“Miranda” Warning For Loan Mods/Short Sales

Miranda Image

The Fifth Amendment guarantees you have the right to remain silent. I advise folks to be very cautious and highly aware when applying for a loan modification, short sale or deed-in-lieu of foreclosure as everything said may be used against them. We have witnessed such statements used against them in court.

Lawsuits against consumers for fraud at loan application have been expected by those who follow loan modifications, et al., for quite some time. The first one just hit the legal system and it is a great example for not doing the typical loan modification, short-sale or a deed-in-lieu of foreclosure. This one is crushing as the debtor may never bankrupt this debt due to fraud.

David A. Pereira has been very kind to allow me to quote him verbatim on this subject: “This whole direction of loan mods and assistance from lenders by the government and the servicers has been a big shill.  They have helped less than 15% of the folks to give the appearance that from time to time they are helping someone when in fact they have been amassing a huge amount of data that can and now will be used against all these consumers.  It is best in the majority of cases to just be quiet, let the lender take back the underwater property and move on with life and recover a few years down the road.

It was a risk and people assisting those consumers with loan mods or short sales (or the government and their housing agencies) had an obligation to disclose that risk and let the consumer make a fully informed decision to proceed with that risk.  I contend the risk was not disclosed and profits over people was the priority or throw the consumer under the bus wheels to prop up the loan system”.

Indeed, the mortgage industry offered Stated Income loans and there were unscrupulous lenders that encouraged consumers to sign a fraudulent loan application all the while assuring the borrower there was no problem as this was a standard practice. Still, labeling the fraudulent loan application merely as an “error” on behalf of the consumer reminds me of the Steve Martin joke about what to tell the judge when you’re on trial for armed robbery: “I forgot armed robbery was illegal.”

For those who may have stated income loans, forward this article to your attorney and talk with your attorney before sending a loan modification package to your mortgage servicer. Remember, you have the Right To Remain Silent.

For high quality, no cost guidance on preparing for a loan modification, I suggest you contact a HUD Certified Housing Counselor via the HUD Housing Counselor locator site. You increase your chances of succeeding by many times over trying to do this by yourself.

As always do not hesitate to write back with comments or questions.  I read everything that comes back, even though I don’t always get a chance to respond as quickly as I would like.

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Art Credit: Google Images

 Financially SpeakingJames Spray CCMB, CNE, FICO Pro | CO LMO 100008715 / NMLS 257365 | February 8, 2011 | Revised August 8, 2014
 Notice: The information on this blog is opinion and information. While I have made every effort to link accurate and complete information, I cannot guarantee it is correct. Please seek legal assistance to make certain your legal interpretation and decisions are correct. This information is not legal advice and is for guidance only. You may use this information in whole and not in part providing you give full attribution to James Spray.

4 comments on ““Miranda” Warning For Loan Mods/Short Sales

  1. jamesspray says:

    Just read an article in the NY Times published March 26, 2011 where a fellow that took out two stated income loans during the mortgage/real estate bubble was sentenced to prison. The enabling mortgage broker got a slap with a minimal 6 month sentence. The consumer also owes Bank of America restitution for these Countrywide originated liar loans. Quite loathsome, I think.


  2. James Spray says:

    The latest Mortgage Fraud Activity reported by the FinCen exposes fraud in years earlier originated mortgages just recently defaulted – http://www.mortgageorb.com/e107_plugins/content/content.php?content.9812


  3. James Spray says:

    Survivors Guide to White Collar Prison


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