Divorce, Your Mortgage and Attorneys, Oh My!!!

"Divorce, Your Mortgage, and Attorney's, Oh My". Just like in the Wizard of Oz, Attorney's are good at just saying, "follow the yellow brick road". When it comes to divorce, that yellow brick road can be a very costly one.

What most couples fail to realize is this: If you treat your relationship and finances like a business, then consider your combined incomes as a pie chart that you're drawing on the board. Whether both are working or just one, the income is one big pie that you are both eating off of. The second you involve an attorney, you now have one if not two(if both parties get attorneys) other people that are eating off of YOUR pie. Furthermore, those people eating from that pie are not contributing to that pie, nor do they have to live with the long term effects. They get their money, and go on to the next client. The two of you still have to deal with the situation. Being honest with themselves, I don't think anyone can really say they've gotten a "better deal" because they had their attorney's involved. If one person gets an attorney, than the other is likely to defend themselves with one as well.

Attorney's typically charge per court hour, in addition to whatever you have to pay in retainer fees. For anyone that has been an hourly wage employee or has employed them, you know that they depend on those hours to make their paychecks. So if an employee has a clear vested interest in getting as many hours as possible, why would you think your attorney would be any different? To the contrary, it's in their best interests to draw things out as long as possible, thus warranting additional fees. I guarantee that if Attorneys were only paid on a per case basis, and not allowed additional compensation per hour, that our entire legal system would magically move that much faster. A legitimate loan modification company will not only have no up front fees, but will also get paid on a per file basis. That company would then have a huge interest in getting you resolution as soon as humanly possible. Some companies set clients on a weekly, or monthly payment that is to continue "until complete". Well if you're paying $200 a week indefinitely, it and it takes 4 months to get a modification, then you've just paid out $3200. If it's $1K a month, then you would have paid out $4K. If a company has it "open" to either make $1600 from you or $3200 from you, what do you think they will do?

Divorce is obviously a highly emotional process that is very "draining" for both parties. You not only have the actual divorce, but everything that is involved (who gets what, who pays who, who gets the kids, who pays for the kids, etc...). There are many couples that are getting divorced or separated that are homeowners. Many of the mortgages that were written previously had more holes in them than Swiss cheese. Some, there is only one person on the loan documents, but two people on the deed. In some cases, the property has been quick claimed and the person on the loan isn't even on the deed.

Unfortunately, dealing with the mortgage situation isn't any easier than the other aspects of the divorce. If you are not on speaking terms, and you're having financial problems with the mortgage on top of it, continuing to not talk about it and solve the problem isn't going to help anything. The problem will NOT just fix itself. For instance, if the husband has left the property, the wife resides in the home, she's on the deed, but not on the loan. She has financial problems trying to keep up with everything and is looking to get a modification, he's mad at the world because they're getting divorced and says that he won't sign off on it. I believe the term is "cutting your nose off to spite your face". As mad as he may be, it's going to cost him in the long run to not cooperate. His attorney will of course advise him to not cooperate, as it takes fuel away from the fire that they are building. But if he doesn't cooperate what will happen is this: she'll continue to not be able to make the payments, the house will go into foreclosure. She finds another place to live, and continues on with the rest of her life. He on the other hand was the responsible party on the mortgage note. So aside from his credit being destroyed for the next 10 years because of a foreclosure, the lender will eventually sell the property (auction usually at substantially less than the value, and less than what the homeowner owes on it). Unlike a few hundred dollar credit card where the company just charges it off and moves on, the lender will most likely pursue action and judgement against the homeowner for the remaining balance (difference from what they sold it for, vs. what the homeowner owed). These funds can be recouped through garnished wages, and possibly state tax returns depending on the state. For me, that sounds like a lot of headache.

Question: "How many attorney's that "specialize" in loan modifications have you heard of before last year?" Second question: " How many attorney's that "specialize" in loan modifications have you heard of now?" Easiest way is to cross reference last years yellow pages with today's Internet searches and see what you find. What I can assure you is this: 98% of companies that claim to be attorney based actually only have one if any attorney's on-site. 98% of attorney's that claim to specialize in loan modifications have little to no experience in actually doing loan modifications. Even Real Estate attorney's are in foreign territory. Their day to day operations do not consist of talking to lenders, reviewing financial statements and hardship letters. To be frank, most of them would have a hard time trying to negotiate their own mortgages, much less yours. "Then why have Attorney Based companies come into existence?" Many of the states in the country have specific rules for loan modification companies, many are very stringent. The common "loophole" to these rules is that Attorney's are "exempt" from the requirements. Now the fact that these "loan modification attorneys" are not bound to the same rules that other loan modification companies are does not give me any kind of comfort. If an attorney is exempt from the requirements of what a loan modification company has to conform to, then who IS regulating the attorney base company? Furthermore, if the attorney based company isn't bound to the same legislation, then does that mean that they can do whatever they want to me without any recourse? YES, they can charge whatever fees they want, they can ask for upfront fees, they can ask you for interest in your property, and they don't have to DO anything for you to substantiate their retainer fee.

The common complaints with loan modification companies are usually that the company charged a large upfront fee, and/or asked for interest in the homeowners property, and/or didn't really do anything for the customer, nor has the customer gotten any type of correspondence from their lender. ALL of these complaints are valid ones, and the consumers have every right to complain about them. Question: If a loan modification company is bound to certain rules and regulations set forth not only by the FTC, but also by the individual states and violations of those rules result in hefty penalties if not a closure of the business, but an "attorney" or "attorney network" who is not regulated, and can legally get away with the actions mentioned above, who do YOU want to put your trust in?"

In conclusion, my personal experience with attorneys has not been pleasurable. It's cost me substantially more than it was supposed to, and I've always looked back wishing I had done something differently. If you pay $4K out to an "attorney based" company, and they don't do anything for you but give you smoke and mirrors, you can complain all you want, but you're still out that $4K. If you have $100K in total assets and you're going through a divorce, regardless of what your split would have been 90/10, 80/20, 60/40, 50/50, etc..., your split will be decreased by whatever you have to pay out in attorneys fees. IE: If you were shooting for a 50/50 split, and going with an attorney you get 60/40 in your favor, you're comparing getting 50% of the full $100K vs. getting 60% of about $70K. You're actually costing yourself $8K, even though you're thinking you got one up because you were getting 60% instead of 50%. ($50K vs $42K). If you think that paying out 30% of your assets between both of your attorneys is unrealistic, think again. Better yet, ask someone who has gone through it........Can I Get A Witness???