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Monday, January 26, 2009

Foreclosure and Loan Modification...Preying on the already traumatized

There was a recent post in Active Rain from an attorney talking about Loan Modifications. I found that blog to be interesting but even more interesting was the amount of comments it received. I believe that the topic of Loan Modifications must be explored in more detail as it rasies many questions.

Are loan modifications spawning fraud?
Are loan modifications mere propaganda from servicing companies?
Does the HOPE NOW program really offer hope?
Does misleading the public and giving them a false sense of hope right?

Here is the link to the original post: Loan Modification Scams

Here is the comment I made:

Basically, I am saying that there are many questions surrounding Loan Modifications but the real issue is not so much the large numbers of people currently professing to be experts in this field but the intent and actions fo the servicing companies you are trying to negotiate with. Are they willing or are they simply promoting "mere commercial puffery" as attorneys for Countrywide stated in a court case in New Hampshire. The attorneys for CW openly admit on the record, that there is little or no intent on the part of CW to modify loans. The publicity surrounding this effort is just that "publicity" or as it used to be called propaganda.

But as I say in my comment and on my blogs, this "commercial puffery" is not limited to just CW, it is almost accross the board. I say almost as I believe there are a few that are attempting to make an effort such as IndyMac who is now under the control of the Federal Government.
There are a percentage of loan modifications that are done, however there are federal statistics to prove that the majority of them go delinquent again and wind up in foreclosure.

The reason for this is probably that the terms given to borrowers for the modifications are terms which most of them cannot meet and are not in their best interest but believe, under duress, that it will help. Most of these new terms do not lower rates, may raise payments, require waiving rights of legal action for TILA or RESPA or any other violations against the original lender, provides NO GRACE period for payment and defaults if one day late and most damaging is that you waive your right to notice of further action of foreclosure should you be one day late.

Brutal, to say the least.

The same people and their banking and lending corporations that got us here in the first place are now gouging the people even more for more billlions in profits. As if they didn't make enough when they sold us the loans then securitized them - selling them off to investors worldwide - makeing more billions. To add insult to injury, we, as taxpayers, are giving them billions - into the trillions - of dollars to replace the money they claim they are loosing as a result. Rmember, they lost NO money on the loan because they sold it to the investment pool. It is the investor in those Mortgage Backed Securities (MBS) that are the loosers along with all of us homeowners.

The predictions from various economic, public and private sources all predict the foreclosure rate to increase even more in 2009.. This indicates to me that there will be more emphaisi on foreclosing then there will be on "workouts".

Obviously there are profit motives to foreclose rather then to modify. For one, the servicing company under most servicing agreements must pay the payments _ collected or not to the trust who distributes that money to the investors. The only way to get that loan off the books and stop shelling out dollars is to foreclose on it. If they modify and lower your payments they still must make up the difference so that loan is still a negative cash flow item. Not good for profits to maintain the high salaries these executives get.

So if we are to stem the tide of this crisis and truly reach out to help the people, the people must fight the forecloosure which often will forece the servicing compnay to modify a loan. You see, they only are allocated a small amount of money to foreclosure - typically $1200 - and they can only succeed if the foreclosure is uncontested, which many if not the majority are.

There is a legal defense to a foreclosure in many cases that goes beyond TILA or RESPA or even Predatory Lending violations. The defense is "The Right Party In Standing". For more information on this issue please visit http://www.theforeclosuredetonator.org/. You will be surprised.

There is much to write on this issue which cannot be done in a blog like this at one sitting. However, dialogue through comments and questions on this type of forum will begin to tell the story.

MSNBC recently published this article concering defending foreclosures. It is very interesting and informative.

'Angel' of foreclosure defense bedevils lenders
Florida attorney trains hundreds of others to help troubled borrowers

In the meantime, I will continue to inform everyone as much as I can here and certainly on TheMortgageCornerFORUM and TheForeclosureDetonator.. I look forward to hearing from you here with all your questions and comments.

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