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Common Violations in Loan Modifications

Loan Modification.jpg

With the economy constantly fluctuating, those once affordable monthly payments can become unmanageable. In those circumstances, people seek loan modifications to help reduce those payments. But often enough mortgage servicers make serious errors on loan modification requests. Down the road this causes homeowners many problems and can even turn into a wrongful foreclosure.

To take preventative action from letting this happen, homeowners should education themselves on common mortgage servicer violations and errors while applying for loan modifications.

Loan modifications are permanent changes to the loan terms. Changes can vary depending on what the lender agrees on but typical changes include, lowering the interest rate, reducing the principle balance, converting variable interest rates to a fixed interest rate, or even extending the length of the loan.

Common errors mortgage servicers tend to make include the following:

Failing to process the application in a timely matter - Once homeowners submit their application for loan modifications they typically experience long delays as the files are being processed. Luckily there are laws to help prevent the long wait. If the mortgage servicer receives the application 45 days or more before the foreclosure sale, they must review, determine if the application is complete or incomplete (within 5 days), and make a decision within 30 days.

Telling homeowners they have to be in default - This is not necessarily true. Homeowners are actually protected by the Home Affordable Modification Program (HAMP). Which states that you may be either behind in payments or simply in danger of falling behind on your mortgage payments to apply for a loan modification.

Requiring homeowners to resubmit information - Servicers sometimes misplace documents and ask for resubmissions. Homeowners should resubmit any duplicate information requested but keep track of when, who, the documents were sent, as well as use a method that is easily tractable.

Asking for a down payment - Most of the time homeowners are not required to make a down payment in order to get a loan modification. This especially true for HAMP modifications.

When these mistakes or violations are made they can result the homeowners in increased fees and costs to avoid foreclosure, the loss of savings, wrongful foreclosure, or missed opportunities for short sales or other alternatives. If homeowners experience any of the above they should contact their attorney.

We at Timothy J. Sierra Attorney at Law would like to state that our blog posts and links, on our web page or any other social media outlet, to any other web pages are not intended for legal advice. We are not responsible for third party website information. If one is in need of legal advice please contact an attorney directly.

Source: Nolo Legal Encyclopedia | Loan Modifications

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