IRVINE, CA (AttorneyNewswire.com) — August 6, 2010 — The intended purpose of a loan modification is to lower monthly mortgage payments for the borrower, usually as an alternative to foreclosure. This tactic is often preferred over foreclosure because of how expensive a foreclosure can be for the lender. The reason why loan modifications have remained so popular is because they offer lower monthly payments for loan borrowers, which makes the following story a bit odd:
Tammy Spagnola’s original monthly mortgage payment was $2,173. Like many other borrowers in this down economy, Spagnola was hit hard when her husband’s work hours were cut in half. The pair applied for a Chase loan modification and were awarded a temporary modification lowering their monthly mortgage payment to $1,635. When the couple was notified of the lender’s final decision, they were surprised to learn that their lender proposed a loan modification that would make monthly payments of $2,191 per month. This means that Spagnola’s attempt to modify her loan resulted in monthly payments that were $18 higher than what she normally paid. After some review, it turns out the pay stubs were to blame. When the application was filled out, it required the two most recent pay stubs be attached. Unfortunately for the Spagnolas, the two most recent pay stubs of Tammy’s husband reflected a rare period when he was allowed to work close to 40 hours per week. This rare occasion produced two pay stubs that presented the image of a higher income than was actually earned.
The Spagnola’s rejected the bank’s offer and are expected to appeal the decision.
A foreclosure attorney in Irvine, CA, Timothy McFarlin said that no person attempting a loan modification should ever settle for a higher monthly payment than normal.
“What happened to the Spagnolas is unfortunate” McFarlin said, “but it is also very rare. The whole point of a loan modification is to lower monthly payments. One way to avoid this type of situation is to review each and every document submitted to the lender very carefully. If the document reflects a higher income than is actually earned, the document should not be submitted to the lender. An attorney should be consulted for further guidance, but at the very least the borrower should explain to the lender that the document in question may lead to false conclusions being formed about the borrower’s actual earnings.”
About McFarlin & Geurts:
McFarlin & Geurts LLP is a full service law firm representing both businesses and consumers in California and throughout the United States. McFarlin & Geurts attorneys possess a keen sense of the law and markets, along with an astute business background that is invaluable in bankruptcy and business litigation. The McFarlin & Geurts team includes five leading attorneys and supporting staff to assure clients that their needs are placed at the forefront of any engagement. Legal representation and counseling is critical in our complex modern world, and McFarlin & Geurts is driven by a desire for excellence and commitment to provide quality, personalized service with integrity.
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