Friday, April 13, 2012

Limited loan modification options for loans involving servicing and investor banks

Question: I received a foreclosure notice after 3 plus years of trying to get a loan modification through my servicing bank. They told me after many tries that the investor bank would not allow my loan modification. I would like to fight them in court as to their right to refuse my loan modification after they rejected my payments. Do I have any options? I've sent payments but they were returned, tried loan modification but that didn't work. Is it possible to fight the validity of my bank in court as the trustee of my note is considering they probably purchased my mortgage with thousands of others and are looking to write off the debt. I have saved up the 90% of my arrears, but I don't want to give it to them without getting better mortgage terms. Should I hire a lawyer to fight this case for me?

Response: It sounds like your case will involve some serious litigation. It is very likely that the bank in the foreclosure action may not be able to prove its standing to sue (by not being the owner of the note) but that can only be disputed if it is timely brought up to the court. Unfortunately, most of these loans where one bank is the servicing company but another bank is the investor, the options for a loan modification are limited. In many similar cases, the investor bank granted the servicing bank very limited rights as to what can be done in terms of loan modification (that information is provided in the Pooling and Servicing Agreement that you would not necessarily know about). Sometimes, when you speak to a servicing bank representative over the phone, you can ask them for the type of limitations that the investor bank has provided in terms of loan modification. The investor bank, for example, may allow for an interest reduction but may not allow term extension, which is another major component of achieving affordable monthly mortgage payment. Also, very often, the problem of being denied a loan modification is improperly filled out paperwork. If you are not properly documenting your income, it is very likely that you can be denied for having insufficient income or you may be denied on the grounds of already having an affordable monthly payment (i.e. current payment is lower than 31% of your gross monthly income). In any case, your hope is not lost. If you just ended up in foreclosure after 3 years, then your process is just beginning. First, you will have to go through the court mandatory foreclosure settlement conference part, where the bank must negotiate with you in good faith. You have a lot higher chances of obtaining loan modification while in court than on your own. So, your battle is just beginning and good luck winning it!

In the legal blog, Attorney Svetlana Kaplun addresses typical questions our firm has received from our clients, or come across from homeowners related to foreclosure, foreclosure defense, loan modification and bankruptcy topics.

The information contained in the legal blog of Attorney Svetlana Kaplun is for informational purposes only, and should not be construed as a legal advice on any subject matter. Please read our full disclaimer or contact the Law Office of Svetlana Kaplun, P.C. by telephone at 718-444-1115 for more information.
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