Attorney's Doing Loan Modifications

In our current search for qualified agents in various states to help our cause we accidentally ran across a "Law Firm" doing loan modifications. Wow....I thought I had heard it all, I was wrong. This "law firm" was very quick to explain how licensed attorneys are the only people that are legal to do loan modifications, and that mortgage professionals who have been actually in this business since it's inception, have absolutely no place in the loan modification industry. The basis of the "discussion" was that when a homeowner purchases a home in a state, they have a legally binding contract in that state, when the homeowner doesn't pay the payments, it is considered to be a breach of contract. Thus an attorney is the only one can assist that homeowner. By the end of the correspondence, it was very clear that they had no idea what they were talking about, and should probably go back to business transactions, disputes and commercial real estate, as that is what they've been doing up until about 9 months ago.

First off, a homeowner does NOT have to be late (hence in breach of contract) to be eligible for a loan modification, PERIOD. Anyone who says otherwise obviously hasn't read through the Federal HAMP guidelines. Next, this firm indicated that 90% (yes NINETY) of the time, applicants should be advised to move out of the home, as opposed to attempting a modification. Their reasoning is flawed, as they are only taking into consideration 5 year modifications, not permanent ones that are being done just as often as the 5 year. The best part of it all, is that this law firm speculated that a mortgage professional wouldn't have the clients best interest at hand, as they didn't have a fiduciary relationship. Definition of fiduciary is: "An individual, corporation or association holding assets for another party, often with the legal authority and duty to make decisions rgarding financial matters on behalf of the other party." One of the major complaints by the FTC and AG's offices is that loan modification companies were asking for Power of Attorney, well in essence that's exactly what this law firm is claiming has to happen. Now if I'm a homeowner, do I want to A) give someone/a company authority to make decisions for me....or B) have someone get me all of the necessary information so that I can make an informed decision? Keep in mind that the reason that "attorneys" are able to do this, is because they are currently EXEMPT from the state and federal regulations. Luckily, the FTC and AG offices are seeing the smoke screen and are one by one making it clear that they are only exempt if they are operating within the scope of their practice. Problem is that there are NO attorneys that are doing loan modifications that are operating within the scope of their practice, because it wasn't even a "business" until a little over a year ago. I'd like to see the "Loan Modification 101" class that's apparently at Harvard, because I haven't heard of it yet.

This firm advised that homeowners who are need should contact their lender first, if denied, they should then contact an attorney (thus stating that loan modification companies should not be in existence as they serve no purpose, but.....they are doing loan modifications?). OK, maybe they are not aware that most lenders give homeowners ONE chance to do a modification (since March 6th). If the client submits their documents unassisted and is denied, what is that attorney going to do? (Advise them to move out and short sell according to them). As my Platoon Sergeant used to say...."WRONG ANSWER". If it takes 30-90 days for a modification to get complete....how many times do you want to resubmit paperwork. If you do it once, then hire a company you're looking at a total time of about 6 months. I don't know about you.....but I just can't wait that long. My momma used to say "Do you want to do something right ONE time, or do something wrong numerous times?"

I hate to even talk about this story because it just makes me queasy.....but it needs to be exposed. One of our clients had hired an attorney to file for Chap 13 bankruptcy, this client had been delinquent on their payments and were nearing the "sale date" of their home. 9 1/2 times out of 10 once you've filed BK, the court will issue a "stay" on the sale date and continue with the BK proceedings. This attorney not only advised her to not try to modify her loan, but advised her to just sell the house to his friend that is interested. Her attorney advised her that there is no way the court will issue the "stay", and that selling and renting from his friend was pretty much her only option. What she didn't know at the time is that the court had already issued the stay, and postponed the sale date to August 13th. Under her attorney's advice, she removed the property from the BK which released the stay and allowed her home to sell in July. She contacted us under the pretense that she had until August 13th to get something done, and it wasn't until we talked to her lender that they informed us that the house had been sold back in July. But wait, there's more........the timing of the release of the property wasn't correct, so they refunded his friend back his deposit and did in fact push the new sale date to August 13th. Her attorney not only told her that it was in fact sold (when she had the notice from the court saying it wasn't) and that she needed to start paying rent, but the lender was in cahoots and also said that it had been sold. Funny thing is that when we asked the lender to provide proof that the property was sold, we suddenly didn't get any returned phone calls. So we advised her to contact the state Attorney General to file a complaint against both her attorney, and the lender, and to retain a different attorney that can refile before the 13th.........Wow.

The cold hard truth is that a "slow" Mortgage Professional would run circles around any attorney when it comes to loan modifications. They know what the banks are looking for, they know how to get it to "make sense", they are familiar with LTV, PTI, DTI ratios and have made their living getting banks to say "YES". Attorney's have made their living getting Judges and People to say yes, not banks.

It comes down to who you trust.....do you want to work with an attorney that isn't bound to any loan modification regulations, and 9 times out of 10 will have a short sale inclusion in their contract, which says that if the modification does not go through, that you have automatically retained them to negotiate the short sale, and get paid X amount of dollars from the proceeds (which, if they get paid either way, what vested interest do they have in making sure it's done right?). Or.....do you want to work with a company that's regulated by the individual states and the FTC, has a clear vested interest in completing the modification (as they don't get paid if they don't do the work), and that utilizes people who actually have experience in this field.

Just like any other field of work, you don't call a carpenter to unclog your drains and toilet. You don't call the Electric Company to help you change out your light bulb. Why would you hire an attorney to do a loan modification?