Loans And Cash Advance

Today’s plaintiff attorneys face a unique set of financial challenges, especially given the current volatile economy. Working on a contingency basis, they typically incur hefty expenses long before collecting their fee. Discovery costs, salaries, expert witness fees, advertising costs, and day-to-day operating expenses can add up quickly, making it difficult to compete with deep pocketed defense firms.

Unfortunately, the plaintiff attorney working on a contingency basis must wait for the case to settle before receiving payment, which can often take years. Furthermore, even once the case has settled, it can take several additional months and in some cases several additional years, before payment is actually received.

There are several reasons for this delay in payment. Defendants, especially large insurance companies, are often slow to pay. In addition, there are sometimes administrative delays that are often coupled with sluggish court approvals.

This is where law firm funding can be a lifesaver for the plaintiff attorney. There are two major classifications of legal financing: pre-settlement funding and post-settlement funding. Pre-settlement funding is a cash advance on a case before the case settles. This is the most common kind of law firm funding.

With a pre-settlement advance, the risk to the funding company is relatively high. Therefore, the rates are quite expensive, usually exceeding 3% per month. In addition, many finance companies will charge a flat upfront fee of 10%-20% of the advance.

Pre-settlement funding becomes very costly when a case takes over a year to settle, as the high monthly interest rate compounds over the course that the funds are outstanding. The amount of the advance usually will not exceed 10% of the estimated case value.

Post-settlement funding involves a finance company purchasing the fee after the case has settled. The attorney receives an advance based on a discounted value of the determined legal fee. This is also referred to as legal receivable factoring.

Rates for post-settlement funding are generally much cheaper, as there is no pre-settlement risk. Legal funding companies usually charge anywhere between 1.5% and 2.5% for advancements on settled cases.

If a lawyer is facing financial difficulties, attorney funding can help to smooth out irregular cash flow. Pre-settlement funding is quite expensive and should only be used when other financial options have been exhausted. Post-settlement financing can be obtained at a much cheaper price and can therefore be utilized as a cash flow management tool on a more regular basis.

Many homeowners facing foreclosure find that they do not have a lot of options at their disposal. Plummeting real estate values have eaten up their hard earned equity. Even if they do have some equity, stricter lending requirements have made qualified buyers a rare commodity. Foreclosure, short sale, or deed in lieu of can be brutal on the average homeowners credit score. If you can’t or don’t want to sell your home and are unable to get a better paying job you should focus on staying put and making your home payments more affordable. Enter the world of the loan modification.

Loan Modification Defined

A loan modification is a process whereby the mortgage lender modifies the terms of the original mortgage. The negotiations are done in-house by the mortgage servicer. The end product is typically a lower interest rate, and often times, longer mortgage term in order to bring the delinquent loan current. Once the loan is current again, the modification ensures that future mortgage payments are more affordable for the borrower. The United States government has a modification program known as HAMP (Home Affordable Modification Program) which is designed to encourage lenders to attempt to modify loans in their portfolio. For each loan successfully modified the HAMP program, the lender receive stimulus money from the government. The borrower receives the benefit of a newly modified loan complete with low interest rate and escrow account, and the lender receives cash for its efforts. The promise of cash brings the lender to the negotiating table where they might not otherwise be.

Impact of Modification

Most lenders will not consider a HAMP or in house modification unless the loan is in a delinquent status. This simple fact can discourage many consumers from even asking about a modification. Consider that while a couple of late payments can hurt your credit, your credit can be hurt far more by a foreclosure. Your credit can also benefit far more once the modification is complete, and the lower mortgage payment decreases your debt to income ratio. If you are considering a loan modification, seek financial advice, and contact your loan servicer and seek the help of a loan modification attorney to discuss the details, and to get started on the required paperwork.

Beginning the Process

Most lenders are familiar with the modification process. Contact your lender, and let them know that you would like to modify your loan and if you have any questions you may seek assistance from a loan modification lawyer as well. An experienced attorney knows the ins and outs of the process. The process begins by filling out an application, and providing your lender with required financial documents such as bank statements and tax returns. Expect the process to take approximately 8 weeks. Once complete, your lender will forward the final paperwork to be signed. Make your mortgage payments as agreed to in your new modification, and your credit score may not take a beating however each individual is different and there are many variables that will determine whether or not your credit score is affected. These variables include how delinquent you were in making home loan payments prior to the modification and whether or not the account has been reported as paid for less than owed, which is not a good rating.