Loan Modification FAQ, Part 2

6. What are the HAMP loan modification guidelines?

Initial qualifications are as follows:

-Have a monthly mortgage payment over 31% of your monthly gross income.
-If the home is a single unit, the unpaid principle must be under $729,750.
-You must be the owner-occupant of the home.
-The loan must have originated before January 1, 2009.
-Must have a mortgage that is unpayable due to a documentable financial hardship.

7. Why should I hire a California loan modification attorney?
Even though the loan modification guidelines are out there for everyone to read, to many they just don't make sense. In addition, every bank has their own way of interpreting these guidelines, and so experiences differ between borrowers and lenders. This only serves to add confusion to a stressful situation.

Loan modifications negotiated by borrowers have a low success rate to start with. Added to this, many of these modifications fail within months of the original negotiation. Why is this? Banks are mostly to blame. The departments they have created to deal with the programs are very difficult to deal with, not only because of the bureaucracy of it all, but because often the departments are overwhelmed with the volume of loan modification requests they receive. There are numerous deadlines, forms, and paperwork that need to be met and submitted or the process can be delayed or stopped.

In addition to this, banks are motivated purely by profit. They receive a payment from the government for every permanent modification they approve. Often they will offer a modification to a borrower that is no better than the original deal they already had, sometimes even worse. Because the borrowers are desperate, they will take any offer they can get in order to avoid foreclosure. Unfortunately, these new deals often result in another default a few months down the road.

For these reasons, many borrowers have turned to loan modification attorneys. These attorneys are experienced in dealing with the banks and loan modifications. Some can tell you straight out if you have a chance of being approved for a loan modification based on your situation. Because they are professionals and often employ a staff equipped to handle deadlines and the paperwork of a loan modification, the chances of getting through the loan modification process successfully are significantly greater. Not only that, but loan modifications negotiated by an attorney have significantly better terms and as a result have a far less chance of defaulting later down the road.

In short, hiring a loan modification attorney is no different than hiring a professional to represent you in court or with the IRS. Sure you can go it alone, but you get what you pay for.

8. How can I protect myself from loan modification scams?

Unfortunately, there have been numerous loan modification scams and attorneys since the collapse of the housing market and the introduction of federal loan modification programs. These fraudulent companies took up front payments from borrowers, and then often stopped returning calls and closed up shop. If a loan modification attorney or company asks you for upfront money, be wary. California has passed a law prohibiting loan modification services from collecting upfront payments, including retainers. Many other states have passed similar laws.

Also, be sure to check out your prospective attorney with the Better Business Bureau and your state's Bar association. If they have any complaints against them, its obviously a red flag. California's Department of Justice has published a list of attorneys under investigation for loan modification fraud, so check your state's DoJ for similar lists as well.