The Dirty Secret- Banks are not Financially Incentivized to Modify Your Loan in Most Cases

Imagine this scenario- your house is underwater and you have the ability to pay a lower amount per month but otherwise continue to pay.  Why would the bank deny you when they would on the face of it make more money than if they foreclosed or accepted a short sale?  The answer is that they make more money by foreclosing.

Most homes are sold into securitized trusts that are serviced by a trustee.  The trustee does not receive interest or principal payments, but instead, servicing fees based on collecting monthly payments, late fees, and foreclosure fees.  In other words, they make more money when you don’t pay and they have no risk associated with a default as they are not the investors.  Why work with you when they are incentivized not to?

There are times when a bank is incentivized to work with you.  This includes when there is bad title, accounting errors, the bank has lost the note, if your loan is old enough that you might actually pay down principle (10 years plus), they might get government money for modifying the loan, and other times when they benefit more than you would from modifying the loan.

Unlike many firms that will charge you $3,000.00 or more to do something you can do yourself without any guarantee of success, we use a different approach.

How We Can Help: Foreclosure Mediation under RCW 61.24

If your attempts to obtain a loan modification fail.  We can help you into Washington’s Foreclosure Fairness Mediation Program.  You are guaranteed under state law (RCW 61.24) of being considered for a loan modification and the bank has to produce the numbers it relies on for acceptance or rejection of your loan modification.  Under state law, if you qualify for a loan modification and one is not offered or if the bank negotiates in bad faith, it is a defense against the foreclosure.

The difference with the Foreclosure Mediation program is clear: you get to see the numbers the bank is relying on, the bank cannot claim they did not receive your papers, and you are entitled to consideration for a loan mod and a final yes or no answer by law.  The one problem with the mediation program is that is does require you to be in default on your loan.  If you wish to avoid being in default or wish to pursue a short sale or deed in lieu, then this approach is not recommended and typically we refer you to a real estate expert that is cost efficient and experienced.

Predatory Loan Modification and Debt Consolidation Companies

If you have been taken advantage of by a loan modification company, we can help.  There are many requirements for a loan modification company to operate legally in WA state and many do not follow the laws.  You may have potential claims under the Mortgage Broker Practices Act (RCW 19.146) or the WA Consumer Protection Act (RCW 19.86).  Call today to see how we can help recover fees and damages if you have contracted with a predatory loan modification company.