The problem with this advice from a bankruptcy standpoint is that those transfers are made in fraud of creditors and recoverable by a bankruptcy trustee.  If you are one of these people,  you should know that bankruptcy is where you will likely end up.

Countless modification applicants end up in the office of a bankruptcy attorney on the eve of a foreclosure sale because SURPRISE, your modification was denied. And the money you transferred to your relative can not be exempted because it is no longer in your possession.  Waiting to the last minute means the eventual bankruptcy problem will be full of surprises and problems.

So, if you think your loan mod professional is great and you have nothing to worry about because he’s giving you all this “expert” advice, consider thinking ahead about what the next step will be if your modification application is unsuccessful.

You can use NACBA’s toll free phone number to find your Congressman and be automatically connected with the office.

Here’s how:

1. Phone toll free at: 877.354.4958

2. Put in your zip code

3. When you reach the receptionist:

• State your name
• Say that you are a constituent
• Ask the Representative to vote FOR the Conyers-Turner-Lofgren amendment (#201) to the Financial Services Reform bill.
• This amendment will cost taxpayers NOTHING and will save millions of homes from foreclosure

We need an alternative to the farsical voluntary mortgage modification programs.  Speak up, today, for a meaningful alternative.

A bipartisan group of Representatives will offer an amendment to H.R. 4173 to allow bankruptcy judges to modify the loans of homeowners in a Chapter 13 Bankruptcy.  This amendment is very similar to H.R. 1106, the bill that went down to defeat last spring.

If passed, many homeowners will be able to keep their homes by filing a Chapter 13 Bankruptcy.  The Judge will be able to change the terms of the loans on the house by adjusting the interest rate, the length of the loan, and even the principal owed.

The Government’s voluntary mortgage modification programs have been a dismal failure. What is needed is this unbiased look at the situation with the teeth to force lenders to do something.

Although, simply bringing an amendment to an existing bill is a long way from passage, it does give hope to homeowners fighting to save their homes.

It’s estimated that a cramdown law could reduce foreclosures by 20 percent. It would cut through red tape by forcing reasonable compromises in bankruptcy courts, which can already modify mortgages on second homes and yachts. Most important, it would provide that all-important stick: Modify more mortgages, or a judge will do it for you.

Certainly, the experience of my clients supports the national numbers.  While clients may be offered trial modifications (send us money while we shuffle your papers again), I’ve seen one permanent loan modification.

It’s depressing to repeat to clients that they have little or no negotiatino power with the lenders.  It continues to be depressing to the economy as the amount of bank owned real estate increases.

As the recession has played out, foreclosure is no longer just the  consequence of sub prime loans and over heated real estate market.  It’s reaching a much broader swath of families.  Falling home values make it economically rational to walk away from underwater properties.

We would all benefit from a legislative “stick” to balance the HAMP plan’s “carrot” for mortgage modification.

Legislation to allow bankruptcy judges to rewrite the terms of mortgages is being considered again in Washington.  Senate House Financial Services Chairman, Barney Frank (D., Mass.), is planning on attached such a bill to a financial regulatory overhaul scheduled to be introduced later this year or early in 2010.  Such legislation passed the House last spring, but was shut down in the Senate.

Such legislation will mean that a homeowner, seriously behind in her house payments, could seek refuge in a Chapter 13 bankruptcy and apply to the judge to have her mortgage “re-written.”  This could, depending on the specifics of each case, allow a reduction in principal to be paid, lower the interest rate on the loan and extend the term of repayment.

Curiously enough, Mr. Frank notes that the best chance to have new bankruptcy legislation passed is because the mortgage servicers are doing such a lousy job of the voluntary mortgage modification programs.

We need this legislation.  The voluntary modification programs have helped some, but not nearly enough, home-owners.   And then, only after many months of frustration.  Having an unbiased Bankruptcy Judge to mediate the process and structure a new home loan to help the home-owner will save thousands, if not tens of thousands, of homes from foreclosure!

My experiences suggest that it isn’t so.  If there is a theme I hear in talking with clients who’ve sought loan modifications is that they can never get through on the phone and that paperwork submitted to lenders seems to be sucked into a black hole.  Again and again, they are told they haven’t provided the requested information or that what they’ve provided isn’t right.

Meanwhile, all kinds of folks offer to help homeowners with the process, for money up front.  Given the apparent success rate of getting modifications, they’d better get their money up front, because they are unlikely to produce a result deserving of compensation.

Word from Capitol Hill is that judicially supervised loan modification may reappear in the financial services bill to be introduced this fall.  Let’s hope that Congress can learn that voluntarism, in the context of mortgage modification, isn’t doing the job.

As the momentum continues in the judiciary committee to revisit legislation to allow bankruptcy judges to modify mortgages in the context of a Chapter 13 bankruptcy, the mortgage industry is writing letters to the editor of the New York Times to slow down or stop the bill.

David G. Kittle, Chairman of the Mortgage Bankers Association wrote that the modification process has helped 4.5 million homeowners!  How they have helped these people stay in their homes is unknown since the experiences of the non-mortgagers are quite the opposite: that some people have been helped, but, only a fraction of those receiving foreclosure notices.

None the less, Mr. Kittle warns that allowing a bankruptcy judge to modify a home loan will increase bankruptcy filings, and be bad in the long term for the economy and the mortgage industry.  Of course, what he doesn’t say is how bad not allowing such modifications is in the short term with the rising foreclosure rate and families losing their homes now.

The voluntary modification programs have helped some homeowners.  Just not nearly enough. We still need someone to mediate and put some teeth into the process.  Bankruptcy judges are the logical alternative.

I was to fax it to the lender after we had discussed the risks and rewards.  The offer, now signed by the client, had the fax number for the return of the agreement and a deadline of August 1.

I tried twice July 31 to fax it, and the fax machine on the lender’s end did not respond.  I tried twice on August 1:  same story;  I tried again on August 3rd, clearly now within business hours on the East Coast. No response.

My paraglegal had to call and get an alternative number to even get the client’s acceptance in the hands of the lender.  It doesn’t raise my confidence level about what’s going on at the lender’s end of this deal.

In the meantime, 1.5 million homeowners got a foreclosure notice in the first half of this year.

Lenders at the top of the list for percentage of eligible loans modified include Saxon Mortgage, JPMorgan Chase, GMAC and Auroa; each modified more than 20% of eligible loans.

Bank of America, Select Portfolio, Ocwen and Wachovia modified five percent or less, according to an AP story in the San Jose Mercury.

My clients listen to the ads on radio and TV and think that modifications are widely available and actually happening. That isn’t my experience.  This report suggests that a lot depends on who is servicing the loan at this point.

We need to revisit judicially supervised loan modification before it gets any later.

Although this was just a preliminary discussion in the Judiciary Committee meeting, it bodes well that this legislation will be brought again.

The Obama modification plans and similar California laws haven’t yielded the relief intended. They remain voluntary so if the lender doesn’t offer a viable arrangement to the homeowner, nothing happens.  A law allowing a judge to oversee the process and put some teeth into it will go a long way to force both the lenders and homeowners to seek a middle ground fair to everyone.  Only in that way, can we stem the foreclosure tide.

As before, the Republicans and some “blue dog” Democrats are likely to oppose the legislation, but as foreclosures continue to rise, homes become more and more “up-side down,” and the current economic down-turn continues, there is hope for this new act.