mortgage

Can an attorney help loan modification?

Highlights
  • A lawyer can explain your legal rights and try to stop a foreclosure sale.
  • Borrowers can get help free from government-approved housing counselors.
  • Borrowers should never pay up-front fees for loan modification services.

Should homeowners who want to obtain a loan modification from their lender hire an attorney to help them achieve that goal? Attorneys say their services can be helpful, but lenders counter that such services are an unnecessary expenditure of money that would be better applied to overdue mortgage payments.

"Lawyers can be and have been very helpful in many cases," says Howard Miller, 2009 president of the California State Bar and a partner at Girardi Keese, a Los Angeles law firm. Miller says attorneys can help borrowers understand their legal rights, negotiate with their lender, complete the required paperwork for a loan modification and even stop a foreclosure sale.

A forestalled sale wouldn't necessarily guarantee a successful loan modification, but could give the borrower more time to catch up on the mortgage payments or complete a loan modification trial period.

Call loan servicer before legal counsel

Lenders have a different opinion.

Tom Kelly, a spokesman for JPMorgan Chase in Chicago, says borrowers shouldn't pay for loan modification services they can receive free from a loan servicer or nonprofit housing counseling agency that has been approved by the U.S. Department of Housing and Urban Development, or HUD.

"You are already struggling to pay your mortgage and you are going to pay an extra $2,000 or $3,000 to somebody?" he asks. "Our advice would be to call us up and talk to us. Start with that. And there are also nonprofits that HUD has certified that can do the same thing for you free."

Worries about loan servicers' nonresponsiveness are out of date, Kelly says, since lenders have staffed up and are now better prepared to handle the high volume of calls and necessarily paperwork.

"In 2009, we have added 2,500 loan counselors to the 2,500 we already had, so we are up to 5,000. We try to work the line fairly and as quickly as we can," he says.

Attorney can help halt foreclosure

Most borrowers don't need to hire an attorney per se to help them achieve a loan modification or delay a foreclosure sale, says Dan Harris, CEO of Home Retention Group, a for-profit loan modification service in Mahopac, N.Y., though he believes borrowers may be hard-pressed to achieve those goals without some sort of hired help.

"If the bank is working on a loan modification, we will pester the living heck out of them -- up to 15 phone calls in a day -- until we get somebody on the phone and work our way up the food chain to someone who can stop the sale," he says.

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But there are some cases in which that pester-the-heck-out-of-them strategy isn't enough and the borrower may be in a position that warrants an attorney's assistance, Harris says.

"An attorney can help them file for bankruptcy to stop the foreclosure, if their finances warrant that, or an attorney can file an order to show cause to stop the foreclosure sale. Those are two of the typical reasons why we would send them to an attorney," he says.

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