Our Process for Pursuing a Loan Modification in NJ
1. AVOID SCAMS
It may be a Loan Modification Scam if:
- You get a letter that looks like a modification pre-approval.
- You get notices that look like they are from the government.
- You get notices that look like they came from a mortgage company.
- They tell you that you are about to lose your home.
- You cannot speak to the attorney that is handling your file.
- They promise a 2% interest rate.
- They promise principal reduction.
- They tell you that you don’t need tax returns.
- They tell you they can lower your payment without taking any information from you.
- They are not a NJ licensed attorney or a NJ licensed debt adjuster.
- They are not located in NJ.
- They are not prepared to help you go to Court or stop a sheriff sale.
2. WHO IS THE CURRENT SERVICER?
The loan modification application must be submitted to the current loan servicer. This is normally the company that is sending the monthly mortgage statements. The monthly statement will have necessary information like the loan number, interest rate, payment amounts, amounts due and the address that can be used to communicate with the Servicer. It is important to open all mail because the Servicing can be transferred and if you send the application to the wrong servicer, there is no chance to stop a foreclosure or get a modification.
3. WHO IS THE OWNER OR INVESTOR FOR THE LOAN?
Knowing the Owner/Investor can be the most important piece of information available and will tell you what types of modifications may be available. If your loan is “Federally Backed,” meaning it is with FHA (federal Housing Authority), VA, Fannie Mae or Freddie Mac, your modification programs are publicly available and the Servicer must abide by them. You can find out if your loan is “Federally Backed” through these searches:
- Find Out if Your Loan is Owned by Fannie Mae Here
- Find Out if Your Loan is Owned by Freddie Mac Here
- To Find Out if you have a VA-guaranteed loan, there is specific language in the note and mortgage identifying it as a VA loan, and there are fees paid to the VA.
- Find Out If Your Loan Is Backed By The Federal Housing Authority (FHA) By Calling:
- 1-800-CALL-FHA (800-225-5342) or HUD’s National Servicing Center at 877-622-8525
- You can also try calling your lender to ask if your mortgage loan is “enterprise backed.”
If your loan is not “Federally Backed,” the modification programs will be determined based upon an agreement between the Owner/Investor and the Servicer. Some Owners/Investors have specific guidelines and instruct the Servicer as to what types of Modifications they can offer. However, other Owners/Investors allow the Servicers to determine what Modification Programs to offer. You can try to find out the Owner/Investor by calling the Servicer, but the best way is to send a written Request for Information (RFI) to the Servicer and ask the name of the Owner/Investor. If the RFI is sent to the designated address, by certified mail, the Servicer MUST respond in writing. This address is required to be on the monthly mortgage statement. If there is any doubt as to the Owner/Investor, we always send the RFI.
4. WHAT TYPE OF MODIFICATION PROGRAM WILL BE USED?
FHA, VA, Fannie Mae and Freddie Mac all have publicly available modification guidelines. They are difficult to read and understand, but they are available and if the Servicer does not follow them, there can be grounds for a Federal lawsuit or a defense to a foreclosure. The Federally Backed loans all have modification programs for Borrowers at the end of a Forbearance or for Borrowers affected by the Coronavirus Emergency.
If the loan is not “Federally Backed,” it could be based upon:
- A borrower’s income
- The value of the property
- The amount owed
- Ratios for income and expenses
- Some other combination of these factors
In our office, we rely upon an expert at this stage of the process, Roberto (Bobby) Rivera. My clients are advised that I can handle the legal aspects of the process, but I am not a mathematician. Bobby makes his living tracking all the different modification programs from the lenders and Servicers and he performs all of our calculations to apply for modifications. Bobby is uniquely qualified. He works across the country and has lectured and taught lawyers how to properly apply for modifications. He can confirm that an application will be in proper form for a specific Federally Backed loan. Additionally, over the years we have done many, many modifications for loans that are not Federally Backed and we track and save the information from each modification, so we have a good idea of what to expect when we do a new application for a Servicer with a specific Owner/Investor.
