Last updated May 17, 2018.
Late mortgage payments and the threat of foreclosure can be extremely stressful and upsetting. When your mortgage bills are more than you can handle, you’re looking for any solution that can help you keep your loan in good standing and stay in your home. One option that can help is called “mortgage modification.”
Unfortunately, you have to be very careful when engaging a company to assist you with a loan modification. In fact, as described below, an Orange County law firm has recently been accused of promising consumers mortgage modifications and then keeping the cash.
Article at a Glance
- Work to negotiate the terms of your loan, lower your interest rate, or obtain a grace period if you’ve missed mortgage payments. Professionals can help you with a mortgage modification — if you qualify for a special government program — but it’s important to be wary of who to trust.
- Because foreclosure announcements are public record, scammers are everywhere. Most mortgage counselors are not allowed to accept fees upfront in California, so stay away from ones who try to!
- Mortgage modifications aren’t for everyone. They’re similar to bankruptcy in that way, but bankruptcy also helps millions of Americans every year keep their homes and get back on track with their finances. Bankruptcy also has several other benefits, including the automatic stay, which stops foreclosure and collection proceedings.
What is a mortgage modification?
Your lender doesn’t want you to default on your loan; most lenders have entire departments dedicated to helping borrowers make their loans work. If you’re struggling to make your payments, you may be able to negotiate the terms of your home loan with your lender to make those payments easier. Your lender may be willing to extend the term of your loan, lower your interest rate, or give you a grace period so you can get back on your feet. This is a permanent modification of the terms of the original mortgage loan.
Who works on mortgage modifications?
While you can handle a mortgage modification on your own, it can be difficult and intimidating to negotiate with a large bank or other financial institution. Chances are that you’ve never renegotiated the terms of a loan before. If you don’t feel comfortable calling up the bank and asking to modify the terms of your loan, there are professionals and programs available to help.
For example, you can consult with a mortgage modification counselor. These counselors are often part of not-for-profit organizations and are licensed by the US Department of Housing and Development and the California Bureau of Real Estate. They’ll help you evaluate your finances and decide what modifications to ask for. In addition, the federal government offers the Home Affordable Modification Program (HAMP) for qualifying borrowers; HAMP can reduce your payments, lower your interest rate, and more.
Attorneys can also help with a mortgage modification. Your attorney can negotiate on your behalf with the banks; they have plenty of experience and know all of the relevant regulations and laws that affect your mortgage. Your attorney can also help you qualify for HAMP and other federal programs; the eligibility requirements are strict and your attorney can make sure you have a fair chance at acceptance. But, again, be sure you are dealing with a reputable firm.
Loan Modification Fraud in California
Unfortunately, thieves and scammers know that homeowners facing foreclosure are particularly vulnerable and desperate for help. That means mortgage modification scams are popular with the unscrupulous. Scammers will watch newspapers and public records for foreclosure announcements and target those individuals, offering to help them modify their mortgages for a small fee. The scammers collect the fee and disappear.
Orange County Lawyers Run Mortgage Modification Scam
In a recent case, the scammers were actually lawyers in Orange County. Attorney Gary Lee Kane and his associates promised desperate borrowers help with mortgage modifications and collected fees from their unsuspecting victims. The law firm in question set up at least 3 fake non-profit mortgage modification companies to draw in struggling borrowers and charged the borrowers large fees up front. They kept the fees but never made any effort to modify their clients’ mortgages, defrauding borrowers of thousands of dollars each.
At trial, the jury unanimously found the lawyers guilty and awarded the victims damages of more than $200,000. In addition, the main attorney involved was disbarred and is no longer eligible to practice law in the state of California.
Avoiding Mortgage Modification Scams
Foreclosure is scary and overwhelming and it’s natural to look for options to help you stay in your home. The fear of losing your home makes it easier for people to take advantage of you. It’s important to know your rights and know how to spot a scam so you don’t get stuck paying thousands of dollars for nothing.
First, non-profit mortgage modification companies may not accept fees up front. They can only collect a fee after the modification is complete. If a mortgage modification counselor asks you to pay a fee, don’t do it! If you’re asked to pay an advance fee, you should report the counselor to the California Bureau of Real Estate and the California Department of Consumer Affairs.
Even if you’re not asked to pay an advance fee, you should check up on the mortgage modification company and your specific counselor to see if other consumers have had problems with them.
Is mortgage modification right for you?
Mortgage modification can make your payments manageable and can make the difference between keeping your home and losing it to foreclosure. However, mortgage modification does come with risks of its own. Remember that your lender is not required by law to renegotiate your loan unless you qualify for a HAMP program, so you’re not guaranteed a mortgage modification.
If you can’t negotiate the necessary changes to your home loan, what can you do? Bankruptcy may be a good option. When you file a personal bankruptcy, you can have your unsecured debts (such as credit card and medical debts) discharged — that means they’re completely forgiven. Without the cash pressure of other debts, many borrowers find they can afford their mortgage payments.
In addition, bankruptcy gives you the protection of the automatic stay. The automatic stay prevents all collection actions during the bankruptcy process, including foreclosure. That gives you the space and time you need to reorganize your finances without worrying about the bank selling your home out from under you.
We Can Help
If you’re struggling with mortgage payments and other debt, contact us today for a free case evaluation and consultation. Our experienced local attorneys can help you evaluate your finances and explain your options for managing your debt. We’re standing by to help you on your journey to financial security. Contact us today.