A Simple Letter Could Prevent Home Foreclosure

Chip Yost, KTLA News

March 12, 2009

LOS ANGELES -- Want to try to reduce your monthly mortgage payments and avoid foreclosure? Real estate experts say a simple letter may help do the trick.

The letter is part of a legal strategy that can be used to try to forestall or prevent a bank from taking your home. Under the Real Estate Settlement Procedures Act (RESPA), Beverly Hills real estate attorney Glenn Stevens says borrowers can write what's known as a "qualified written request" to their bank, informing the bank that the borrowers want to see their loan documents. The law requires banks to acknowledge the request within 20 days, and to provide the loan documents within 60 days.

The problem is, banks are so overwhelmed with foreclosures and other issues, those deadlines often come and go without the borrowers hearing anything from the bank. And when the bank does respond, Stevens says the response is often incomplete.

"In almost every file I have taken a look at there are some documents missing... it's unbelievable," Stevens said.

Stevens works with Peter Blacksberg of Equity Credit Options to search through the loan documents provided by the banks to find what's missing and what's not. They also look for errors - such as a mortgage broker failing to put down what kind of commission he or she made from the deal.

Every error or missing piece of information found in the documents is then used as leverage to renegotiate the loan terms with the banks.

"Every missing document is a violation of federal law," Stevens said.

Armed with all the problems in the file, Stevens and Blacksberg say banks are often much more receptive to modifying the loan terms in a way that both sides can live with. The result can be a reduction in monthly mortgage payments of 25% or more for the borrower - a reduction that can let them stay in their home and let the bank avoid the risky and costly foreclosure process.

Stevens says one of the best parts of this strategy for borrowers is this: The whole time borrowers are waiting for their file from the bank and subsequently disputing the information in the file once it's received, the bank is not allowed to report any negative information to credit agencies - even if the borrower stops making mortgage payments while the dispute drags on.

"Under federal law, banks can take no action adverse to the borrower until the dispute is resolved," Stevens said.