The following is a summary of a Foreclosure Defense “white paper” currently being presented by Amstar Litigation all over the country as part of an effort to improve the quality and the quantity of legal representation that is available to US homeowners that are in financial distress.

Loan Modifications

A. Tool Kit

1. Consider availability of formal programs allowing and/or requiring loan modifications

a. Federal Government’s “Making Homes Affordable Program”

i) Offers assistance to as many as 7 to 9 million homeowners

ii) Provides 4 to 5 Million responsible homeowners who took out loans owned or guaranteed by Freddie Mac and Fannie Mae the opportunity to refinance

iii) Provides 3 to 4 Million responsible homeowners opportunity of reduced monthly payments

iv) Available for next 3 years

b. FHA Hope for Homeowners Program

i) Primary residence, no ownership in other residential property

ii) Existing mortgage originated on or before January 1, 2008 and they have made at least 6 payments

iii) As of March 2008, total monthly mortgage payments were more than 31% of gross monthly income

iv) Refinance loan amount up to $550,440

v) No more than 90% loan to value

2. Consider strength of your claims and defenses in litigation

a. How long will the litigation last? How difficult will it be for the lender/servicer to proceed? How much exposure do they have?

b. Get a realistic, current appraisal of the property

i) Nearby foreclosures

ii) Recent sales

iii) Registered felons

iv) Time on the market

v) Inventory of homes for sale

c. Time—perhaps your strongest ally—take a moment and appreciate the chaos the lender/servicer is trying to deal with

3. Mediation

a. Can force the servicer/lender to negotiate

b. Compulsory in many jurisdictions

c. If not, suggest it to the judge—dockets are slammed

d. Insist lender/servicer personally appear at the mediation

e. At worst, can buy you lots of time

4. Loan modification

a. Reduce principal

b. Reduce interest rate

c. Extend term

d. Reschedule/ forgive arrearages

e. Don’t buy another foreclosure—this is the best time you will ever see to get your client a mortgage they can afford—you are helping the lender/servicer avoid large losses from foreclosure—don’t assume property values will recover—ever