Let’s start out with this – I’m incensed today. The newest cottage industry to crop up in the wake of the foreclosure tsunami are the loan modifiers. Many of the most notorious loan modification companies were headed by the same individuals that were all to happy to originate loans that never should have been considered in the go-go days of the real estate bubble bath. Now, there may be some legit people out there really trying to help out with loan modifications, including some attorneys perhaps, but most do not require money upfront and promise things they can’t deliver on.
I met with someone today who just came from the courthouse steps after learning that his home had been sold at a trustee’s sale. He showed up at the sale with all the money necessary (so he thought at least) to reinstate his loan. No can do. The problem for him is that under Arizona’s lender-friendly statutory scheme for trustee’s sales, he was required to come forward with payment by 5pm the day before the trustee’s sale. He didn’t know that because the average person on the street would have no reason to know that – that is what we attorneys are apparently for.
The reason I am incensed is that many in the loan modification industry (and many lawyers for that matter), don’t understand the law or the dynamics of how servicers are processing loan modifications. It is well established that the servicers of loans have their own financial interest at heart when it comes to loan modifications and they are not too terribly interested in saving people from foreclosure. Indeed, the loan servicers, who often have competing interests to the very investors that own the loans, don’t much care whether they foreclose or not, as they get paid. In the end, loan modifications are expensive, time consuming and do not pad the servicers’ bottom line, and the servicers run a parallel track of claiming to consider a loan modification and moving along the foreclosure at the same time. See Diane Thompson’s very well researched and explained article on why servicers foreclose rather than modify loans. It is a relative expose on the lending industry.
Had the loan modification company that was supposedly trying to help this individual understood the law and the dynamics of how servicers lull borrowers into the trap of believing that a modification is forthcoming, while processing the foreclosure at the same time, this company would have known that this guy needed to come due with the money the day before the sale or attempt to stop the sale if he had a defense. This company falsely believed that the modfication was coming too – a big mistake. This guy paid $1,500 and lost his house. A quick trip to an attorney could have saved this fiasco. We need more education out there – that is for certain. Sad day – yet another preventable foreclosure.