Client Bulletin: Why Your Loan Modification May Have Been Denied

J Thomas Black
Board Certified, Consumer Bankruptcy Law- Texas Board of Legal Specialization

Quite a few of my Houston area bankruptcy clients are trying to get their mortgage servicers to give them Loan Modifications these days. Many people financed houses in the past few years using the so-called “exploding ARMs” or adjustable rate mortgages whose interest rates can go up and down with an index.

Nationally so far there have only been about 225,000 permanent loan modifications granted, really a drop in the bucket compared to the 3 million to 4 million that President Obama had as a target for 2012. And many of my clients that apply are inexplicably turned down for a loan modification, to lower their interest rates and give them a fixed rate mortgage loan that they can afford.

I think I may have discovered the reason why. In an article by Kathleen Howley published by Bloomberg on April 21 entitled “Mortgage Servicer Profits May Threaten Obama Housing Programs,” it was stated that mortgage servicers can make as much as $10,000 from foreclosing on a home, whereas the government (that is you and me) is paying them $1000 for each successful Making Home Affordable loan modification.

So no wonder the mortgage servicing industry isn’t exactly “on fire” with granting loan modifications. They can make TEN TIMES AS MUCH MONEY foreclosing, as doing the right thing, and trying to keep borrowers in their homes.

It’s a darn shame that the “mortgage modification” bill lost in Congress. That bill would have allowed bankruptcy judges to modify home loans, by reducing the principal balance to the value of the house, lowering and fixing the interest rates, and extending terms. This would have been the “stick” that may have been enough to encourage mortgage servicers to do more loan modifications.

Granted, a lot of people were allowed to buy homes in the past few years, when they probably should not have. But now that millions of people are in the homes, something has to be done. If all these houses are allowed to foreclose, it will hurt all of our property values and do tremendous further damage to the economy.

And frankly, many of the mortgage loans that were made, were predatory. One case I am litigating now, the Hispanic couple would have qualified for an FHA fixed rate loan, yet their mortgage broker put them in a high-rate ARM, likely because of the much higher commission. They were told (falsely) that they didn’t qualify for a fixed rate loan unless they had “perfect” credit, which at the time just wasn’t the case, and they had 20% down.


28 YEARS AND COUNTING!

Mr. Black celebrates his 28th year in practice this month. He was licensed by the Supreme Court of Texas to practice law in May, 1982. In fact, while working as a law clerk for his brother David Black in November 1979, Mr. Black helped file one of the first Chapter 11 cases and one of the first Chapter 13 cases in the Southern District of Texas under the then-new Bankruptcy Code of 1978.


Mr. Black Obtained Advanced Legal Training in March at the 11th Annual Texas State Bar Bankruptcy International Seminar in Munich, Germany. Mr. Black attends far more than the minimum continuing legal education (CLE) required of attorneys, to stay current.


QUOTES

Only those who dare to fail greatly can ever achieve greatly.

-Robert F. Kennedy

I can’t imagine a person becoming a success who doesn’t give this game of life everything he’s got.

-Walter Cronkite

Flops are a part of life’s menu, and I’ve never been a girl to miss out on any of the courses.

-Rosalind Russell


SAVE $$$$$

Start saving for retirement now

How much money can you lose by not contributing to a 401(k) when you’re young? Money magazine senior editor Walter Updegrave did the math: A 34-year-old making $50,000 who contributes 10 percent of his or her salary to a retirement plan will have about $680,000 in the plan at retirement time (assuming a 7 percent annual return, and a salary that rises 2.5 percent a year).

But waiting six years to start contributing to a plan would leave the employee with just $475,000 at retirement age. Workers who procrastinate until they’re 45 will have just $335,000, or less than half what they would have saved by starting at 34.


A little humor

Lawyers-

A Mexican bandit made a specialty of crossing the Rio Grande from time to time and robbing banks in Texas. Finally, a reward was offered for his capture, and an enterprising Texas Ranger decided to track him down. After a lengthy search, he traced the bandit to his favorite cantina, snuck up behind him, put his trusty six-shooter to the bandit’s head, and said, “You’re under arrest. Tell me where you hid the loot or I’ll blow your brains out.”

But the bandit didn’t speak English, and the Ranger didn’t speak Spanish.

Fortunately, a bilingual lawyer was in the saloon and translated the Ranger’s message. The terrified bandit blurted out, in Spanish, that the loot was buried under the oak tree in back of the cantina.

“What did he say?” asked the Ranger.

The lawyer answered, “He said ‘Get lost, Gringo. You wouldn’t dare shoot me!’”


Are bill collectors threatening to take your home or garnish your wages?

Are they threatening to do anything else that they are not allowed to by law?

Is your mortgage company charging you fees and costs that are not due? Are you just overwhelmed with debt? Facing a foreclosure or repossession? I.R.S. threatening to levy your wages or other property? If any of these situations describes you, contact Mr. Black at 713-772-8037 or send him an email at Email J. Thomas Black.


ARE YOU IN CHAPTER 13 NOW? Always keep the law office updated with your current address, telephone numbers, and email address. We may need to reach you quickly. 24 hours/7 days a week, you can check on the status of your Trustee payments, how much you still owe on your case, etc., by going to www.13datacenter.com to set up your user ID and password. Lose job or overtime? Expenses increase? Want to give up property to lower payments?

Go to www.jthomasblack.com , click on ” Current Clients Click Here” on home page, and fill out the Motion to Modify worksheet. Fax to office at 713-772-5058. We’ll review it and contact you if a change to your plan is possible.