If you’re financially stressed and missing mortgage payments, chances are – you’re being bombarded by people, companies, attorneys, and organizations offering to help you get a loan modification.
Your mortgage lender is also probably telling you that you don’t need any help – that you can easily do the loan modification process yourself.
It can feel overwhelming to try and figure out what to do and who to trust.
The concerns you are having about who to hire to help you are valid – the loan modification industry is a scam-heavy industry.
It is also equally reasonable to have concerns about working with your mortgage lender directly – they are a creditor who is not always trying to help you.
So, you probably want to get some help – you just want to make sure that you’ve hired the right kind of help so you don’t get taken advantage of during a stressful time.
It may feel like you have to make a fast decision to get some help (and maybe you do!) but before you hire someone, inform yourself about what you’re needing and who the best party is to help you.
There is no such thing as a “loan modification attorney”
Be wary of companies who only offer loan modification support. The best type of attorney to help you is going to be an attorney who is comfortable with ALL aspects of loss mitigation – not just loan modifications.
A good attorney for you will be someone who has negotiated all loss mitigation agreements. For example, short sales, repayment plans, deed in lieu agreements, forbearance plans, AND loan modifications.
The best type of attorney to help you should be well versed in direct negotiation with the lender’s loss mitigation departments
There are many areas of foreclosure defense law that do not directly translate to loan modification work.
While there are many awesome bankruptcy attorneys and foreclosure defense litigators out there, these attorneys aren’t always versed in the actual loss mitigation work required to get a loan modification application through the review process.
If your main goal is to sue your bank or file bankruptcy, then you likely need to hire that kind of attorney.
But if you’re looking to apply for a loan modification with your bank to try and resolve the default and resume mortgage payments in the lowest impact way possible, a litigator or a bankruptcy attorney may not be a great fit for you. They may do this job as a tangential part of their practice but you should be looking for someone who does this as their primary focus.
You need to hire an attorney who has direct experience with your mortgage lender’s loss mitigation department. Each mortgage lender operates slightly differently and you want someone who knows your lender so they can overcome the various obstacles lenders put in place to make the process hard.
Here are some questions that can help you determine if an attorney has actual loss mitigation experience:
- How often are you speaking on the phone with lenders directly?
- Have you compiled a complete loss mitigation application before?
- What are the types of things you review for prior to submitting an application?
- How many different lenders have you worked with before?
- Can you explain the loan modification process from start to finish?
An attorney who has worked with multiple lenders, spends most of their time each week on the phone with the lenders, and can explain to you exactly what the loan modification process looks like, is going to be able to help you.
The best attorney for you will help you understand your chances for modification approval before you apply
During your consultation, the attorney should discuss the following things with you:
- Your household income and expenses, your original mortgage payment and whether you’re showing enough income to stand a good shot at being approved
- Whether you have been approved for a modification in the past and how that could impact your future chances of approval
- Whether you qualify for any state-run protections against foreclosure like Foreclosure Mediation that could be used to help negotiate approval for your loan modification
- Whether there are any government-backed programs that apply to your loan (Freddie Mac, Fannie Mae, VA, FHA, or USDA) and how the programs can help you
The best attorney for you will help you build you a big picture plan, complete with backup options should your first choice plan fail
Since loan modification approval happens at your mortgage-lender’s discretion, you need to know what a worst case scenario situation looks like for you and what options will be available in the event you get denied for a loan modification.
Many homeowners make the mistake of hiring someone to help with their modification and then they end up abandoned (shortly before foreclosure) if the mortgage lender refuses to modify.
At the end of your consultation, you should know what will happen to you if a modification is not available to you and what the attorney can do to help you if the modification gets denied.
The best attorney for you should have a good understanding of your foreclosure timeline, how much time you have, and how long the process will take
Since you’re likely applying for a loan modification while you’re behind on payments, it can be very stressful to feel like you’re up against a tight foreclosure timeline.
The person you hire to help you should be able to fully explain your foreclosure timeline from start to finish. They should be able to tell you the fastest possible foreclosure timeline (if you decide not to take action) and how the things they’re going to help you with will impact that timeline.
The best attorney for you should do more than just help you collect your documents and submit your package
- They should have familiarity with the investor guidelines backing your loan
- The should have familiarity with your specific servicer’s procedures
- They should know how to open escalations with the lender’s supervisory team, submit qualified written requests, and use the regulatory procedures (like CFPB complaints) to hold your lender accountable
- They would know how to present your income and expenses so that your debt to income ratios show up within the approvable ranges
- They should be familiar with the loan modification appeal process in the event you get denied
The best attorney for you should work in the state that you live in
Always ask the attorney you’re hiring what state they’re located in. Foreclosure laws are governed by state law and there are many large companies that operate from one state across the country. These “attorneys” often pass off most of the file work to paralegals or assistants and you often won’t receive the same type of support you would if you had a full-time attorney working on your file.
These firms also often miss specific state protections (or don’t help homeowners take advantage of the available programs like foreclosure mediation).
The best attorney for you should understand how to handle options to vacate the home in the event you cannot get approved for a modification
Even though the goal of a loan modification is to keep the home, in the event that you can’t keep it (e.g. if the lender denies you or you can’t afford the payment or your circumstances change), you want to be partnered with someone who can easily transition you to a different loss mitigation option like an equity sale, a short sale or a deed in lieu of foreclosure so that you don’t end up losing the property to foreclosure just because your first choice option didn’t pan out.
The best attorney will understand the recent protections offered to homeowners trying to transition off of their COVID-19 Forbearance
In August of 2021, the big government investors (Fannie Mae, Freddie Mac, FHA, VA, and USDA) announced protections for people who took a COVID Forbearance.
You need to make sure that you’re working with an attorney who is staying up to date on the most recent pandemic related mortgage protection information.
You should not pay exorbitant amounts of money to receive help with a loan modification
Unfortunately, this area of law is ripe with predatory firms that are trying to take advantage of people who are stressed. I hear horror stories of people being charged thousands of dollars a month to get help with their modification. It should not cost thousands of dollars for you to get this type of assistance.
If you’re a homeowner in Washington state and would like to discuss options to get help with the loan modification process, feel free to give me a call at (425) 654-1674.
I’m glad you mentioned that you should ask the attorney what state they work in. My husband and I have been struggling to pay our house mortgage for the past couple of months, so we want to find a lawyer who can help us with modifying it to a more affordable plan. I appreciate you helping me learn these tips on how to find a loan modification attorney.
Thanks Daisy! If you’re in Washington State, let me know!