Mortgage loan modification is all about making changes in the original terms and conditions as agreed upon by both the lender and borrower. Any third party like the Trustees or bank Servicers has no authority to modify the rules as detailed in the original loan agreement. Mortgage loan modification has some drawbacks for the procedural work as well as homeowners too.
Modifications of Mortgage Loan – An In-Detail Focus
A new contract will be prepared between the Trustees or Servicer and the homeowner. The new contract will not take into account what is written in the promissory note. It is an illegal pact that will be outside the knowledge of original lender and homeowner between whom the mortgage deal was finalized in writing.
Mortgage loan transfer involves a step-wise process which begins with form fill-up. After some essential checking for loan approval, the lender finally signs up the deal that allows transfer of mortgage note to another bank or entity or a trust. Now the question arises if the previous contract is still valid after mortgage loan is modified. No, it will lose its validity as soon as the mortgage and note are assigned to a commercial trust.
The homeowners should be skeptical about mortgage loan modification. They must be aware of the scam artists. Some pretend to have a good rapport with your servicer and make a fake promise of lowering payment for a small fee. Agreeing to their offer makes it more likely for you to encounter harassment.
The scammers have different ways to trick the unsuspecting borrowers. They may offer you help as to qualifying for mortgage modification program as approved by the government. In exchange of their service, they demand hefty fees. To avoid such imposters, you should contact your lender and ask him whether you are eligible for such process. Having a good knowledge about the subject can only save you from the sharks in mortgage market.
You are less likely to qualify because the trustee or servicer does not own the signed mortgage paper. Only a third party working in the capacity of a debt collector enjoys the powers under Federal law, especially if note and mortgage have some security on them. It is important for you to know that banks, servicers, lenders, investors are not entitled to own the original mortgage note and deed of trust.
Even if your bank owns the original note, it gives the trustee or servicer no right to take initiative for foreclosure and collect the proceeds. After the note and mortgage are sold, assigned and transferred to the trust, the note is free from equity payment obligation. This is because the lender was paid in full and that ended his mortgage contract with the borrower as per the release clause for deed of trust or mortgage.
This clause clearly mentions that after receiving full payment, the lender is obliged to transfer the Mortgage or Note back to the borrower. The borrower has an obligation to pay for the cost on present Free and Clear Property.