Loan modification is a big subject, something we get asked about a lot. Essentially, it’s when a borrower needs to work out some sort of payment arrangement with their lender because they fell behind on payments due to a financial hardship and has become so far behind that they can’t just catch the payments up in one or two months but they need some sort of special arrangement with the lender to be able to get their loan reinstated. Most commonly, the way this comes about is the lender’s going to have to rewrite the terms of the loan, they’ll change the loan term, the payment, the interest rate, pretty much every aspect of the loan to accommodate the borrower so that they can start making regular monthly payments again and keep the property.
You probably knew all that if you’re Googling loan modification. You may even be in the loan modification process and know how frustrating it is. Lenders will ask for documents continuously, they want pretty much every document they could ask for to re-qualify you for the loan, pay stubs, bank statements, tax returns, utility bills. If you’re self-employed, they want every sort of self-employment document, profit and loss, balance sheet and that sort of thing. All that trouble could be worthy effort in the end because a lot of times, there are really good loan modification programs out there. Wells Fargo, Nation Star, Bank of America, they all have in-house programs. All that trouble and all that aggravation can be worth it in the end but it’s just a process.
It’s a process of being tenacious and staying in there, keep following up, keep doing the things they’re asking you to do and it couldn’t come out with a good result. What I really wanted to talk about though is those situations where the lender gives you the run around, ask for documents for months and months, even a year and then just never gives you any kind of answer, any kind of result whether it’s a decline or an acceptance. They just put you in this hamster wheel and have you run like a hamster forever. That’s a tough way to live. That’s a really hard process, it takes up so much of your time, huge distraction, and oftentimes, they aren’t really even reviewing you. They are just giving you the runaround to keep you busy while they foreclose anyway.
That’s really the issue. In California, lenders are not allowed to do that. It’s not acceptable, it’s not lawful under the home owner’s bill of rights, it’s not lawful for the lender to be negotiating with you on a loan modification and then at the same time, moving the process forward to foreclose on your house. That’s called Dual Tracking. And in 2013, it was made illegal by the California Legislature so that’s good for us in California. We have Dual Tracking laws. However, dual tracking is still really common, I see it all the time, practically every day where a client is diligently working with the lender on the loan modification, yet at the same time, they’ve had the lender take steps toward foreclosure on them. Filing the notice of default, sending them notices about their intent to begin foreclosure.
That’s not acceptable. You actually have a good lawsuit if you decide to pursue it. I would encourage you to do so. I think for lenders, the cost of compliance is higher than the cost of just paying some settlements and dealing with attorneys that end up suing them from time to time. So it’s definitely advisable to go discuss with a qualified foreclosure attorney, someone who understands the process, actually litigates cases. A lot of guys, they talk about how their loan modification lawyers, they don’t actually litigate cases, so you need someone that can really do it and enforce your rights for you. If you feel like there is dual tracking going on, you feel like you’re negotiating with your lender in good faith but that your lender is foreclosing on you anyway, you really should speak to a qualified foreclosure attorney because just so you know that’s illegal in California and they’re not allowed to do that.
It’s also illegal in a lot of other states but I am only licensed in California, can only really give you any insight on California law. So hopefully that’s helpful for your loan modification situation. If you have questions, please, subscribe to my channel and leave me a question in the comment box. I’ll try to answer it. I want to make a video for everyone who has questions. I can’t promise a video but I’ll do my best. Thanks for listening.
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