Beware of Loan Modifications!

[Ruby the Liberal]

I hadn't thought of this, but it makes perfect sense.

Here's The Devious Reason Why Banks May Be Releasing A Wave Of Mortgage Modifications

There has been (from my narrow perspective) a flood of approved loan mods in just the last few weeks. People who were on the edge and not paying a mortgage get a letter in the mail that says their application has been approved. After weeks and months of hanging on a phone and waiting for an axe to drop some relief arrives. Nothing particularly unusual about that. Mods are granted all the time. But I was struck by the timing. The foreclosure story is exploding around the banks. It is not possible to see where this will end but it is a certainty that it will cost the banks big time.

What might a banker do if he was sitting on a pile of defaulted mortgages and now the traditional route of foreclosure was blocked? Adding to the problems of the bankers is that there is no assurance that they even have a valid claim to foreclose given that so much of the paperwork is tainted.

One possible response would be to get all troubled borrowers to reaffirm their debt, the second is to get the trouble borrowers back to paying something on the mortgage, even if it were a fraction of what was formerly owed on a monthly basis. A loan modification would achieve both results. When a borrower signs up for a loan mod they sign new papers. A portion of this process will re-establish any loan balance that is due. The language in the mod could have new foreclosure terms that eliminate the banker’s problem with past tainted documentation. Once a borrower makes a few months of new lowered payments they are, in effect, confirming their acceptance of the new terms.

Most Mods go bust in six months. So little is accomplished from the lenders perspective. But what if the lenders motivation for doing a Mod was not to get a borrower to a loan balance and monthly nut that they could pay, but rather the motivation was to circumvent the foreclosure trap the lenders are in? A Mod could legally resolve the problems.

Read more: http://www.businessinsider.com/wave-of-mortgage-modifications#ixzz12dtvSOmF

[Odin2005]

1. Of course, banksters don't do things out of the goodness of their hearts.

[EFerrari]

2. From our experience and the bit of reading I've done

the national banks tell you that you are approved for a mod, delay, delay, delay, and then simply take the property. They've been going at it full tilt boogey for some time. Doing what the OP suggests will require them to come to a full stop on that program and actually follow through with the mods.

[Raven]

3. They still have the title problem, don't they? If they can't substantiate

the original loan and their ownership of it, how can the banks modify the loan?

[EFerrari]

4. Because the borrowers aren't trying to verify title

they are asking to modify the terms of their debt. If the borrowers don't ask, it won't be brought up.

[tridim]

7. What's the harm in continuing to break the law? Nobody is stopping them.

Yet.

[Ruby the Liberal]

11. This isn't a refinance - it is a note modification

Can't foreclose because you can't produce the note? Con the borrower into signing a new one.

[Raven]

14. Do we all generally agree that if someone got the money to buy

the house they owe the money to someone?

I had a client once who borrowed $ to buy a house from a mortgage company. He paid for awhile and then stopped getting monthly mortgage bills. That lasted for about 2 years during which time the client didn't escrow the $ or try to find out what was up with the lender. The lender then reappeared and wanted the 2 years of payments. My client didn't want to pay. He got the $ and bought the house with it but somehow thought he didn't have to pay up. I honestly don't understand that mentality.

[Ruby the Liberal]

15. Without question. That is morally/ethically corrupt.

My "beware" shouldn't be read as "under no circumstances do this" but as "be informed and ask the right questions".

[Reader Rabbit]

5. So glad I'm refinancing with my credit union.

These people are evil.

[dkf]

8. My credit union started selling all their mortgage loans.

I wonder if they are immune from these shenanigans.

[tridim]

6. And another big piece of the puzzle falls in place.

Great read. Thanks.

[glinda]

9. We had one offered to us a few months back as part of the program through

the Obama administration and Government. Is this the same or different?

[Ruby the Liberal]

10. Same thing.

They played games with the program and modified precious few loans. What the author is noting here is that all of a sudden, the mods are getting approved and overnight at that. His theory is that the new note you sign could wipe out the little problem the banks have today by not being able to produce the note on their current foreclosures.

If he is right, this is downright evil.

[Pisces]

12. I am not clear on what you are advocating. Loan modification is

what most people want. If you can not afford the loan modification then your choice is to short sell or go into foreclosure. Under no plan do you get to keep your house for nothing????
What do you propose people do?

Even if the paperwork was not files correctly, money is still owed on the property. You, as the home owner will never get to retain your property due to improper filing. Unless you were paying the wrong person due to the incorrect filings and the mortgage owner filed foreclosure because they did not receive the payments. I can not imagine another scenario where you get to keep the house and pay
no one.

Companies are always out for themselves, sometimes the politics makes it so that the consumer has a chance to benefit. If you are a person waiting for a mod and get approved due to the current
climate and you can afford to pay the mod payments, why would you tell them to beware????

[Ruby the Liberal]

13. Motivation. Legal ramifications.

I am not an attorney, and anyone in a pending foreclosure should run, not walk, to their nearest real estate attorney, so don't construe this as legal advice.

What the author is saying is that the foreclosure crisis hit and then all of a sudden, loan mods accelerated. In a loan mod, the note is rewritten. The current foreclosure process is a mess because there is no ownership trail on the original note - thus no one can prove who actually owns the mortgage. He is saying that by modifying the note, the borrower signs a new note and *poof* the problem goes away (or could). He is also noting that most mods fail within 6 months, so statistically, this is the banks kicking the (inevitable) can down the road where they can go to foreclosure in a few months without that pesky "no note" problem.

If I were in the position of facing foreclosure, I would double down and take the "produce the note" strategy to the mat rather than sign a new note - but again, this would need to be run by an attorney. I tend to be more of an ideological fighter than a pragmatist.

I am not advocating that people shouldn't pay what they owe or get a home for free. That isn't moral or ethical, IMO. However, if the banks are acting like crooks, this could provide huge leverage on the modifications (beyond what is being offered now, hurriedly, in the dark of night).

Right now, the scariest thing a person could do, IMO, is to purchase a foreclosure. The details keep dripping out about how toxic this all is.