Below is a true case of how we negotiated a loan modification for a client.
In March 2011, our firm was negotiating a conciliationi with Chase (Home Finance LLC) whom was servicing a loan for their parent company JP Morgan Chase Bank. In this particular negotiation our client was approved for a HAMP modification. The approval would adjust our client’s payment from $1,818 (including taxes and insurance) to $1899.35 (including taxes and insurance). Our client’s payments would increase under the Chase’s offer by $81.00. Amerihope Alliance Legal Services’ goal was to negotiate a new monthly mortgage payment of $1,500.00 and to have the loan capitalized (the arrears distributed over the life of the loan). in order for our client to not have to pay the exorbitant past due amount in a short period of time. Chase approved the client for the HAMP program and, during negotiations with our firm, argued that the payment met the debt-to-income ratio criteria per HAMP guidelines section #6 item 6.1 (monthly Mortgage Payment Ratio). This section states that the mortgage payment must equal 31% of the homeowner’s Gross income. At a glance and to most law firms the Chase approval would seem justified due to the following formula;
Gross income of $6,126.94 divided by 31% equals a monthly payment of $1,899.06 (including taxes and insurance in the payment).
However, Amerihope Alliance Legal Services is an expert in loan modification negotiations, our firm has completed over 3,000 loan modifications. We argued that section 6.1.2 of the HAMP guidelines state the following:
6.1.2 Monthly Mortgage Payment
The monthly mortgage payment used to determine borrower eligibility includes the monthly payment of principal, interest, property taxes, hazard insurance, flood insurance, condominium association fees and homeowner’s association fees, as applicable, regardless of whether these expenses are included in the borrower’s current mortgage payment. It also includes any escrow payment shortage amounts that are subject to a repayment plan. The monthly mortgage payment does not include mortgage insurance premium payments or payments due to holders of subordinate liens.
Chase did not include the homeowner’s HOA payment of $441.67 in their calculation. Our firm pointed this out and Chase was clearly aware. Our agreement was that per rule #6.1.2 in the HAMP guidelines the final loan modification payment should not be $1,899 (including taxes and insurance) but rather $1,457.33 (including taxes and insurance). The 31% ratio must include the Homeowners association fee. Therefore, in this case the $441.67 fee must be deducted from the $1,899 payment, totaling the modified payment at $1,457.33. Chase finally agreed with our assessment and agreed to modify in compliance with HAMP Guidelines. With another law firm, this client most likely would have been guided to accept the $1,899.06 per month payments.
In conclusion, if you are wondering what ingredients it takes to complete a loan modification, the answer is: lots of time, patience, financial expertise, continuous follow up with your lender, determination, numerous firm phone calls to your lender and an excellent understanding of all the loan modification guidelines.
WITH THE WRONG LAW FIRM, YOUR MONTHLY PAYMENT MAY GO UP
i In a mortgage loan Conciliation the firm holds a conference call with the Loan Servicer and their legal counsel to discuss possible home retention options for the homeowner.