Modifications are mathematical formulas. The Servicer does not look at the hardship letter and a Borrower’s file to decide if they deserve help. The question is whether the numbers work. Once we can identify the Owner/Investor and the Modification program they will likely use, we can determine how best to use the Borrower’s financials to complete the mathematical formula and get the best modification possible.
Knowing the program that will be used allows us to determine whether to use non-borrower contributions; what expenses will be reviewed; or the proper target monthly income for self-employed individuals who will be submitting a Profit and Loss Statement instead of pay stubs to show income. This can mean the difference between getting the best possible modification terms, or getting approved at all. Some people think they have to show as much income as possible, so they add income from other members of the household, or they will even rent rooms to have more income. However, with some modification programs, you don’t need to show so much because the program is designed to be based upon the Borrower’s income, and principal can be forgiven or deferred to make an affordable payment, without income from others.
Bobby has been preparing our modification applications for about five (5) years, and if I needed a modification for my home, I would not go to anyone else.
FHA, VA, Fannie Mae and Freddie Mac will have several different modification programs available, and if you don’t know the requirements of the programs, you are not giving yourself the best chance for the best modification available. For example, FHA offers a “Partial Claim” Modification, in which they can take up to 30% of the principal and put it in a new loan with no interest. This allows the interest payment to be greatly reduced. There are no monthly payments for this second loan, but it does need to be paid if the property is refinanced or sold. However, to be reviewed for this program, your application must show specific ratios and percentages. This is where you don’t need a lawyer, you need someone who knows how to best prepare the modification application. Bobby can do the math to tell us whether we can be reviewed for the “Partial Claim.”
Once we know the Owner/Investor and the Modification Program that will be used, and we have our clients’ financials, we have a good idea of whether the application can be successful, and we can usually estimate the terms of a modification.
5. DETERMINE WHAT CONSUMER PROTECTION LAWS APPLY
We are a Consumer Defense Law Firm with a focus on Foreclosures and Modifications. Additionally, we pursue claims under the Fair Debt Collection Practices Act (FDCPA) when the lenders, and/or their attorneys take improper steps to collect the debt. Before a modification application is submitted, we want to know what Consumer Protection Laws apply. For a Homeowner who is living in a 1-4 unit property and who has not been reviewed for a Modification by the current Servicer since January 1, 2014, almost all the applicable Consumer Protection laws should apply. These are:
- Truth in Lending Act (TILA)
- Real Estate Settlement Protection Act (RESPA)
- New Jersey Consumer Fraud Act (NJCFA)
- Fair Debt Collection Practices Act (FDCPA)
Some reasons that these laws may not apply to a specific Modification Application can include:
- The Servicer has reviewed a prior Modification Application since 2014
- The property is more than 4 units
- The Borrower no longer lives in the property and it is used as an investment property
- The property is vacant or abandoned
- The property is used for commercial purposes
When there is an issue or concern about RESPA or TILA or the NJCFA, or the case is complex, we have a valuable resource for our clients. Dann Law is a multi-state Law Firm that has a focus on RESPA and TILA. Many of our clients have been represented by Dann Law in Federal Actions against the lender or their attorneys, and I have Co-Counselled cases with them.
Javier Merino, Esq. is the Partner of Dann Law responsible for NJ. You can view their information and some of our successes here:
- D’Alessandro v. Ocwen Loan Servicing – Prevailed on a Motion to Dismiss in the District of New Jersey under the Consumer Fraud Act.
- Duffy v. Wells Fargo Bank, N.A. – Prevailed on a Motion to Dismiss in the District of New Jersey under RESPA.
- Alfaro v. Wells Fargo, N.A. – Prevailed on a Motion to Dismiss in the District of New Jersey under RESPA.
- Ghulyani v. Carrington Mortgage Services, LLC, et al. – Prevailed on a Motion to Dismiss in the District of New Jersey under the Consumer Fraud Act and for claims of breach of contract.
