Stop a nonjudicial foreclosure

HAMP can stall process, but affidavit hiccup could spell doom.

DEAR BENNY: I am writing to you to regarding the "nonjudicial" process of foreclosure. My wife and I received a repayment agreement for our original mortgage from a bank, whose name we won't disclose, as part of the loan modification program. This was a result of the bank initiating a foreclosure case toward sale and the temporary suspension of the sale, because we agreed to enter the Home Affordable Modification Program.

In any case, the bank is asking us "to acknowledge that they are the legal holder and owner of the note and security instrument and further acknowledge that if lender transfers the note, as amended by this agreement, the transferee shall be the 'lender' as defined by the agreement." It should be noted that this is not the original bank we signed the mortgage with.

The bank also proposed a three-month trial period where we would pay a slightly lower amount for the mortgage.

We obviously won't sign this amendment and supplement to the original mortgage until we have an attorney review the documents.

Unfortunately, the bank has given us less than two weeks to sign the amendment to the original contract and send the modified payment, and we don't have time to find an attorney who is who is fluent in foreclosure defense litigation.

We want to send a letter to the bank to inform them that we will not sign the letter without the benefit of having an attorney review the documents first. However, we want to make sure this is the proper procedure, as the bank can possibly get a summary judgment to foreclose on a technicality if this is not the proper procedure.

Because we are not exactly sure how to respond to the bank, your help in this matter would be greatly appreciated. --Brian

DEAR BRIAN: Unfortunately, by the time my answer is printed, it will be too late to assist you. But this has become a serious -- and significant -- issue in recent months, so I am writing to hopefully assist other readers in similar situations.

This is a nationwide problem. Banks go down two tracks: modification and foreclosure. And often the person at the bank who is working on a loan modification does not talk with the attorneys who are moving forward to foreclose.

Clearly, the best approach would be to hire an attorney who will try to get a judge to issue a restraining order to stop the foreclosure. But unless you can qualify for free (called pro bono) legal assistance based on your income, you will have to pay a legal fee.

Alternatively, there are local, state and federal agencies that may be able to assist.

Finally, when my clients have problems with national banks, I often file a complaint with the Office of the Comptroller of the Currency, a federal agency. I have found that agency to be fairly responsive, especially because the banks under its jurisdiction are required to promptly respond to the government agency. You can find that office on the Web at www.occ.treas.gov.

In recent years, lenders who made mortgage loans would bundle them up and sell them to investors. This gave the lenders more money to lend, and gave the investors a possible profit. But as real estate prices fell and homeowners were being foreclosed upon, these investments turned sour. Oversimplified, this was one of the primary causes of the financial situation we currently are in.

But when the lender packaged its loans, included in the package was the original promissory note that the borrowers had signed.

In many states, judges will not allow a foreclosure to take place unless the foreclosing party can produce the original note. And the originals -- as a result of this bundling (called "securitization" in the financial world) -- are scattered all over the world. That's why your bank wants you to sign that affidavit, and you were correct to seek legal assistance before signing.

Obviously, it's a difficult decision to make; some people would call it a "Hobson's choice." You really have no alternative: Sign or lose your house.

If you are facing foreclosure, get help immediately -- whether that be from a lawyer, a government or private agency, or a combination of those.

Inman News

8 Tips to Getting Your Loan Modification Application Reviewed

Many homeowners seeking a loan modification to lower their monthly mortgage payments and avoid foreclosure continue to find the application process a complex web, often causing them to give up before their application is ever reviewed by their mortgage company.

Certified housing counselors for CredAbility, a national nonprofit credit counseling and education agency, speak daily with hundreds of homeowners seeking a loan modification or other solutions to keep their homes. The organization has several tips for people that will help them increase the chances that their application is reviewed as quickly as possible.

"A homeowner needs to collect and send several documents that tell the mortgage company why you need a modification, and it needs to be done in a timely, organized manner," said Michelle Jones, senior vice president of counseling for CredAbility. "Once a homeowner has submitted these documents, they need to stay in regular contact with the company. With hundreds of thousands of applications under consideration, homeowners must take matters into their own hands to make sure their application gets to the right person at the company."

Here are CredAbility's recommendations for homeowners seeking a loan modification:

Speak With a Nonprofit Housing Counselor to Understand Investor Rules for Your Loan. Every homeowner's mortgage loan is different, so don't rely on information you may have heard from your neighbor or your sister-in-law, even if they received a loan modification. For example, if your 30-year, fixed interest rate loan is owned by one investor, and your neighbor's is owned by another investor, the rules governing a loan modification may be quite different. A certified counselor at a nonprofit credit counseling agency can help you find the investor who owns your mortgage and determine your options.

Submit All Documents That Prove Your Current Income. Income verification is critical, but homeowners sometimes don't provide their mortgage company with recent documents. If you lost a job in June, don't provide pay stubs from March. In addition to recent pay stubs and other traditional income sources, homeowners should also provide a document called a "contribution letter." This letter explains the source of any household income that is not easily verified. For example, a servicer will want to know the total household income of a married couple, even if only one person's name is on the loan. The letter could also include income verifying that you have a roommate that pays rent.

Submit Current Bank Statements. Recent bank statements allow your mortgage company to verify your income and expenses. This information enables the mortgage company to see your monthly expenses for food, utilities and other expenses and determine whether you will have enough money to make your mortgage payment.

Mail Your Documents to the Mortgage Company. Many people prefer to send all of their documents by fax or scan their documents and send them via email. However, postal mail is usually more reliable, especially if it's addressed to the person you spoke with at the mortgage company. Faxes often get lost.

Label Each Page With Your Name and Loan Number. One of the most common complaints among homeowners is that the mortgage company loses their documents. You can help your own cause by writing your name and loan number on each page of every document.

Fully Explain Any Recent or Unique Income Changes. For example, a bank deposit may show various one-time transactions, such as an asset sale, cash gifts from family members or a bonus. Unless you explain this one-time increase in income, the servicer may not understand it and use this information to deny your loan modification.

Include a Timeline in Your Hardship Letter. Every application for a loan modification must include a "hardship letter" that explains the reasons for your request. But the letter must have specific dates explaining when an income loss has occurred. If your spouse lost her job on July 15 and your family income will decrease by $3,000 beginning in August, your letter needs to provide these details.

Call Your Mortgage Company Every Week. Many homeowners work extremely hard to submit all of their paperwork to the servicer - and then wait for weeks before picking up the telephone to call them about the status of their application. This is a mistake for several reasons: the person handling your application may quit; the application may be transferred to another person; the company may need more information. You get the picture.
RISMEDIA

Learn About Making Your Home Affordable Again

Your Path to a More Affordable Mortgage ... http://www.makinghomeaffordable.gov/

President's Homeowner Affordability and Stability Plan

On March 4, 2009, The Obama Administration announced new U.S. Department of the Treasury guidelines to enable servicers to begin modifications of eligible mortgages under the Administration's Homeowner Affordability and Stability Plan – announced by President Barack Obama on February 28, 2009. NAR has reviewed these policies and has developed a summary of the plan. You can also get more information from the brand new website set up by the Treasury Department: www.financialstability.gov.