The National Mortgage Association (NMAA) and the National Association of Home Builders (NAHB) have formed the United States Government Loan Modification (“RGGM”) Working Group to help streamline the loan modification process for homeowners. The working group brings together government agencies and interest groups, such as lenders and servicers, to address issues that are often related to mortgage loans. In every case, the group must determine if there is a need for principal reduction. Principal reduction is typically referred to as “canceling” a mortgage loan. It is used as a means of providing the illusion of a quick and easy remedy to homeowners who cannot keep up with payments.
On occasion, it may be necessary for homeowners to seek principal reduction. However, it should not be the only consideration in making a decision to pursue a loan workout. In some cases, borrowers actually do not need to have a principal reduction. They may still qualify for other assistance. For example, in many cases of distressed property owners, financial institutions will work with the borrowers to restructure their mortgages in order to allow them to keep the homes.
It is not unusual for state attorneys general to decline to sign on a loan modification application. While there is nothing wrong with submitting a loan mod application to the state attorneys general, it is important for borrowers to realize that refusal to sign on the agreement does not mean that the application has been denied. Refusal by the state attorneys general does not necessarily mean that the homeowner will not be able to retain the home.
The lender will send a letter of denial, or “censure,” to the borrower notifying the borrower that he or she has been disapproved of the loan modification application. The attorney general will then make his or her decision as to whether or not to sign on the agreement. The lender typically requests that the borrower to submit additional documentation to confirm that he or she is eligible for the loan modification. Once the lender determines that the borrower is eligible for a loan modification, they will notify the borrower and assign an attorney to represent them in the loan modification process.
There are a number of benefits to hiring an attorney to represent the borrower in the loan modification application process. First, the borrower will have someone who is knowledgeable about mortgage law representing him or her. Second, the lender will have a higher approval rate because of the legal representation from an experienced attorney. Third, the lender will not have to hire another staff person to deal with the borrowers and their representatives. Fourth, the attorney can use his or her skills and experience to negotiate a discount with the mortgage company. Fifth, and probably the most important, is that the attorney knows the laws and regulations pertaining to mortgage lending, so he or she can effectively protect the interests of the borrower and the company.
When borrowers do decide to use the services of an attorney, one must remember that the borrower will be signing away any rights he or she may have to bring the mortgage into the current status. For instance, if there are default payments on the national mortgage, the borrower will no longer have the right to redeem the loan in that case. Furthermore, the borrower will not have any opportunity to pay off the default amounts at any point during the life of the loan. It is a good idea to carefully read over all of the terms and conditions related to the loan before you sign. Once the paperwork is done, and you know what you are agreeing to, it is very simple to find out if you have truly agreed to all of the terms and conditions.
The National Association of Home Builders provides a sample loan modification form for borrowers to complete. Many other groups and attorneys provide similar forms as well. However, it is a good idea for the borrower to check with the national mortgage lender and make certain that he or she has not signed away his or her rights under the FHA or other federal programs. If not, the borrower should consider consulting with a foreclosure lawyer who will be able to review the documents with care and make sure that the loan modification application is not a fraudulent effort.
There are also some federal loan modification programs that can be availed of by anyone. If one is interested in pursuing such an option, it is best to contact a reputable national mortgage provider and work through the options that are available. Many homeowners have been able to get their loans modified successfully and avoided foreclosure. It is a good idea to use resources such as this to obtain a loan modification. In some cases, the new terms will be significantly more favorable than the existing terms and the homeowner may be able to avoid foreclosure altogether.