for the minimum qualifications of arbitrators, many meritorious claims are not fairly decided. In addition, these proceedings make it highly unlikely that borrowers will receive equitable remedies in cases of fraud or predatory lending. Furthermore, since most arbitration decisions are binding and non-appealable, the “deck is usually stacked against borrowers.

    Furthermore, it is not unusual for borrowers, who have gone through the arbitration process, to learn that find that still need to go to court. This means that borrowers with legitimate claims are forced into a longer, more costly, and often duplicative process to obtain adequate relief. 

    Moreover, as a result of mandatory arbitration, homeowner protection laws, such as the Truth in Lending Act, the Fair Credit Reporting Act, and the Real Estate Settlement Procedures Act (which are all intended to foster an open and fair path to home ownership), are seriously undermined by the “closed door” private justice of mandatory arbitration. These acts only apply in court proceedings.
    It should therefore not be surprising to learn that private arbitration firms market their services to large institutions by touting the advantages that arbitration has for such institutions. 

  • Steering & Targeting

    In many instances, predatory lenders steer borrowers into subprime mortgages, even when the borrowers could have qualified for a conventional loan. Vulnerable borrowers may have been subjected to aggressive sales tactics, and outright fraud. According to Fannie Mae, up to 50% of borrowers with subprime mortgages could have qualified for loans with better terms!

Page Tools