Failure to Comply With Loss Mitigation

This is a very interesting defense that is not yet tested in Maryland appellate courts, and may depend upon the type of mortgage, the lender, and whether the lender is either a part of Making Homes Affordable (MHA) or has agreed to participate in MHA.  MHA is President Obama’s rescue plan for homeowners facing foreclosure.

One provision of MHA requires the lender to consider the net amount it would receive if the property went to sale under foreclosure with the amount of money that it would expect to receive if it modified the loan. 

While this involves many factors, there are two main factors to consider.  They are the current value of the home, and whether a rewrite of the loan involves a reduction in principal.

Additional facts are whether the government will help in getting a principal reduction, and whether the write down of the principal will be permanent, or tacked onto the back end of the loan.

Attorney’s comment.  There have been warnings to a homeowners not to pay anyone upfront for making application to MHA.  The purpose of this warning is to prevent the homeowner from falling victim to the abundant amount of scams in this area. 

Unfortunately, the warning does not distinguish between a mortgage refinance company and an attorney representing and defending a client both in and out of court.

If you are considering either free or for paid services, ask the person or entity offering this free or paid service whether they will act as your attorney and represent and defend you in and out of court.  Then ask yourself whether you want or need this defense.