- Mannarino v. Ocwen Loan Servicing, LLC. – Prevailed on a Motion to Dismiss in the District of New Jersey under the FDCPA, RESPA, and the breach of duty of good faith and fair dealing.
- Grembowiec v. Select Portfolio Servicing, Inc. – Prevailed on a Motion to Dismiss in the District of New Jersey for claims under RESPA.
- Ebner v. Statebridge Co., LLC. – Prevailed on a Motion to Dismiss in the District of New Jersey for claims under the FDCPA.
- Davidson v. Caliber Home Loans, Inc. – Prevailed on a Motion to Dismiss in the District of New Jersey for claims under RESPA and the FDCPA.
6. DETERMINE THE STATUS OF ANY FORECLOSURE
The status of a foreclosure is critical in the modification process. In most instances, the Modification Application MUST be submitted at least 37 days prior to the Sheriff Sale. However, it should be submitted at least 45 days prior to the Sheriff Sale to make sure the most protections are in place. As long as the “Complete“ application is being reviewed, the Lender cannot conduct the Sheriff Sale.
Based upon the status of the Foreclosure, there can also be strategic decisions about when to submit the application. In most instances, if a “Complete“ application is being reviewed, a Lender cannot file a Foreclosure Complaint. In most instances, if a “Complete” application is being reviewed, a lender cannot file an Application for Final Judgment.
Accordingly, we need to know where the Foreclosure stands, so we can best advise our clients about the timing of the application and the protections that can be expected.
Some reasons that the application may not stop the foreclosure are:
- If the Servicer has reviewed a prior Modification Application since 2014
- If the property is more than 4 units
- If the Borrower no longer lives in the property and it is used as an investment property
- If the property is vacant or abandoned
- If the property is for a commercial use
7. PREPARE AND SUBMIT A COMPLETE MODIFICATION APPLICATION
Once we know the Servicer, the Owner/Investor, the Modification program we believe will be used, the laws that apply and the status of any Foreclosure, we are ready to prepare and submit a complete application. It is always my advice not to submit an application in pieces. It should be complete in one package with proof of delivery, so that if there are any issues with the review, there can be no claims that they never received some of the documents. If available, we will send the Modification Application by email or fax, but we will always send hard copies to the designated address and to the attorneys if there is a foreclosure. To have the best protections, all submissions need to be made to the address designated by the lender and we always make sure we have proof of delivery.
If there is a Sheriff Sale scheduled and we adjourned the sale to have time to submit the application, we always include the letter from the Sheriff to confirm the sale has been adjourned and there is enough time for a review. The Servicer does not get automatic notice when a Borrower requests an adjournment. They have the date in their system that was provided by their attorneys. They need to be made aware that the sale has been postponed and there is time for the review.
8. AFTER APPLICATION IS SUBMITTED, REQUEST FOR INFORMATION (RFI) AND NOTICE OF ERROR (NOE), IF APPLICABLE
If RESPA or TILA applies, the lender must acknowledge receipt of the application and advise if anything else is needed, within five (5) business days. If we do not hear from the Servicer, we will send a RFI (Request for Information) pursuant to 12 CFR § 1024.36, to ask them to confirm:
- That they received the application
- That they did not ask for any additional documents or information
- That the application is complete
- That the application will be reviewed within 30 days
At the same time, we will send a NOE (Notice of Error), pursuant to 12 C.F.R. § 1024.35 to put them on notice that they are in error for failing to acknowledge receipt of the application.
The letters MUST be sent to the address designated by the Servicer and the letters MUST be sent by certified mail. These are necessary steps to protect the homeowner and prepare to litigate if the Borrower is improperly reviewed for the modification. Under the rules, a lawsuit can be brought for failing to correct the situation after a NOE is received. A lawsuit cannot be brought under TILA and RESPA for failing to acknowledge receipt of the application, unless an NOE has been properly issued. If we have to litigate, we want as many claims as possible, so this is the first step to try to set up a case for the Homeowners if they are improperly denied. Additionally, if the application is properly denied, there can still be grounds for a Federal Lawsuit and, in many cases, a Servicer will grant a modification to settle litigation. It is improper for a Debt Collector to contact a Consumer that is represented by an attorney, so we advise our clients to tell us about all communications they receive during the modification process.
