BE CAREFUL, MORTGAGE MODIFICATION APPLICANTS CAN END UP IN FORECLOSURE!!!
Recently, the big mortgage lenders are trying to show that they are sympathetic to struggling homeowners by offering loan modifications. In defense of the banks, the modification programs are offered in good faith. The reality is that the execution of these programs is so bad that the so called “mortgage modification” ends up accelerating the foreclosure process making it almost impossible to keep a home without filing for bankruptcy.
The process goes somthing like this…
A reduction in household income leads to the inability to pay all the monthly bills. The largest expense, for most families, is the home mortgage. A call is made to the bank and after an hour of being placed on hold and being bounced around to different departments the loss mitigation department is reached. They say to get behind on mortgage payments for a few months and then fill out an application for a modification.
The problem with this is that once the application is filled out, there are usually three to four mortgage payments that have been missed and that is enough to place an account in the foreclosure department. It is not uncommon for a house to go to judicial sale while the modification is still pending. None of this would be a problem if the foreclosure department was made aware of the fact that the loss mitigation department is actively trying to do a loan modification. This is a classic case of the left hand not knowing what the right hand is doing. As a result, the only loser is the homeowner is just trying to save their home doing what the bank told them to do in the first place.
On occaision, the modification process ends before the foreclosure begins but loss mitigation informs the homeowner that their application was rejected. Now, the homeowner is able to afford their monthy mortgage payment but the bank is telling them that they need to make up all of the payments that they have missed and then keep current.
Any homeowner would be frusturated in this situation and it would seem that there are no options for saving a house. Filing a Chapter 13 or Chapter 11 Bankruptcy will stop a foreclosure and allow for the payment of missed mortgage payments over time instead of right away. In many cases, while the Chapter 13 or Chapter 11 Bankruptcy is pending a loan modification can still be worked out without missing monthly payments.
While the banks may be trying to help out homeowners, they are forcing more and more people to seek out more debtor friendly restructuring options such as Chapter 13 or Chapter 11 bankruptcy. If you find yourself in a situation such as was described above, do not hesitate to examine your bankruptcy options to help save your home.
