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.
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Worries about loan servicers’ nonresponsiveness are out of date, Kelly says, since lenders have staffed up and are now better prepared to handle the high volume of calls and necessarily paperwork.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.
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.
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.
The bottom line for borrowers may be a matter of time versus money because Harris estimates that the average homeowner would have to spend several hours a week on the telephone to work out a loan modification. Those who don’t have the time to take on that much work may prefer to hire professional help.
What’s more, while attorneys and lenders may disagree over whether the involvement of an attorney is warranted, they do agree that borrowers should exercise caution before they hire anyone to represent their legal interests.
Miller says borrowers should ask for references and a reputable lawyer should be able to explain his or her experience in loan modifications, describe the results he or she has achieved for other clients and give potential clients the names and telephone numbers of previous clients who can attest to the good quality of the lawyer’s services.
Kelly explains that borrowers will need to sign a form that authorizes the attorney or other representative they’ve hired to speak to the lender about their situation because the lender has a responsibility to protect the borrower’s privacy from unauthorized inquiries.
Harris advises homeowners to walk away from any attorney or loan modification company that charges an upfront fee before the work has been performed. Such fees are banned in a number of states.
“If anybody is asking for $2,000 or $3,000 or $4,000 upfront to do your modification for you, their incentive to help you is gone when you give them the money, unless they are just a mensch,” he says. “People shouldn’t be paying those fees upfront.”