9. NOTICE OF ERROR (NOE) IF THE APPLICATION IS NOT REVIEWED WITHIN 30 DAYS
The Servicer is required to review a complete application within 30 days of receipt. We always try to get written confirmation from the Servicer that the application is complete. If we have written confirmation that the application is complete and it is not reviewed within 30 days, that is a violation. However, many times, we will not get the written confirmation, so we must create it. If we do not hear from the Servicer within 30 days after we submit the application, we will send a Notice of Error if they did not request any additional documents or information, and that they did not review the application within 30 days. It is important to understand that a lawsuit is for violating the rules and, if successful, the Servicer would be required to pay penalties and attorney fees. A successful lawsuit often ends with a settlement that includes a modification, but a violation does not automatically entitle the homeowner to a modification.
10. RECEIVE AND REVIEW TRIAL MODIFICATION (TRIAL PAYMENT PLAN) OR DENIAL AND REVIEW TO CONFIRM IT IS ACCURATE
There can be months of submitting documents and sending RFIs and NOEs, but eventually the application will be reviewed, or the Servicer will likely get sued.
In most cases, after the review, the Servicer will either offer a Trial Modification, often called a Trial Payment Plan (TPP), or they will deny the application.
If a Trial Modification is offered, Bobby will review it to be sure it has been properly calculated. If we believe that a better modification should have been offered, we will send Requests For Information to find out about the guidelines for the modification program and the figures that were used. We will also send a Notice of Error to advise the Servicer that there has been an error with modification and that the proper modification must be provided.
You should be aware that you may not get details about the permanent modification until you have made the trial payments. The lender is supposed to wait until you make the 3 payments and then apply those funds to the loan and create the Permanent Modification. Many people want to know the interest rate, payment amount and other details, but in many cases, the Permanent Modification has not been created yet, so the Customer Service Representatives don’t have that information to provide. We normally have a good idea of the terms of the Permanent Modification, but we don’t know for sure until we see it.
If the application is denied, Bobby will review it to see if the correct figures were used and the calculations were done properly. If we believe that the denial was improper and a modification should have been offered, there is a right to an Appeal of the denial. We will also send Requests For Information to find out about the guidelines for the modification program and the figures that were used. We will also send a Notice of Error to advise the Servicer that there has been an error with the review and that a modification must be provided.
Based upon many factors, including but not limited to the fact that modification programs and interest rates can change at time, or the loan could be sold at any time, there is never a guarantee at the time we submit the application.
11. IF MODIFICATION WAS PROPERLY DENIED, REVIEW OPTIONS
If the modification is properly denied, it is not necessarily the end. The loan can be sold at any time or the Servicer can change at any time. If the loan is sold, many times it is purchased at a discount and the new Owner/Investor may be able offer a modification. Additionally, if the servicing changes, by law, there is a right to submit a new modification application. The new Servicer may have a different modification program, with different requirements, and a modification may be possible. Depending upon the status of a foreclosure, it may be possible to defend the foreclosure to create time.
Our office does not file Bankruptcies, but it makes sense to speak to an experienced Bankruptcy Attorney to see if that is an option. It is possible that Bankruptcy will provide an option to catch up on the payments and avoid losing the property.
12. IF APPLICATION WAS NOT PROPERLY REVIEWED, EVALUATE POSSIBLE COURT ACTION
Our office has a focus on defending the State Court Foreclosure and bringing claims under the Fair Debt Collection Practices Act (FDCPA). If an application was not properly reviewed, or improperly denied and the lender moves forward with any part of the Foreclosure, including the Sheriff Sale, I am prepared to go to Court to defend my clients. I have filed over 100 motions to Stay or Set Aside Sheriff Sales, and I have successfully Stayed over 35 Sheriff Sales and Set Aside over 25 Sheriff Sales. Additionally, I have obtained more than 10 modifications for my clients as part of Setting Aside their Sheriff Sales.
