The Illusion of Home Mortgage Modification
I just read an interesting article in the Michigan Lawyers Weekly of November 22, 2010 by Syvia Hsieh. Homeowners are now suing banks, in class actions, to force the banks into giving loan modifications. The suits allege that the banks are giving people temporary relief by lowering their payments while demanding documents, losing the documents, demanding more documents and generally stringing the consumers along until ultimately the bank says “no” to any mortgage modification. The consumers, not surprisingly, have been misled into believing that they have a right to have their mortgages modified. The laws regarding mortgage modification are illusory. They give the impression that government has given consumers new rights, but they have not. Its time for everyone to wake up, smell the coffee and make plans around this new reality that I call the “Illusion of Mortgage Modification..”
The lead attorneys in these consumer class actions against the banks are alleging that the bank’s own forms say that if the consumers comply with bank’s requirements and qualifications that the bank “will” modify their loans ( not “may” modify their loans). Consumers, I have news for you. You don’t have any right to a loan modification. I am sorry to be the bearer of bad news, especially since I am a consumer rights attorney. I think that anyone that tells you otherwise is perpetuating the illusion. Lawyers know or ought to know about the concept of Consideration. Consideration is what transforms a gift (something for which a beneficiary has no rights) into a contract (something to which a beneficiary has rights). In my opinion, even if the bank said that it “will” modify your loan if you get certain documents to it, do you really believe that the bank’s lawyers bungled this form so as to not allow the bank a thousand escape clauses? Seriously??? Wake up!!! I am going to guess that none of these bank forms that promised any kind of loan modification specified just how much the bank was going to lower your monthly payments. I am not saying that the bank is not interested in keeping you in your home for a lower payment as much as I am saying that it may not be as interested in doing so as might think and may not be interested in lowering your payment as much as you may need to stay in the home. I am saying that you don’t have a right to a loan modification.
Lets look at the Michigan statute for a moment. Last year, Governor Granholm signed into law, an amendment to Michigan’s foreclosure by advertisement statute that required lenders to modify consumer’s mortgage loans if they qualified for such a modification. This law has hustled through the Michigan Legislature quickly. Not much debate on this subject because law makers jobs are to stay in office right?
OK, so what happens if the consumer qualifies for a mortgage modification under the new law, but the lender chose not to give the consumer a modification? Essentially, nothing! Under the Michigan law, if a consumer qualifies for a mortgage modification and the lender refuses to give one, the consumer has the right to complain to a judge about it. So what can the judge do? If the judge follows the law, the judge cannot do anything for the consumer because a court is required to follow a contract as written in most cases. The judge is in no position to rewrite a mortgage loan or any other obligation pursuant to his or her moral compass.
The big question then, is what did the amendment to the Michigan law on mortgage modifications accomplish? In my opinion, it perpetuated the Illusion of Mortgage Modification in Michigan. It made us, as consumers, feel like we got something from our state legislature in response to the mortgage crisis. We, in fact, got very little. I don’t blame the legislature for what they did, because they had very little to work with. They do not possess the power to allow courts to re-write mortgage loans as that would be unconstitutional and such a law would be struck down in a heart beat the courts.
“Gary, what do you recommend?” you might ask. If you are in foreclosure, I would tell you to still attempt a mortgage modification. You have nothing to lose by trying to get your mortgage modified. But keep in mind that you don’t have a right to a mortgage modification. I would also advise you to create an exit plan from your house in conjunction with proposing a mortgage modification plan so if you are unable to make a deal with the bank, you have a plan to move your home and get on with the business of life. If you are plaintiff in class action against the bank because you think you have a right to mortgage modification, I would tell you to stop tilting at windmills and get working on an exit plan.
If you have been victimized by a debt collector or have items on your credit report that are incorrect, call or email Attorney Gary Nitzkin for a free consultation at (888) 293-2882. For more information about your credit rights as a consumer, visit our blog at www.micreditlawyer.com/blog. Visit our website at www.micreditlawyer.com.