Loan Modifications, Foreclosure & Bankruptcy
Facing Foreclosure and Worried about Losing Your Home?
Working on a Loan Modification But Getting No Where?
Considering Bankruptcy But Unsure of Your Options?
We Have Answers!
Many homeowners today are struggling to meet their mortgage obligation amongst high employment and depreciating property values stemming from the foreclosure crisis. Do you want to stay in your home but can’t afford it anymore due to under-employment, economic set-back due to illness, or other hardship? Maybe you just don’t see the point in continuing to make payments when your home’s value is driven down by surrounding foreclosures.
Either way, you need a strategy to navigate through today’s tricky mortgage mess and a professional to help you through it. Acclaim Legal Services offers free consultations to:
- Determine the appropriate strategy with your home;
- Keep it and modify the loan and/or remove a second mortgage to rebalance the value
- Turn it back over to the bank with minimal damage to your credit
- Review your other debt obligations and monthly budget;
- Assess your long-term financial goals;
- Provide sound recommendations on your available options to lasting debt resolution.
Call us today at 866-261-8282 to set up a free consultation at one of our seven convenient locations in: Detroit, Ann Arbor Dearborn, Southfield, Flint, Lansing or Warren, Michigan.
Loan Modifications – Is the Mortgage Company Required to Modify My Loan?
Simply put, no, the mortgage company is not required under any state or federal law to modify your home loan. Due to all of the government talk about helping homeowners, many people assume that their mortgage company is bound to provide a loan modification. This is not the case. Sadly, due to the overwhelming level of requests for modifications, we talk to many clients who are told that they need to get behind on their payments before the mortgage company will engage in loan modification discussions. This is referred to as “imminent default” in the mortgage industry. In the past, mortgage companies have relied on the lack of an “imminent default” to deny loan modifications.
In most cases, we find this to be detrimental to the homeowner. There is no law that requires the mortgage company to only deal with delinquent customers, but rather their own internal backlog that requires them to only deal with the emergencies first. Your credit and home ownership is put in jeopardy by their organizational ineptitude!
So how do you best navigate through the loan modification process? Here are some factors to keep in mind:
If your mortgage lender has set up a trial loan payment program, be aware that you are still in default on your mortgage during this time period and therefore susceptible to foreclosure.
- For instance, if your regular mortgage payment is $1,000.00 per month and the bank gives you an $800.00 per month trial payment, you are in default each month for $200.00. You are also accumulating interest penalties, late fees and attorney fees. In addition to accumulating more debt, this has an adverse impact on your credit.
- We suggest setting aside the $200.00 each month in a bank account so that you are able to reinstate the loan if the trial period payment does not culminate in a permanent loan modification.
Read about the January 2014 changes to Federal foreclosure laws for mortgage loan servicers regarding new requirements for dealing with delinquent loans. We are here to answer your questions!
Home Foreclosure – What are My Rights? How Can I Avoid Foreclosure in Michigan?
In Michigan, the mortgage company is required to put you on notice if it intends to proceed with a home foreclosure. If you get a notice in the mail, take it seriously even if you believe you will receive a loan modification. Get legal help from a licensed professional such as the foreclosure prevention attorneys at our firm. This notice means the bank lender has referred your file to a local law firm (i.e. Trott and Trott) to pursue selling your home at a foreclosure sale. These attorneys work for the bank, you need an attorney to represent and advocate for your rights!
The foreclosure process can be legally stopped and we can force the mortgage company into repayment terms through the Chapter 13 process. Chapter 13 provides other distinct benefits, such as:
- Ability to remove a second mortgage or home equity loan or reduce principal mortgage balance on rental properties to rebalance your home’s value relative to today’s market.
- Court protection from creditor actions such as vehicle repossession, judgments, garnishments, utility shut-offs, creditor calls and collections, etc.
- Favorable terms to repay your debts:
- 0% interest repayment on all unsecured debt obligations (credit cards, medical bills, personal loans, etc.) and mortgage arrearages.
- Ability to legally eliminate all unpaid balances on unsecured debts at the completion of the program.
- Improved credit throughout the program by focused efforts to:
- Reduce principal debt
- Restore timely payments to your creditors.
Even if you are unsure if you wish to keep your home, there are strategies and advantages to taking action prior to the foreclosure sale. We help clients file Chapter 7 to minimize the impact on their credit and ensure that they are protected from exposure to a post-foreclosure deficiency owed to the lender. Either way, we specialize in assisting people resolve foreclosure related problems and move forward to a positive financial future. Call us today toll free at 866-261-8282 for a free consultation with one of our licensed attorneys.
Filing Bankruptcy: How Can It Help and Will it Ruin My Credit?
If you want to stop a home foreclosure, attempt a loan modification, or save your credit in the event that you can no longer afford your home, bankruptcy may be your best option.
- Chapter 13 Reorganization to protect your home and credit. Chapter 13 is a form of bankruptcy designed to:
- Provide court protection from your creditors including:
- Home Foreclosure
- Vehicle Repossession
- Calls and collection efforts
- Judgments or garnishments
- Utility shut-offs
- Force the mortgage company to consider a loan modification under HAMP guidelines;
- Allow you to remove a second mortgage or home equity loan to rebalance your home’s value;
- Consolidate, and likely eliminate unsecured debt obligations such as credit card and medical bills.
- Improve your credit standing by focused efforts to reduce principal debt and restore consistent, timely payments to your creditors. Combined, these two factors influence 65% of your credit score according to FICO.
