Mortgage Modification and Short Sale for 2011

The process of getting a mortgage loan modification or a short sale will be simpler in 2011. Getting sandbagged by your mortgage servicer will become much less likely in 2011 – if you follow the new rules. I assisted distressed homeowners prepare their mortgage modification applications for several prominent and successful attorneys for eighteen months. The whole process changed this past June.

First, you need to know that mortgage modification is now a do-it-yourself mortgage modification. Same for do-it-yourself short sale. Any other search in Google, such as, avoid foreclosure, prevent foreclosure, foreclosure alternatives, or stop foreclosure should result in the same process.

There are two reasons for this new Process.

First, the banks have learned that they will not be held accountable for lack of good faith negotiations unless they file a foreclosure. No third party negotiator can get anything accomplished on your distressed mortgage that you can’t get done by yourself. Even the most accomplished mortgage attorneys get sandbagged by the lenders. Equal opportunity subterfuge.

Secondly, the new MARS Rule adopted by the Federal Trade Commission makes it unlikely that any third party negotiator can make a profit by assisting distressed homeowners. There’s no advantage to paying someone else to do what you can do by yourself.  This under-publicized new rule takes full effect at the end of January, 2011. I will show you how to negotiate your mortgage for free.

If you haven’t already, you need to separate mortgage servicer from mortgage investor for this exercise. Your mortgage servicer is little more than a bill collector. They’re the one that makes your life miserable by misinforming you, losing your paperwork, shredding your faxes, and foreclosing on you while you think you’re in the middle of negotiating your mortgage. Your mortgage investor, (and there may be as many as eight of them,) actually holds your mortgage note. Your mortgage servicer is legally responsible for communicating all mortgage negotiations. That point will be crucial in the mortgage modification process.
Getting a mortgage modification or a short sale with no mortgage deficiency is a two-step process.

First, after you are 45 days late, your mortgage servicer has calculated a Net Present Value, which is the point at which your mortgage investor and you, as a mutual solution, will benefit more from a mortgage modification or a short sale. Those are the only two options. Only your mortgage servicer benefits from a foreclosure, plus all the late fees and interest. That is the heart of our current mortgage scandal. Precise definition of establishing ‘Imminent Default’ was an oversight in the wording and enforcement of the “Home Affordable Mortgage Plan,” or HAMP, and the mortgage securitization mess that got us in this predicament to begin with. The REST Report overcomes that Imminent Default oversight.
The whole point of Net Present Value is to hold your mortgage servicer and investor accountable for their responsibility in this mess. It is the one unbiased calculation that balances the mortgage negotiation industry, and affords the homeowner a level playing field in mortgage negotiations.

You need to know however, that it is not necessary for you to miss any mortgage payments to demonstrate ‘Hardship,’ regardless of what your mortgage servicer tells you. That is either miscommunication or downright mortgage fraud. But your mortgage servicer will probably never get caught, as you will see.

Your mortgage servicer uses proprietary software to calculate Net Present Value. The REST Report is the same  software. This is a .8 million program. We have exclusive access. By submitting the REST Report with your supporting documents, you prove to your mortgage investor what is the best resolution to your ‘distressed mortgage.’ Again, mortgage modification or short sale are the only two remedies. The trick is to get your file in the hands of your mortgage investor, thereby avoiding all the treachery of your mortgage servicer.
Mortgage modification is not a refinance. Credit scores are not used to evaluate a modification. Mortgage modification is a re-writing of the terms of an existing mortgage so as to mitigate the effect of a troubled asset to both parties (homeowner and mortgage investor). Those modification terms follow a prescribed process and order of consideration, whether HAMP-eligible or conventional financing. Banks had a pre-existing modification process long before the Home Affordable Mortgage Plan. A general overview of typical mortgage modification terms can be seen at: www.http://mortgage-monster.com/calculate_mortgage_mod.html. The Bottom Line?: You should get a new ‘permanent’ monthly mortgage payment that is 31% of your new, stable, monthly income. The REST Report assures that and uses it as the starting point of calculations. Without the REST Report, your mortgage servicer will decide what they think you can afford per month. Again, you want to be in control of the mortgage modification process.

Ninety-nine percent of all REST Reports never get presented in court because the mortgage servicers know the game is up once they see it. But you need to be prepared for mortgage servicer stupidity, ineptness, or fraud from a position of strength. Knowing that the foreclosure courts recognize the REST Report as an unbiased calculation of Net Present Value ensures that the court will side with you. They always have.

Why? Because the mortgage servicers learned that no court will hold them accountable for being stupid. As long as they don’t foreclose on you, there’s no harm or foul. There is no reason to pay a third party to negotiate your mortgage, because they can’t get anything done that you can’t do yourself. I’ll show you. Only when they file a foreclosure can you, the distressed homeowner, stop them in court. Every bank has two separate departments that deal with ‘troubled assets.’ One is the Loss Mitigation Dept. and the other is the Foreclosure Dept. A foreclosure court will hold the mortgage servicer accountable so that they don’t foreclose on you behind your back. You stop them by proving that you are trying to negotiate a mutually beneficial solution to your ‘troubled asset.” You use the unbiased REST Report to prove those calculations to the court.

