Thankful for Loan Modifications?

I’ve had many clients come into my office recently, having paid tens of thousands of dollars pursuant to loan modification agreements with banks.  This Memorial Day, I’m so thankful for the honest bankers who cared enough to work out agreements with these homeowners so as to avoid foreclosure, enabling these allow hard-working homeowners to make monthly mortgage payments and remain in their homes.  OH, WAIT.

These hard-working homeowners paid tens of thousands of dollars, diligently made all monthly mortgage payments, and did everything the banks asked them to do to stay in their homes and avoid foreclosures.  But the bankers weren’t honest and, and these loan modifications were nothing to be thankful for.  It was all a fraud.  A farce.  You see, these homeowners entered a loan modification agreement and made all of the monthly payments required thereunder, but they got sued for foreclosure anyway, often waiving all defenses to that foreclosure as part of the loan modification!

Please, please don’t make this mistake.  Please, please don’t fall into this trap.   Please, please, please read these articles:

Tempoary loan modifications are the ultimate scam!

Loan Modifications can CAUSE foreclosure!

Banks Offer Loan Modifications to Dupe Homeowners!

I’m not trying to say homeowners should never do a loan modification.  My point, simply, is this … banks know how desperate many homeowners are for a loan modification, and bankers prey on that desperation, resulting in agreements that are terribly one-sided and, yes, even fraudulent.  If you’re going to enter an agreement like this, you have to do so with both eyes open.

I could write pages and pages of terms that I think a loan modification should include.  I could give horror story after horror story of homeowners who made tens of thousands of dollars in payments yet got sued for foreclosure anyway.  Instead, I’ll put it like this … if you’re adamant about entering a mortgage modification, and you have a bank willing to do so, I’d make sure, at worst, of the following:

1.  The loan modification is in writing, signed by you and the bank.  A bankster telling you over the phone that you have a deal is about as trustworthy as an email from Nigeria telling you that you’ve won $10,000,000  and that you need to mail them a $10,000 check to claim your prize.

2.  The loan modification specifically says, in writing, that the bank will not sue you if you make the monthly payments, or, if a suit is already pending, that the suit will be dismissed (upon your entry into that agreement).  That might sound obvious, but what good is a loan modification – and what purpose does it serve to mke monthly payments – if the bank can still sue you for foreclosure anyway?

3.  The loan modification has some type of written representation from the bank that it is the owner/holder of the Note and Mortgage.  Incredibly, I often see loan modifications where the bank asks the homeowner to represent that it is the owner/holder of the Note and Mortgage.  This is bass ackwards.  The typical homeowner has no idea whatsoever which bank owns that Note/Mortgage – that’s something the bank should have to represent, to the homeowner, so the homeowner has some recourse if it turns out to be false.

4.  The mortgage modification is recorded in the Official Records of the county where the property is located.  If it’s not recorded (or not in a format that it can be recorded), chances are pretty good that it’s not real.

5.  The loan modification agreement does not require you to waive all defenses to foreclosure.  If I’ve seen this once, I’ve seen it 100 times.  A homeowner is desperate for a modification, so he/she will sign anything, even something that says all defenses to foreclosure are waived upon any default in the modified agreement.  This might be kosher for homeowners who know they won’t re-default, but few are in that boat.  Even if you really want a loan modification, do you really want to be in a position of not being able to defend a foreclosure because you’ve waived all defenses?

If we all stand up, and insist on these basic terms, then perhaps we can collectively force banks to enter loan modifications that aren’t so one-sided.

Mark Stopa

Posted in Main | 12 Comments »

12 Responses to Thankful for Loan Modifications?

  1. Senka says:

    The only way that any mortgage modification can be good and legal is to ask a bank to prove the standing, to prove to a homeowner that they have the standing, that they’re the lawful owner of your mortgage. Then, and only then should anyone sign the modification papers. So, how to do this – not sure yet, as everything else in the fraudulent mortgage securitization/foreclosure maze, we learn as we go. In MA, our group (Foreclosure Defense League) is requesting from our AG to look into this issue and allocate money from the mortgage settlement agreement toward this.
    Can you as a lawyer ask a bank to prove the standing during a modification process for your client? I bet that is still impossible because those masters, those too big to fail still think that they are the masters of the game and not obligated to prove anything to anyone!

    • Mark Stopa Mark Stopa says:


      I’ve never seen a loan mod be entered with this sort of condition.
      As a practical matter, I think the best we could ever do is stipulate to an order in a pending court case saying that the existing mortgage of record has been modified (and, if applicable, that the note has been modified as well).
      If an order is entered so reflecting, and the bank represents that it is the owner/holder, I think that’s the best we’re ever going to get (the alternative being to simply not enter the loan mod).


  2. enid says:

    I want to know what options do homeowners have if loan mod is a scam. What is a homeowner fighting for then?

    • Mark Stopa Mark Stopa says:

      To be clear, ENID, I’m not saying all loan mods are a scam.
      Some are perfectly legitimate.
      If anything, the purpose of this post is to help consumers understand the difference between a good modification and a bad one.
      That’s hard to explain in one post, but the list of factors to look for in a loan mod should help.


  3. pam says:

    Thanks, Mark, for that excellent and concise information. I was afraid I had made a mistake by not signing a loan modification agreement with the bank but thanks to your post, I believe I made the right decision. Thanks so much for your blog.

  4. susan quick says:

    What can I do? I have not made a payment on my house in 1-1/2 years … because I spoke to the bank in 2010 .. I was seeking a refinance on the property. At this time my credit was GREAT and they had me in a 9% interest rate..with no escrow . When they refused to work with me I refused to make the payments.
    I would like to know if this bank even owns my home. (Chase)what is your best advice?

  5. J.R. Homeowner says:

    Avoid any so-called “foreclosure defense attorneys” that center their “defense” of your home on negotiating a loan mod with the alleged lender.

    Competent foreclosure defense counsel should be ready, willing and able to litigate your case in a court of law and NOT simply exchange phone calls and emails with a loan servicer and act as another “loss mitigation” agent for the bank along with the servicer.

  6. Pingback: Is Your Modification In Your Best Interest? – Naples Foreclosure Attorney

  7. Pingback: Is Your Modification In Your Best Interest?

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