You have every right to pursue a loan modification through the Chapter 13 process. In fact, we have access to the attorneys working on behalf of your mortgage company to help facilitate the process. By reducing debt and reorganizing your budget, you may be a more attractive loan mediation prospect to your lender based on your qualifying or debt-to-income ratio.
Further, the bankruptcy courts and Chapter 13 Trustees are becoming borrowers’ allies in their efforts to modify their mortgages in conjunction with their Chapter 13 reorganization efforts. The objective of a Chapter 13 is to put the individual in a better financial position following the case than they were when they started. Reducing the interest rate on their mortgage and improving the affordability of home ownership furthers this objective and is in the best interest of all parties. Several bankruptcy courts across the country have implemented programs for the express purpose of facilitating the home loan modification process in Chapter 13. Local bankruptcy courts have expressed an interest in developing and implementing similar programs locally here, demonstrating their willingness and desire to maximize the benefits and protections that a Chapter 13 can provide to the struggling homeowner.
Another unique aspect of the Chapter 13 program is the ability to remove a second mortgage or home equity loan. You can remove this lien on your property at the same time that you pursue a loan modification on the primary mortgage. Both work towards the goal of reducing your mortgage debt and monthly payment.
The Chapter 13 program also allows you to defer and likely eliminate a portion if not the majority of your unsecured debt such as credit card balances, medical bills, personal loans, deficiency loans and judgments. It also has a built-in function to improve your credit by restoring timely payments to your creditors and reducing your debt-to-income ratio each month.
- Chapter 7 to establish a fresh start and ensure no legal or financial obligation after a foreclosure sale. Chapter 7 is a complete debt elimination program. By filing, you gain peace of mind that you will be able to make a clean break from the mortgage company if a foreclosure becomes inevitable. Within a 4 -5 month timeframe you would be free from unsecured debts such as:
- Credit cards
- Medical bills
- Personal loans
- Lawsuits, judgments including all mortgage related obligations.
Post-Foreclosure Loan Deficiency Debt – Will I Owe Money?
With mortgage companies beginning to sell their post-foreclosure loan deficiencies to collection agencies or pursue collections through local law firms (i.e. Trott Recovery Services is a subsidiary of Trott & Trott – the largest local firm hired by mortgage companies to complete the foreclosure process), homeowners can no longer afford to assume that once the home forecloses they will be able to walk away without financial consequence. Aggressive collection of the loan deficiency by the mortgage lender or a subsequent purchaser of the debt is very likely.
- Many borrowers are lulled into a false sense of security that the deficiency will not be pursued as it often takes years for the lender to take aggressive action. This misperception is perpetuated by stories of consequence-free “walk aways.” Exacerbating the misinformation is the practice by mortgage lenders of reflecting mortgage related debts as a “charge off” on a borrower’s credit report. Borrowers often erroneously believe this means the debt will not or can not be collected. “Charged off” debt remains viable, collectible debt and is merely an accounting practice for creditors. The mortgage industry is quickly adapting their practices to ensure maximum recovery for loan deficiencies. The key to maximizing deficiency judgments lies in the foreclosure sale bidding process.Historically, mortgage lenders would direct their local attorney to execute a “full debt bid” on their behalf at the foreclosure sale. Executing the “full debt bid” would ensure title to the property would revert to the lender at the expiration of the statutory redemption period. However, such a bid would eliminate the possibility of a deficiency liability as the debt was satisfied at the sale, albeit by the lender. The “full debt bid” has largely fallen out of favor with lenders as property values have plummeted. Instead, lenders are obtaining a “brokers price opinion” (BPO, cash value estimate of the property calculated by viewing the exterior of a property and reviewing various comparable sales) and accepting bids as low as 80% of the BPO. The rationale of the lender is that they will spend 20% of the value securing, maintaining, and marketing the property for sale. As such, accepting a bid of 80% of the BPO value puts them in the same position as obtaining the property for 100% of the value or paying the amount of the full debt and later selling it. The most important consequence of this foreclosure bidding/pricing practice is that, in contrast to a “full debt bid” there many times will remain a substantial loan deficiency. The deficiency amount is represented by the total amount owed by the borrower minus the accepted bid at foreclosure sale.
- Example: Debtor owes $100,000.00 and property sells for $20,000.00 at the foreclosure sale, the deficiency is $80,000 and this amount can be aggressively collected by the mortgage lender or a subsequent purchase of the debt).This bid price can be determined by reviewing the Sheriff’s Deed recorded with the county register of deeds office.
As a result of the trend toward below fair market value bidding and aggressive deficiency collection (including judgments, garnishments, and liens) we encourage our clients to proactively settle the debt or file a bankruptcy to limit exposure to aggressive deficiency collection 5 years in the future after the borrower has taken great strides toward improving their credit. One common mistake made by borrowers is to spend years and years re-establishing their credit only to have all of their progress destroyed when they are served with a summons and complaint from a creditor attempting to collect the deficiency.
Chapter 7 allows you to re-build your credit faster than if you wait to see what steps the mortgage company takes to collect on the mortgage deficiency debt.
Why Choose Acclaim Legal Services?
We have partnerships with mortgage lenders, short sale real estate specialists and HUD counselors to provide assistance if we can’t help. We have over 50 years of combined legal experience in bankruptcy law and a solid 10-year firm track record of success for our clients. Read our testimonials to hear what some of our clients had to say.
We offer free in-office or phone consultations to review your personal circumstances, analyze your situation and advise you on the best course of action. We specialize in bankruptcy law, debt resolution, foreclosure prevention and credit repair. We have offices in Detroit, Southfield, Dearborn, Flint, Ann Arbor, Lansing and Warren, Michigan. Please call us toll free at 866-261-8282 or click here to schedule a consultation right now.