A CALIFORNIA LOAN MODIFICATION, FORECLOSURE PREVENTION HOUSING

							   A CALIFORNIA LOAN MODIFICATION,
  FORECLOSURE PREVENTION & HOUSING
      CRISIS INFORMATION WEBSITE


                               Loan Modifications             Loan Audits
                               Loan Rescissions               Forbearance
                               Loss Mitigation                Foreclosure



           FORECLOSURE PREVENTION
            Written by Patrick Pulatie for BrokenCredit.com




Much has been written about the foreclosure problems facing
many homeowners today. But how effective are the programs
and which one should a person choose? I offer this as the topic
today because there is much confusion about these programs and
what is entailed. I will discuss the characteristics in basic and
random order.

Chapter 13 Bankruptcy is still the most common attempt made to
stave off foreclosure. With the filing, all foreclosure proceedings
are put on hold. It is a legal action in which all debt is organized
into what is hoped to be an affordable monthly payment for the
homeowner. All consumer debt and taxes are lumped together to
create one monthly payment for sixty months . Included in this
amount will also be the mortgage amount that is in arrears. it is
hoped that this new monthly payment will reduce monthly outgo
and solve the person’s financial problems.
The problem with going this route is that one still must make the
current mortgage payment, plus the bankruptcy payment. It does
not address the mortgage rate or terms. So if a person has an
adjustable rate mortgage, then that rate can continue to adjust
up or down. So a homeowner still can face changing payments.

Also, lenders include many “junk” fees in the foreclosure
process. Unless you have a sharp attorney who understands this
and also how RESPA and TILA violations can be used in the bk
process, you can be at a big disadvantage.

A large number of people using this method will end up losing
their homes anyway.

Loan Forbearance

Forbearance is a popular method promoted by lenders. It is a
process where the lender will “workout” a new payment plan for
you to catch up. It involves a higher payment for many months to
a couple of years. Occasionally the lender will add payments to
the end of the loan term.

A “wrinkle” on this plan is one I have seen from Wells Fargo.
They will adjust the payment for a short period of time, in this
case four months. At the end of four months, the borrower must
come in with a large lump sum payment, again in this case
$40,000. If they cannot pay this amount, or they miss one
payment, the forbearance ends and the foreclosure picks up
where it left off.

As you can see, forbearance does not address the issue of
increasing interest rates, etc. This is a plan where the
homeowner is likely to fail.

Loan Modification

This is a popular program. With it, the lender will negotiate new
terms on the mortgage, reducing the interest rate and payment.
However, there are major problems with this program.
Lenders tend to not work with people who are not in default or
late on payments. In fact, they often tell the homeowner that
they must be behind on the mortgage before they can be
processed for the modification. So the borrower allows himself to
get behind on the mortgage and then the mortgage company
starts to process the modification. But there is no guarantee that
it will be approved, which is often the case of it being declined
more than 80% of the time. Now the borrower is behind, no
modification, and they have trashed their credit. Unfortunately, I
see this time and again.

Lawsuits

I refer to this as the “Nuclear Option”. In this program, the
homeowner goes to an attorney who will check over the loan for
violations of RESPA, TILA, fraud, deception, and other issues.
(This is usually done by outside people familiar with the loan
process.) Based upon the findings, the lawyer will determine if a
case exists for filing lawsuits.)
At that point, a retainer agreement is executed and the lawsuit
is filed. It will usually include a Restraining Order stopping the
foreclosure on the home until settlement is reached.

The issues with this method is that it is very costly. The retainer
can involve payment of the initial fee upfront, or monthly
payments. This can be quite overwhelming for many
homeowners.

Also, while the case is ongoing, though the homeowner is not
making his mortgage payment, he must have a bank account
where he is depositing the monthly payments and not using
them. This is interpreted by the courts as a sign that the lawsuit
is being done in Good Faith.

The lawsuit must have an End Game to it. There must be a plan
on how to end. Most will involve settlement whereby the loan
will be rescinded or modified. Very few actually go to trial due to
the high cost of litigation and lender willingness to settle out of
court rather than risk trial in this current environment of the
housing crisis. If there is no realistic End Game, their is no
lawsuit.

The other issue is that the homeowner must understand that he
is “going to war” against the lender. Lawsuits are not an easy
chore. They are time consuming, stressful, and expensive. Many
homeowners start a suit, only to back out midway into it because
of the cost and the stress.

These are the most popular methods of stopping foreclosures.
They all do have their drawbacks and risk. Nothing is ever
guaranteed in these negotiations. The most important part for
deciding which method to use to stop a foreclosure is to take
time and carefully evaluate your options. And, when you decide
which method to use, to commit to going through with it, thick
and thin. It will be frustrating and time consuming, but it can be
effective.

(Patrick Pulatie is currently a Loan Officer, Loan Examiner, and
Court Expert Witness. Please feel free to contact him with any
questions you might have about your options. He will be more
than happy to answer your questions. He can be reached by
email at ppulatie@pacbell.net or by phone at 925-522-0371.
BTW, He is not an attorney and does not give legal advice.)