Episode 4- Myths About Loan Modification
This Episode of “Use the Law”, Las Vegas Nevada attorney David Rahm discusses the Myths of Loan Modification in Las Vegas, Nevada.
Podcast Transcript:
There are a lot of common myths out in the industry about loan modifications and mediation. One of them is that in Nevada, the lender has to quote, “Produce the Note!”
Myth Number 1- The Lender Must Produce the Note!- The Produce the Note idea started because when a party’s original lender made the loan, they may have turned around and sold it to a larger bank, and they may have turned around and sold it to a large investment house like Merrill Lynch, Bear Sterns or Leehman Brothers, who may have turned around and put into a syndicated package of ten thousand loans from all across the country. Then sold that syndication, very similar to a real estate investment trust investment; where you could buy shares in that syndication. The way they sold them five years ago, it seemed like it was a great investment. One could make three times as much money as you could at the bank, with no risk! The logic was, who’s not going to make their house payment? Well, times have changed! A lot of people are not making their house payments. So in Ohio and in Pennsylvania (and a few other States), there were some State and federal judges who told parties who wanted to come in and foreclose people;
“Before you can foreclose them, you have to produce the original note and the deed of trust, and any assignments from the first lender, to the big bank, to Fannie Mae or Freddie Mac, to the big investment house, and out into syndication. Because, how do we know you really own their mortgage, and we’re not going to let you to foreclose their house if you really don’t own the mortgage.”
That happened in a couple of States in the 2006 to the 2007 time frame. That’s where the Produce the Note language came from.
Today, in Nevada, there is no requirement to “Produce the Note”. There was a federal case decided in Southern Nevada in early 2009 where the federal judge determined there is no requirement to produce the note. At mediation, because of a statute, the bank does have the requirement to “Produce the Note”.
If you are going to a loan modification company or an attorney who is telling you they are going to fight to keep your house by sending out a qualified written request for all your information, and find out what the bank did wrong on the loan, and if they committed fraud, and then we are going to ask them to produce the note; you are totally wasting your time and your money and the net result is very likely going to be that you are going to loose your house!
The second thing I want to talk about is the topic I briefly mentioned above, and that is Sending out a Qualified Written Request, and asking the bank to send to your loan modification company or your attorney all of the loan documents pertaining to your original loan. That’s fine! This law office has done the same thing many times. The problem is, in Nevada, lenders and escrow companies, and title companies, and loan officers, and escrow officers have limited, if any, fiduciary duties to borrowers. That means, It is a let the “buyer beware” State! If you go get a mortgage, it’s presumed you know what you are getting yourself into. It is not the escrow officer’s duty to explain it to you. It is not the loan officer’s duty to explain it to you or make sure those terms are acceptable to you. It’s your duty to know (the borrower)!
So if you ask for a qualified written request, and you get all the documents from the bank, and you see that they forgot to have you sign this document or they fail to do something that is minor in the scheme of things, there are people out there that are telling you:
“Ah, you can use that to get out of your whole loan. You can get the bank to write off your whole loan!”
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Well, I have been an attorney in Nevada for seventeen years working primarily in the area of real estate law, and I have represented well over one hundred homeowners in Las Vegas and other parts of Nevada in loan modification and the mediation process. I have also represented approximately 15 to 20 of them in litigation in District Court and Federal Court in the Southern District of Nevada. I know other attorneys, some of who have filed as many as three hundred lawsuits in this area. I have not heard of a single case where the plaintiff (homeowner) prevailed based on a fraud theory. Not a single one! There may be some, but there aren’t very many. It is not a useful area for you to expend your efforts and your money trying to save your home.
The bottom line is that you are highly unlikely in litigation, or in a demand letter, or in any communications with the bank, to get them to write down your principal balance, to get them to write off your mortgage, to get them to do anything useful to you; pertaining to an error that was made in your closing documents or anything pertaining to a fraud claim. It just isn’t happening. I know cause I have represented clients in this area, and at the end of the day, we’ve ended up getting them loan modifications because that was the only thing that was available to them.
So I caution you! Don’t get ripped off an inexperienced attorney. By an unlicensed loan modification company. If you are going to look at this area of law, or if you are going to seek information on how to save your home; if you are going to find a clean way of breaking from your home and giving it back to the bank, then make sure you go to a licensed Nevada attorney that knows something about real estate law. They must have experience in real estate law and have actually helped homeowners just like you! Don’t make the mistake of going to an unlicensed loan modification company, or an out of State loan modification company, and don’t go to a local loan modification company who tells you, “Oh yeah we are backed by an attorney and we’ve got an attorney here, but you don’t actually meet with the attorney.”
You can come to my office and have a FREE Consultation with me (David Rahm), because I will find out what your circumstances are, and determine what the best course of action is. That is the only way, you can effectively protect your rights!
Call David Rahm for a FREE CONSULTATION at 702-369-4663
Mediation
More about Mediation to come.
