Home Loan Modification Programs Create Additional Revenue for Real Estate Lawyers. Yet during this Current Recession, they are Worth the Cost.
Real Estate Attorneys profit during an Economic Expansion
During the “Good Times” real estate attorneys can get slow and do a lot of contract writing. Many may even speculate in the real estate market along with their clients. Some draw up general partnership and limited partnership agreements to make a few bucks while others may tend to commercial lease agreements and the like. Normal Real Estate Counsel deal with the occasional foreclosure. After all, you would never bring a home loan modification claim because your house has doubled in value, would you?
When Recession Hits, Real Estate Attorney turn to Loan Modifications
There are some businesses that can be recession proof and you can say that lawyers are one of them. Usually a lawyer is needed when things go wrong and in a recession I would venture to say that lawyers can make a living specializing in only bankruptcies and foreclosures. But a new business has emerged with this recession and it’s called the Home Loan Modification Business. While it is very good for the homeowner if a lawyer can get them a successful Home Loan Modification, it really is not very lucrative for lawyers as I’m sure they can make more money with big corporate clients rather than helping us lowly middle class homeowners that got over our head. But it is a noble cause. There is a reason that Home Loan Modification came around during this recession and not in others.
This was a Home Loan Driven Recession.
After the tragedy of 9/11 an already weakened economy needed a boost to get going and the Federal Reserve lowered interest rates making homes more affordable. They also allowed a slew of New Home Loan Mortgages to enter the market making the purchase of a home easier. This would help stimulate the economy and really drive the next bull market. It seemed like magic as the economic pressure of 9/11 faded away to the roaring new millennium and buying a home was easier than ever. Then Wall Street came up with a new product to sell and everything started to rise very fast. The new item was called a Collateralized Debt Obligation.
How and Why Collateralized Debt Obligations were used to Finance Home Loans.
The Collateralized Debt Obligation or CDO as the Wall Street folk call them was nothing more than a package of mortgages bundled into fifty million or one hundred million dollar blocks and sold to Wall Street clients to collect the interest paid on all of the mortgages. This was supposed to spread the risk around so much that even if a normal amount of defaults happened on the mortgages, the balance of them would certainly cover those defaults and thus they were considered a great investment vehicle. This allowed the entire world’s investment money to buy mortgage receivables at will and created a much broader worldwide capital investment pool to buy real estate. Thus, the real estate prices started skyrocketing. CDO’s were even given a AAA rating by the most recognized stock and bond rating agencies. So they were safe and paid a good rate of return. At the time it made sense to invest in them. Even if a bundle went bad, that bundle was insured with another new instrument called a Credit Default Swap.
The Role that Collateralized Debt Obligations, Mortgage Default Swaps and the Recession played on your Home Loan Modification is Significant.
Credit Default Swaps protected investors against too many foreclosures, or did they?
Now you know how and why the Real Estate Market was booming, but what you didn’t know, at least until Lehman Brothers failure was that the credit default swaps that were bought to protect the investors in case of foreclosure were unregulated, not traded on any exchange and counterparty risk was not collateralized. So when prices on homes started to come down and people started to default, the companies that bought the Credit Default Swaps wanted the insurance money. So they were hedged and couldn’t lose anything. Except when it came time to pay the insurance claims, too many claims came in and since there was no collateral to pay the Credit Default Swap Buyers, the markets collapsed. It’s like buying insurance on your house and when it burns down you find out that the insurance company doesn’t have the money to pay you. These combined events (the perfect financial storm) created a vicious cycle and home values continuing to plummet and to this day are still falling. Really the homes are just coming back to a normal price before all of these financial instruments and low interest rates combined with an easy monetary policy ballooned housing prices beyond any realistic sustainable normality. The lenders know that a lot of people bought at an unrealistic price and can not sustain the mortgage payments, hence the new product, Home Loan Modifications. So why is an attorney needed?
Real Estate Attorneys can influence the outcome of your Home Loan Modification.
While your home is a very personal item to you, the lender considers it an asset on its balance sheet. The investor that owns the loan paper that it was bundled with may or may not see it as a profitable transaction to modify your Home Mortgage Loan. There are many new rules and procedures regarding Home Loan Modification programs and as a layperson, how can you be familiar with all of them? Unless you make it a project to learn all that you can about how to package yourself and your income and assets to fall into the criteria needed to get a loan modification done successfully, then in all probability you may fail. Even if you were lucky enough to be approved, without the expert advice of a Real Estate Attorney that specializes in Home Loan Modifications, you may get a loan modification that is not the best that you could have done with the assistance of a professional. Yes, much propaganda is out there that you should do it yourself but I assume that information is not in your best interest. Be careful to find an Attorney that has experience and don’t fall for any phony scams. If you are in need of a Home Loan Modification, fill out the application on our site and we will refer you to a Lawyer that has been researched by us first.