Secondly: To prove good faith to your mortgage investor, you mail every supporting document by certified mail, return receipt requested. These receipts become part of your file that you might submit as evidence in any court foreclosure defense that may arise. The sooner you file, the less fees the mortgage servicer can attach because you have proof that they received your documents/file. Translated: No faxes.

We have anecdotal evidence that one well-known lender had a fax machine in their Loss Mitigation office that fed directly to their shredder. That is no joke, either.

When you call your mortgage servicer, you will be simply talking to a call center. They will be reading a computer screen prepared for them by a Loss Mitigation Department that benefits by foreclosure and fees; not by mortgage modification or short sale. You will never, ever talk to an authority decision maker on the phone. Get your mortgage servicer’s mailing address, request a mortgage modification or short sale package and get off the phone. Anything else just wastes your time and increases your stress.

Again, you DO NOT have to miss mortgage payments to show “Imminent Default.” 
If you believe what you hear on the phone from your mortgage servicer, go out and talk your nearest tree. Same authority level. Your mortgage servicer is simply a bill collector, and the person on the phone is not a bank officer. You want to communicate with your mortgage investor. That means certified mail, Return Receipt Requested, period. Again, no faxes.
We have run almost 1500 REST Reports with astounding results, both in and out of court. If for some reason, your mortgage servicer ignores the incontrovertible calculations of the REST Report, a foreclosure court judge will not. Has not.

Just imagine your mortgage servicer in front of the judge: “Mr. Lender, are these your calculations, using your software?” Lender: “Yes judge, they are.” You have just proved lack of good faith on the part of your lender. Game over.

Just imagine your mortgage investor going to their mortgage insurer (Read FDIC): “So, Mr. Investor, calculations with your own software show that a mortgage modification or short sale was the best solution to this distressed mortgage. And you want us to pay you for this foreclosure? We don’t think so.” Game over. Your mortgage investor cannot prove that foreclosure was better than mortgage modification or short sale in order to collect their insurance on the ‘distressed mortgage.’

Your mortgage servicer is counting on your lack of knowledge and frustration so the mortgage investor can collect on the Loss Sharing Agreement with the Federal Deposit Insurance Corporation, or FDIC. Your mortgage investor has nothing to lose.

Next, after you officially file your supporting documents, including the REST Report on top, call your local county Trustee and/or District Court once a month to make sure your foreclosure case is not on the docket. (You may be able to do this online, but it’s not anything to be left to chance.) Until it is, enjoy your free house. Your mortgage servicer WILL string you along with a promise of a mortgage modification and foreclose on you behind your back. We see it happen all the time. If it is on the docket, march right on down to your foreclosure court, contest the foreclosure, and file a copy of your entire file, (including certified mail receipts and REST Report on top,) as evidence in your foreclosure defense. Watch your delinquent fees and interest melt away.

Picture this: Your judge lives in your district. You have just submitted the bank’s own recognized and unbiased calculations, with proof of submission to the lender, (Read: good faith). Again, the results have been spectacular, both in and out of foreclosure court. Game over.

Lastly, in my two years of assisting distressed homeowners file their mortgage modification or short sale applications, I have found a spectacular hardship letter template. No one can or should write your hardship letter for you. But there are proven aspects to that letter that get results. It’s required as part of your application, and I know those aspects. Believe it or not, this is a human endeavor. You just have to get to a decision-making authority with an offer they can’t refuse. Heh. Reminds me of a movie I once saw.

Closing caveats:

You may or may not need, or want, legal counsel in your mortgage modification or short sale journey. But there’s plenty of time for that later. And you’ll assuredly save money anyway by doing the REST Report research for your attorney anyway. Forensic loan audits are a separate consideration also.

The Home Affordable Foreclosure Assistance. or HAFA, provision of HAMP (Home Affordable Mortgage Plan) has been a miserable failure.  An experienced mortgage investor will be much more adept at negotiating your mortgage deficiency. Mortgage servicers do all they can to sandbag investors because they want all the distressed mortgage profits to themselves. The REST Report takes all those travestys away from them and allows you to do what is in your best interest. Once you commit to HAFA, there’s no escape. There are no reports of satisfied homeowners that I can find; and many, many reports of RE agents that regret it. HAFA was written by the banks. ‘Nuff said.

If you have heard of the MERS computer, or the computer that calculates and securitizes almost all of the mortgages in the U. S. today, you need to know that a computer cannot foreclose. A human being must show up to foreclosure court to present the mortgage holder’s foreclosure case. The REST Report will take all precedence in any case presented by your mortgage servicer. This appears to be at the center of the ‘Foreclosuregate’ or ‘Robosigner’ scandal. Game over.

A mortgage deficiency is the difference between the current mortgage balance in a short sale, which will include late fees and interest piled on by your mortgage servicer; and the selling price at closing. You, the seller, will be held accountable for that deficiency for 7 to 10 years after the closing. The only opportunity you have to negotiate your mortgage deficiency is before closing on your property.

You can recover from the credit implications of a short sale by lease-optioning another house for two years and by then be in a position to purchase it. Deed-in-Lieu and foreclosure will stick with you for 7-10 years. With just a little effort, you can keep your property and credit score damage to a minimum.