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Loan Modification FAQ
Las Vegas Loan Modification FAQ
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What is a Loan Modification?
A loan modification is simply a restructuring of the current loan terms between the borrower and the lender. Lower interest rates, longer term, principal reduction, or a principal forbearance are a few examples of how a loan modification can help a homeowner lower their monthly mortgage payment.
Why would agree to a loan modification?
The main purpose of a loan modification is to reach a mutually beneficial agreement between a lender and borrower that prevents foreclosure or future payment defaults. With the rapid decrease in Las Vegas property values, prolonged sale times due to an over abundance of listing inventory, and the tightening up of mortgage guidelines for new purchases, lenders that acquire properties through foreclosure stand to lose significantly more money than potentially working out a new payment arrangement with a current borrower.
How do I qualify for a Las Vegas loan modification?
This is slightly a tricky question, so please refer to the legal disclaimer below.
The Making Home Affordable Modification program is a government sponsored loan modification plan that was designed to help up to 9 million American homeowners avoid foreclosure by reducing their monthly mortgage payments to something more affordable for a five year term.
To qualify for the Obama Modification Plan, you need to live in the home you are modifying, the balance cannot be more than $729,750 for a single unit, there has to be a significant hardship, and the possibility of foreclosure has to be imminent. Since this is such a new program, the various servicers, lenders, and other financial institutions are still learning how to adjust with the guidelines.
Qualifying for any other form of a loan modification that does not fall under the Making Home Affordable guidelines requires a negotiation process between the borrower, investors, and generally a servicer who may act as the middle filter. Since the lender / servicer’s main priority is to protect their investor’s financial interests, it is important to be familiar with any violations in the real estate or mortgage contract that potentially contributed towards your current financial hardship.
To answer this question more specifically, qualifying for a loan modification is a process that involves proving to the lender / servicer that you have the ability to make future mortgage payments on time based on a calculation of a new rate, term, principal amount, and your income, assets, and employment.
We are finding that equity, or the amount a home is underwater, does impact a lender / servicer’s decision as to whether or not they would approve a borrower for a loan modification or short sale.
Do I need to be late on my mortgage to qualify for a loan modification?
No, under the Making Home Affordable Modification Program, the guidelines state the a borrower does not have to be late on their mortgage to qualify for a loan modification. If your lender has forced you to go 90 days past due before they are willing to start the modification negotiation process, it is important to speak with an attorney about your legal recourse.
What if I am already in foreclosure?
Foreclosure can be postponed while a loan modification is attempted, but it is vital to file the proper paperwork as soon as possible.
What if I have assets, can I still get approved for a loan modification?
Since most lenders weigh their decision for a loan modification based on the threat of imminent foreclosure, having a significant amount of available capital does not strengthen your case. However, there are several other factors that can be taken into consideration, including monthly budget, lender or RESPA violations, employment and income.
Will the lender require an appraisal or inspection?
Yes, the lender may require that your property is inspected to determine the livable condition as well as the market value.
Can I do a loan modification on my own?
Yes, it is possible to work out a solution directly with your lender / servicer that lowers your monthly payment. Just be aware of any hidden language in the new contract that requires you to sign away your legal rights to litigation. Other things to pay close attention to are the terms of the new loan, whether or not your mortgage becomes a recourse vs non-recourse loan, if there are any balloon payments 15 – 20 years out, and the difference between a lower rate vs a longer term. There are literally hundreds of details that can mean the difference between the perception of a lower payment vs an actual fair loan modification.
What if I have already failed on my own, is there still hope with the help of an attorney?
Yes, most homeowners or real estate professionals are not well versed in real estate / mortgage contract law. Actually, most of the loss mitigation consultants or case managers at these large financial institutions are still learning the process. Knowing your legal rights, how to write a hardship letter, and who makes the final decision can give you a significant advantage for a successful loan workout.
A complete forensic loan audit may uncover several lender violations that your bank may not want to address court.
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Click Here for Legal Disclaimer
Please contact us @ 702-369-4663 · for more information. Since they do place first priority on homeowners who need immediate help, we’d like to please ask for your cooperation and to contact us to see if we can answer some basic questions and get you set up prior to meeting with them. We will respect your privacy and understand how sensitive every one’s individual situation can be.
09-04-2009 New Online Video Ad
Attorney David Rahm has over 17 years of experience as a lawyer, and for years has been doing both residential and commercial real estate law. He has a successful proven track record of loan modification in Las Vegas, and is offering new clients a free consultation with him. He looks at each case individually and works with the client to decide the best possible solution. He can help you reduce your interest rate, represent homeowners in mediation, extend loan payments, and in some cases reduce the principal balance. Call 703-369-4663 for a FREE CONSULTATION. You must be a Nevada homeowner, or visit http://www.DrLawLV.com for more information. The David Rahm Law Group has a great reputation and is ready to help you now! Se Habla Espanol!