I have also filed, and successfully settled, several FDCPA Complaints against Lenders, Servicers and their attorneys.
If the proper steps are taken during the application process through Requests for Information (RFI) and Notices of Error (NOE), the Borrower can be in a position to go to Court if the application is not properly reviewed or the modification is improperly denied. In the case where a lender is trying to file a Complaint, Apply for a Final Judgment or Conduct a Sheriff Sale while they were in possession of the complete modification application, and proper notices have been given to the Servicer, it is possible to file a Motion with the Court to Dismiss the Complaint, Deny Final Judgment, Stop a Sheriff Sale or even Set Aside a Sheriff Sale. This also applies if the Borrower was making payments on a Modification or Trial Plan. The lender cannot file a Complaint, apply for a Final Judgment or conduct a Sheriff Sale while any modification is in place.
Aside from stopping the foreclosure, it may also be possible to file a Federal Action against the Servicer under Truth in Lending Act (TILA), Real Estate Settlement protection Act (RESPA), New Jersey Consumer Fraud Act (NJCFA), and the Fair Debt Collection Practices Act (FDCPA).
It may also be possible to file a Federal Complaint under the Fair Debt Collection Practices Act (FDCPA), against the attorneys that took an improper action to collect the debt through the foreclosure.
These cases are best handled by attorneys that are experienced with these laws and the resulting cases. My office handles cases under the Fair Debt Collection Practices Act (FDCPA). However, there are more complexities in suing under the Truth in Lending Act (TILA), Real Estate Settlement Protection Act (RESPA), and the New Jersey Consumer Fraud Act (NJCFA). If we believe that we have created claims under these laws, we encourage our clients to speak with Javier Merino, Esq., of Dann Law. Mr. Merino’s firm handles Mortgage Servicing Litigation in multiple states, and they have the resources to litigate these complex claims with lenders, servicers and their attorneys.
13. IF MODIFICATION WAS APPROVED, MAKE AT LEAST THREE (3) TRIAL MODIFICATION PAYMENTS
If a Trial Modification (Trial Payment Plan) is approved, at least three (3) payments will be required. It is important to make sure the payments are made on time and the payments should be exactly the amount requested. DO NOT PAY EXTRA. In many instances, they want the exact amount and paying extra could be considered a breach of the agreement. Additionally, DO NOT STOP MAKING PAYMENTS. Even if you have made the three (3) required payments and you are waiting for the Permanent Modification, do not stop making payments. It may take 1-2 more months for the final paperwork to be prepared.
14. AFTER COMPLETION OF TRIAL PAYMENT PLAN, RECEIVE AND REVIEW PERMANENT MODIFICATION
Based upon knowing the Owner/Investor of the loan, we know what Modification Program(s) should be used. However, sometimes errors are made, and we need to issue a Notice of Error (NOE) because the Permanent Modification is not correct. That is a benefit of knowing the programs and being able to do the mathematical calculations under the modification guidelines. If the proper modification terms are not offered in the Permanent Modification or the modification is cancelled and a Permanent Modification is not offered, there may be grounds for a Federal lawsuit under Truth in Lending Act (TILA), Real Estate Settlement protection Act (RESPA), New Jersey Consumer Fraud Act (NJCFA), and the Fair Debt Collection Practices Act (FDCPA).
15. ONCE PERMANENT MODIFICATION IS FULLY EXECUTED, CONFIRM FORECLOSURE IS DISMISSED
Once we have confirmed that the Permanent Modification is correct, it must be signed and returned to the Servicer. Most times, it will need to be Notarized because it is going to be filed with the County Clerk. Once we receive a signed copy back from the Servicer, we will confirm that any Foreclosure is dismissed and that the Lis pendens is discharged from the County records.
Have Questions about the New Jersey Loan Modification Timeline?
Contact the Law Office of Ira J. Metrick today to discuss your options for getting a loan modification in New Jersey.