One aspect of my law practice that brings me much personal satisfaction is when I can help a client keep their home after they’ve fallen behind on their mortgage payments. People sometimes run into a string of bad luck, can be temporarily out of work, experience poor health of a family member causing high medical expenses, or some other tragedy resulting in missed mortgage payments. Consequently, they get sued by their bank in foreclosure.
What can I do to help? I tell clients that there are usually two components of my help in defense of a mortgage foreclosure lawsuit. The first, defending the lawsuit in court – the litigation component. The second is working with the client to submit an application for a modification of their present defaulted mortgage.
Let me give you an example. More than six years ago a client retained me to defend his foreclosure lawsuit. I immediately answered the complaint while simultaneously requesting certain documents in the discovery process, one being an inspection of the original note and mortgage. I also brought in a mortgage modification consultant (this I regularly do) so that he can review the person’s income and overall finances and submit a modification application that will win approval.
In the instant case, the bank ignored my request for delivery of the original note in discovery. What was worse is that ultimately the trial judge did not compel them to deliver it (in my opinion contrary to the law on discovery)! I appealed this decision.
Meanwhile, my client’s first two modifications were rejected by the bank. The third time was the charm!
My client over the course of the litigation revived his income and was now able to afford the mortgage payment – unfortunately with taxes, interest and attorney fees tacked on. The principal amount of the mortgage was in excess of the value of the home.
Here is what happened and often happens when we negotiate with banks over defaulted loans.
The bank offered us a six-month trial modification.The client needed to make six timely payments to the bank. After that, he was given a mortgage at a reduced rate of interest than he originally had. Also, the bank REDUCED the principal by $90,000 per year for the first three years of timely payments. My client would ultimately be able to knock off $270,000 of his mortgage principal after three years of timely payments – now the principal was less than the fair market value of his home.
Banks quite often reduce or defer principal, elongate time of payments (convert a 30-year loan to a 40-year loan, enabling the borrower to make the payments) and/or reduce interest. In this case, the bank sold the mortgage during the litigation, probably for a reduced price, because they had paid quite a bit in legal fees already and, they were uncertain of what would be the result of the appeal.
My litigation skills forced the bank to reconsider the modification request. My client was thrilled and kept his home. You can too! Call me if you are in such distress. I may be able to help.