“How do I use the new RESPA rules when doing a loan modification with my mortgage company?”
If not worse.
Let’s talk about the typical process, then how this has changed under the new RESPA (Real Estate Settlement Procedures Act).
Then, we’ll talk about several practical steps you can take in order to improve your odds of being successful in getting a fair modification.
The old way of getting a loan modification.
You would get a package from the mortgage servicer.
Then fill it out and send it off.
Afterward, you’ll wait with no updates from them.
Then you are told your house will be foreclosed.
“But I sent a package in!”
They don’t care. They say it was lost. Never received. Misplaced. Anyway, they are going to foreclose because “the investor won’t let us stop the foreclosure.”
But then they do, and you submit another package.
Weeks later you get a letter saying you have 48 hours to submit documents.
You scramble to do this and then find out all of your other documents are “stale” now.
This goes on and on and on until they foreclose on you and tell you that you refused to cooperate with the process so this is your fault.
The changes under RESPA as of January 10, 2014.
Now when you submit a “workout” or “loan modification” or “loss mitigation” package, the servicer has to tell you quickly if you are missing any documents.
They can’t make you guess but instead have to tell you plainly what is missing and when it must be given back to them.
Normally while considering your package, the mortgage company cannot foreclose on you. This is a huge change and does away with the infamous “dual tracking” where they were talking to you about saving your home (and telling you they would not foreclose) while at the same time plotting the foreclosure. This was something the mortgage industry was very proud of. It caused a lot of folks to not file bankruptcy and then they would lose their home.
Note I think it is normally a terrible idea to file bankruptcy to stop a foreclosure but it is what most people have heard of and even that was taken away by the dual tracking.
This is also because the mortgage companies think under Alabama law they are allowed to lie as long as they don’t put it in writing. This is not true and is certainly not true under the FDCPA (Fair Debt Collection Practices Act) that covers most mortgage servicers. It also isn’t true under RESPA.
So let’s talk about what you can do under RESPA right now.
Practical steps you can take now under RESPA.
As soon as you send a loan modification package, send a letter requesting information about receipt of the package. You MUST send it to the correct address listed on the mortgage statement for “Qualified written requests, notices of errors, and requests for information.”
If you send to the wrong address, it is worthless.
These must be sent as certified mail, return receipt requested or the company will claim it never received your letter. So spend the 7 bucks per letter to make sure you can prove the letter was received.
(Hint: Sometimes clients ask, and lawyers that we train ask, “Can I put all these separate requests into one letter or in one envelope. Sometimes this will work. If you put multiple letters in one envelope, I would video it to make sure you can prove you sent the letters.)
Here’s a sample request for information letter you can use and adapt as appropriate in your own unique situation:
Please let me know if you received my loan modification package [or whatever it is you sent] that I sent to you on _______ by ___________(fax, regular mail, overnight mail, etc).
Let me know when you received it and what documents were included in it. I want to save my home from foreclosure.
Here’s another type of letter you could send:
Please tell me every document that you claim I have failed to provide and every document that you need to evaluate me for a loan modification.
This is important to me as I want to save my home from foreclosure.
If the loan modification is denied because you supposedly failed to provide a document — that you actually did — you can send a notice of error:
You denied my loan modification because you said I failed to give you __________. Actually, I did provide this to you on ________. You admitted I sent this to you when you answered my request for information that you received on ___________.
Please fix this error immediately and properly consider my loan modification. I want to save my home from foreclosure.
These are just several examples of the types of letters to consider sending. I hope these give you an idea of how to use requests for information and notices of error. The point is to always ask for more information to make sure you have “pinned down” the mortgage company on what it is doing and why. (You can also see our free training video/resources on using RESPA letters).
And when it does things that don’t make sense or that seem wrong, use a notice of error to give the company a chance to correct its error.
If it does, great.
If not, then look at suing in federal court. Every separate violation is a possible $2,000. Per violation. And you can get actual damages (including emotional distress — considering it is your house, how could there not be emotional distress?) and your attorney fees paid.
What to do next.
If you have questions about what letter to send, or the effect of the mortgage company not properly responding, and you live in Alabama, give us a call on the phone at 205-879-2447. You can ask the receptionist to transfer you to our foreclosure defense department and you can briefly describe what has happened to Carolyn who can then set up a phone consultation or an in person meeting.
Or if you prefer to explain your situation to us in writing, use our contact us form and give us as much information as possible.
We look forward to hearing from you.