Loan Modifications

Loan modifications, forbearance agreements, short-sales, and other foreclosure prevention options

Reed Law represents borrowers who either need to (a) modify their loan(s) in order to avoid a foreclosure pursuant to a loan modification or forbearance, or (b) obtain relief of their debt burden pursuant to a short sale or deed in lieu of foreclosure. The loans at issue are generally secured by residential or commercial property. In the case of residential property, which is the borrower's "primary residence", more protections and options may be afforded to the borrower than for "non-owner occupied" residential or commercial property.

If you are experiencing, or have experienced, financial distress and fear you could lose your property to foreclosure, please call us. We can analyze your specific financial situation to determine which options may be available to you in order to achieve your individual goals with respect to your property. Time is of the essence. There are statutory time requirements related to foreclosure proceedings and the sooner a legal action plan is initiated, the sooner a potential workout can be achieved. We approach each client individually and seek an optimal solution for their specific situation. With a tailored negotiation strategy in hand, Reed Law is in a good position to pursue a workout plan and resolution of the client's issues.

Call us toll free at 877.390.REED (877.390.7333) or fill out a contact form today. We can set up a free initial phone consultation to discuss your specific situation. See answers to FAQs.

Typical workout solutions for borrowers experiencing, or anticipating, financial distress and an inability to pay their current mortgage payments on time:

  • Loan Modifications. This is the permanent restructuring of mortgage terms in response to the current financial situation of the borrower. Loan modifications may (a) add delinquent payments and fees to the principal, (b) formally extend the term of the loan so that the monthly payments are reduced, and/or (c) change material loan provisions affecting the principal amount, such as changes to the interest rate, frequency and amount of installment payments and maturity date. A successful loan modification will result in a negotiated and executed Loan Modification Agreement ("LMA"). This LMA will document and memorialize the modified loan terms and obligations of the borrower.
  • Forbearance Agreements. This is when the lender agrees to defer or postpone foreclosure without changing the delinquency status of the loan. Lenders grant borrowers additional time to repay the amounts due under the loan. Please note, a forbearance plan does not stop foreclosure proceedings; it merely postpones the proceedings until the loan can be made current. If the borrower cannot bring their loan current within the time provided by the lender, the foreclosure proceeding will continue.
  • Short-Sales. This is a procedure whereby the lender allows the borrower to sell the property at the current fair market value even though the sale proceeds will be less than the total amount owed on the loan. If negotiated and documented properly, the lender will typically agree not to go after the borrower for a deficiency judgment. A negotiated short-sale stops the foreclosure process and is less detrimental to a borrower’s credit rating than a foreclosure.
  • Deed in Lieu of Foreclosure ("Deed in Lieu"). This consensual act allows the borrower to transfer title of the property to the lender and avoid an embarrassing foreclosure and may be less detrimental to the borrower's credit. The debt and deficiency, if any, is usually completely forgiven by the lender.
  • Foreclosure. When a borrower is delinquent in their payments, this is the process by which the lender obtains title to and possession of real property it has financed. A foreclosure can be detrimental to a borrower’s credit and his/her ability to buy other property in the future. Foreclosure should, and often can, be avoided by the effective and timely execution of one of the consensual foreclosure prevention options discussed above.

Frequently Asked Questions ("FAQs")

Q: Do I need retain a law firm in order to successfully negotiate and receive a loan modification?
A: Technically, no. On the one hand, if you qualify under a Federal or State program for loan modification you may be able to negotiate a satisfactory solution for your particular situation in a timely manner by yourself. But, it should be noted that this is a legal process. If you are successful, you will be required to execute new documents with legal obligations. If you are not able to successfully negotiate with your lender, there could be dire consequences, such as the loss of your property through foreclosure or otherwise, damage to your credit or deficiency actions. It is imperative to put together the best team to represent you in this confusing and, oftentimes, difficult process. With Reed Law’s extensive real estate experience, we are in a strong position to achieve the most favorable results for you. Additionally, we can analyze the new legal contacts and explain the terms to you so you know what you are agreeing to.

On the other hand, if you do not qualify under a Federal or State loan modification program or you lack the time, experience, skill, or knowledge required to effectively negotiate the optimal financial and legal workout solution, then you should seriously consider retaining legal counsel. Legal issues surrounding mortgage finance can be complex and confusing for someone who does not deal with such issues every day. Your property ownership is an important matter. We encourage you to do everything you can to ensure success in this process.

Additionally, we are experienced in analyzing loan documents. Residential mortgage lenders are expected to follow the legal requirements of the Real Estate Settlement Procedures Act ("RESPA") and the Truth in Lending Act ("TILA"). Occasionally, residential mortgages have RESPA and/or TILA violations. We can analyze your particular loan documents to determine whether RESPA and/or TILA requirements have in fact been violated.

Q: Should I hire a real estate agent or "loan modification consultant" to represent me?
A: Be very careful. First, these types of service providers cannot legally or ethically provide legal counsel to you. Second, in many cases, the services they purport to provide are not even allowed under California law (see Department of Real Estate Bulletin and the State Bar of California Ethics Alert regarding same).

Q: Should I just stop making payments and/or ignore my current situation?
A: NO! If you have the financial means to make your mortgage payments, then you should do so. If you cannot make these payments, then you should pursue a loan modification or other foreclosure prevention option immediately.

Q: There are many law firms out there, why should I retain Reed Law to represent me in this important matter?
A: Reed Law provides specialized real estate counsel. The firm's attorneys have broad and deep experience in real estate and finance matters.

Lenders' loss mitigation departments are processing countless loan modifications and other potential solutions to borrowers’ issues daily. In fact, they have entire departments of professionals and attorneys devoted to dealing with loss mitigation and asset recovery. If you do not have experience in this area, it may be difficult to negotiate an optimal workout solution or to recognize whether you are being offered a good deal by the lender. Reed Law is experienced in dealing with lenders and negotiating with loss mitigation departments and will represent your best interests.

The information presented above, and elsewhere on this Site, is not legal advice and does not create an attorney-client relationship. Legal advice can only be rendered to you by Reed Law Corporation, PC once a formal attorney-client relationship has been established in writing. See our Terms of Use for more information.