MacFarlane Real Estate, Inc.

Do you own a real estate investment?  Are you in default on your loan?  Be aware that most lenders have a clause in the loan documents that allows for an absolute assignment of rents when the borrow is in default.  The lender files a Notice of Default and then, the lender intercepts the rents before the owner of record can collect.  If the owner tries to interfere, the owner could be liable for the attorney’s fees to get an injunction against the owner collecting rents.

The typical clause is as follows:  “In the event of a default, lender shall be entitled to accelerate all sums due under the loan secured by deed of trust and is authorized to enter into and upon the property for the purposes of collecting the rents, issues and profits from the property.”

At MacFarlane Real Estate, we often take control of a property before the trustee sale (foreclosure).  Basically, once the Notice of Default is filed, MacFarlane Real Estate seizes the rental income for our hard money clients.  At this point, the borrower has to make up the payments owed without help from the rental income.

It is the wild west in California’s housing and mortgage industry. The new, latest and greatest service offered in the real estate industry is LOAN MODIFICATION. Companies are springing up everywhere as self proclaimed loan modification experts. However, this is the wild west and there are no experts. Every bank is different. In fact, the servicing agents within the banks have different terms and guidelines and those guidelines are changing every day. Nobody is truly an expert! Every loan modification agreement must be analyzed closely.

Borrowers should get answers before signing the loan modification… What are the tax implications? What are the fees? What do the new terms actually mean? What are other options?

Many borrowers desire a lender to forgive or cancel a portion of the debt. Prior to 2007, the IRS considered forgiveness of debt as taxable income. The Mortgage Debt Relief Act of 2007 created a homeowner exception for debt incurred by buying or improving real property. However, Loan Modification is not buying or improving real property. Thus, forgiveness or cancellation of debt as part of a loan modification has tax implications!

Loan Modification agreements charge attorney’s fee, loan modification administrative fees, late fees, etc… All are negotiable!

Another aspect of Loan Modification… The Truth In Lending Act and Predatory Lending. Was the loan properly documented at the inception? If not, certainly the borrower has serious negotiating power! Loan documents should certainly be reviewed prior to any Loan Modification.

A Loan Modification Attorney can also leverage the threat of litigation and bankruptcy to secure a more favorable loan modification. Often, the lenders elevate the negotiations to their in house counsel once a borrower “lawyers-up.” Thus, the run-around ends and borrowers get results!