mortgage workout
How to Find the Owner of Your Mortgage
Concerns continue about parties filing foreclosures when they do not own the note. Florida recently enacted a rules requiring plaintiffs in foreclosure to verify ownership of the note. (Here’s a brief article on the rules, with the original subheading “Bankers Don’t Like It”). While these concerns may be interesting for those of us who understand civil procedure, standing, and the importance of the rule of law, the practical problem looms for homeowners who want to know who owns their note. Particularly, in non-judicial foreclosure states or for those families who are not in foreclosure, they do not have the option to ask the judge to order the plaintiff (foreclosing lender) to prove ownership.
John Rao, an attorney at the National Consumer Law Center and Credit Slips guest blogger, wrote a great short piece in the National Association of Bankruptcy Trustees publication this winter called “Six Ways to Find Out Who Owns and Services the Mortgage.” I can’t seem to find an online version, so I’ll give the short story here. For ownership (rather than servicing), the best options that John identifies are:
1) Send a request to the servicer asking it to tell you (the borrower) who the actual holder of the mortgage is, and to provide the address and telephone number of the owner of the obligation. These requests are authorized by Truth in Lending section 1641(f)(2). Importantly, the Helping Families Save Their Homes act of 2009 amended the Truth in Lending Act to provide a remedy for non-compliance. Borrowers can recover actual damages, statutory damages, costs and fees.
2) Review the transfer of ownership notices that are required to be sent as of May 20, 2009 and thereafter under the Helping Families Save Their Homes Act. This one won’t help for loans bought and sold long ago, but at least Congress heard the message that tracking down ownership is a problem.
3) Send a “qualified written request” under the Real Estate Servicing Procedures Act (RESPA). While this statute primarily is aimed at servicers, John Rao points out that because the servicer acts as an agent for the owner of the mortgage, the request is related to the servicing. The servicer has 60 business days to comply, which may be too long for families facing foreclosure. Actual damages, costs and attorneys fees are available for violation. HUD provides a little information on how to make a qualified written request on its website.
It’s important to note what is NOT on this list: the old-fashioned method of searching the land records. John includes that method in his list of six ways, but cautions not to rely solely on the registry of deeds because many assignments are not recorded. I think in a world of MERS, and missing paper, the land record system needs a hard look. The point of that system is to provide a public record of security interests in land, but it’s clearly no longer serving that function in the way it historically has. In what ways is the land record system failing? How should we fix it? Do we need penalties for not recording assignments? Or federal regulation of MERS? Or something else entirely?
Home Affordability Modification Program: How does it work?
Everyone knows about President Obama’s program known as the Home Affordability Modification Program (“HAMP”). Many have wondered if the program can help them save their home, but how does it work? In brief, the HAMP was designed to save your home if you are struggling to pay your mortgage. It was also designed for consumers to be able to work through the process on their own without the need of an attorney or a consultant.
The HAMP process is not really that difficult. A consumer should review the mortgage company’s web site for all required documentation which is needed in order to be considered for the HAMP. Once all the required documents are submitted the company will put the consumer’s request for review under the HAMP into a pool of thousands of other like consumers.
It sounds simple right? Well, there are many problems hidden within this simply process. A consumer should keep in mind that the mortgage company in the HAMP is trying everything not to get the consumer into the review of the program. What I mean by this is that the mortgage company is likely to reject a consumer’s request for not having all documents requested even though you’ve submitted them. Also, the mortgage company is not going to stop foreclosure proceeding while the consumer’s request sits in the pool of thousands of request. The biggest issue with this process is time. The HAMP process is likely to take 3 to 12 months.
How to ensure that this process works for you? You really will need to either make a commitment to setting aside at least two hours a week to follow up with the mortgage company for updates and to ensure that the mortgage company continues to review your request. Alternatively, you could hire a professional like an attorney to ensure that the mortgage company continues to review your request and to ensure that the process is documented.
Overall HAMP is a simple process, but be prepared to dedicate the required time to prepare the documents and also for the long review process.
Loan Modifications vs. Traditional Mortgage Refinancing
There are many differences between loan modifications and refinancing. However the main difference stems from the financial opportunity provided; Refinancing relates to obtaining a whole new mortgage, whereas a loan modification is simply changing the essential terms of the homeowner’s present mortgage. When you refinance your mortgage you are paying off your existing mortgage with a new mortgage thereby change your payments for the life of the new loan. The two largest facts that come into play in determining if a homeowner will be approved to refinance is their credit rating and whether any equity exists in the home.
A loan modification generally is considered a temporary solution to a homeowner’s inability to comfortably pay the full mortgage, or to wait out an uncertain real estate market. According to Michael Hall in the Practicing Law Institute Corporate Law and Practice Course Handbook Series, March 2008, homeowners will be moved into a lower fixed interest rate, for five or more years. The most significant benefit of a loan modification is that credit scores do not come into play. Under many state laws, (for example M.G.L. c. 93A) if you want to get help negotiating a loan workout or modification, an attorney must negotiate with the bank on the homeowner’s behalf based upon your hardship. There are no closings needed in a loan modification. As such, there are no closing costs, no points being paid, no new title insurance fees, no application fees, or any other fees typically incurred in traditional mortgage transaction.
There are Federal loan modification programs such as the Home Affordable Modification Program (“HAMP”), however, traditional loan modifications are conducted by the bank under no specific program. Each lender has its own set of rules to determine whether a consumer can qualify for a modification. Some lenders will look at the homeowner’s other outstanding bills; if the homeowner is in financial distress and whether there is equity in the home. Some lenders will look to the amount of time the homeowner has gone without making a mortgage payment. Sometimes the modification will be as simple as moving from an ARM loan to a fixed mortgage rate, or if there is a FHA loan involved, the homeowner could qualify for a partial claim. A partial claim, according to Brian Heaton, in the Indiana Law Review of 2005, is when the loan is brought current and a lien is placed on the property for the outstanding balance until the property is sold or refinanced.
The benefit to a homeowner of conducting a loan modification is rather obvious, in many cases a very large reduction in monthly mortgage payments. Additionally, under the HAMP program, should the monthly payment be reduced by 6% or more, homeowners are eligible to receive $1,000 per year for up to five (5) years against their principal.
Should you wish to learn more about traditional loan modifications or those pursuant to the Federal Govenment, you should contact a local bankrutpcy or consumer debt lawyer in your area.
