Q What Are the Odds of Getting a Modification?
Before getting a Summons and Complaint, you can submit modification packages to the bank’s loss mitigation people, either independently yourself, or with the help of a service provider, including the help of an attorney. However, you need to understand two key facts:
Fact #1 – Few modifications are approved. How few? Well some statistical studies (relying on bank provided data) have broken down the number of modifications granted by the 8 largest servicers. One study shows that between 10% and 20% of modifications are approved.
However, other evidence suggests it is far fewer, as low as a fraction of a percent for some banks. One thing is for sure, certain banks are better than others at granting modifications on loans they service. AHM seems to be among the best, and One West, CitiMortgage and JP Morgan Chase seem to have the lowest rates of modification among the Big 8.
Fact #2 – Banks are disincentivized to modify loans. Why? They get paid fees to service the delinquent loans in their portfolio. Wells Fargo, the biggest servicer, may make as much as 10% of its total company revenue doing this, depending on which study you read. This leads to perverse incentives not to modify loans, to delay and lie to homeowners about the status, and to lose important paperwork. Bank of America, in particular, has been cited by numerous authorities for atrocious violations in this regard. While Wells Fargo for instance has a strong disincentive to modify loans, Wells Fargo is also very good about modifying qualifying loans if your paperwork is actually in order – they just don’t help much getting you to the finish line. Confused? Part of the problem is that the banks traditionally did not have the highest level employees or the best trained employees on their loss mitigation teams, and these individuals were not incentivized to “guide you” through the process to get a modification. It was a “take it or leave it” affair. Recently, the banks have stepped up their game and you have a far better shot at getting a modification and getting meaningful help; but, in our experience, the cases in litigation tend to get priority for underwriting review/modification and settlement. It is better to modify the loan before it gets to litigation, but if you haven’t litigation is a time when the banks natural “discincentive” to work with you flips and they are “incentivized” to get a concrete result. You can take advantage of this shift in momentum to strike a deal that you were having trouble with previously, despite your best efforts.
The good news is that the banks are getting much better. The bad news is they still steamroll the uninformed and those that have ‘difficult modifications’ that don’t fit neatly into any of their criteria or that have difficult issues. Say it is an investment property, you have a prior bankruptcy, your credit is blemished, you own your own business, recently started a new job, or you have multiple investments. These are the kind of ‘risky situations’ the banks don’t like to see and these facts can derail you – these cases must be carefully presented to the bank, addressing the reasons for the problem and why it doesn’t mean a lower likelihood you’ll pay the loan in full. One of the fallouts of the mortgage meltdown is the banks don’t want to “kick the can down the road.” That would happen if they worked out bad loans, that shouldn’t have qualified, and those loans defaulted a year or two down the line. They have a ‘moral’ or ‘ethical’ obligation to “clean house” and clear out bad loans, while salvaging those that can be modified using sound underwriting.
Given these two important facts, you stand a far better chance of being granted a modification, once you are seriously delinquent and in foreclosure, if you have an attorney on board. Most individuals who have really good credit and meet all the qualification criteria outright should be able to get a modification themselves, without any assistance. But, how many of these end up in foreclosure? Almost every case we see has multiple issues that need to be presented carefully and explained in order for an underwriter at the bank to sign off on it. If you haven’t succeeded yet, despite your own diligent efforts to modify, that is an indication that you may need to take a different approach and create some leverage in the negotiation process and get someone higher up the food chain, outside the call center, to take a look at your case and approve your modification. A lawyer can help do that, especially if your case involves predatory practices, modification fraud, or other condemned practices. We can’t change your financial numbers. We can’t promise you a modification. We are working with the same formula that anyone else would, but we are also in a highly risky litigation setting where the bank is very uncomfortable, and where there is legal recourse for mistakes made against you and violations you have suffered. As a result, we can usually get higher level people on the phone than you might be able to, we can work with the bank’s attorneys to get approval for your situation, and we can create pressure for the bank to enter the modification so as to avoid being called on the carpet for all the violations of the various consumer protection laws that have occurred in your case.