Consumer Bankruptcy Journal Fall 2016 - Page 32

Loan Modification, the $100K Mistake? By Cathy Moran, Esq. Moran Law Group Mount View, California the loan was modified was due only upon sale. Asked for a payoff, the servicer returned a payoff that failed to include some $127,000 of non-interest bearing principal. Granted, this particular mistake cut in favor of my client. Who are we to complain? This article first appeared at http:// www.bankruptcysoapbox.com/ The job of a mortgage servicer is to collect loan payments and keep track of what’s owed on the mortgage. That shouldn’t be too hard. But the evidence is that they don’t do that basic job very well. Throw a loan modification into the mix, and who knows what you’ll get. Accounting for modification I got a glimpse of what we face when my client requested a loan payoff in connection with a sale. The loan had been modified some five years ago, with the result that a sizable hunk of the amount due when 32 CONSUMER BANKRUPTCY JOURNAL But it is just as easy to image that the blunder works the other way: the requested payoff doesn’t take into account the changes made to the debt when the loan was modified downward. The payoff demand could just as easily have been calculated at the old, higher rates in effect before modification. Multiply this instance by a fraction of the modified loans out there, and we need to tell Houston we have a problem. Mortgage modifications to the rescue Mortgage modifications were supposed to save both individual homeowners and the economy as a whole. They promised to keep homeowners in their homes despite the housing crash of the Great Recession. To some extent that has worked. Or at least mortgage modifications spread the failures out over time so that the market wasn’t glutted with The job of a mortgage servicer is to collect loan payments and keep track of what’s owed on the mortgage. That shouldn’t be too hard. But the evidence is that they don’t do that basic job very well. Fall 2016 National Association of Consumer Bankruptcy Attorneys