Earlier this week I was talking with a client who let me know that their home was headed into foreclosure. I was a bit surprised to hear this because I had been led to believe that there was no problem making the home mortgage payments, only the other debt (which included other real estate). I was also surprised to learn that this problem had been going on for a few months. And I was even more surprised to learn that the clients had been working with a mortgage broker. But what really surprised me was why I was only learning about this now.
Apparently, the clients had been solicited by a mortgage broker who assured them they need not file bankruptcy. He assured them that they would refinance the house and avoid bankruptcy. He also told them not to discuss this at all with me: their bankruptcy attorney.
For reasons that only they can explain, the clients chose to follow that advice. And unfortunately, they may pay a price for doing so: they risk losing their home, and they have complicated their bankruptcy filing and made it more expensive. I write about his with the hope that this error will serve as a cautionary tale to others in a similar situation.
Mortgage brokers get paid a commission based on the mortgage they obtain. If they do not obtain a mortgage, they do not get paid (although some may charge non-refundable applicable fees). If a mortgage broker is able to get financing, no bankruptcy attorney is going to dissuade a consumer for taking it…unless the mortgage product (or the act of refinancing itself) is going to place the client into an even more precarious financial position. With that said, the only reason why a mortgage broker would be concerned about a client talking with an attorney is if the attorney attempted to talk the consumer out of the mortgage….and the only way I see that happening is if the attorney is doing his or her job by protecting the client.
If you’re trying to refinance and are speaking with mortgage professionals, please do yourself a favor and speak with an attorney. If any of these professionals urge you not to speak with an attorney of your choosing, do not do business with them. There is no harm in speaking to your attorney, but there can be great harm to you and your family if you follow the recommendations of someone whose interest is not the same as yours.
