Loan Modifications – Be Warned!
Homeowners applying for a loan modification need to be aware of what could go wrong, or rather – what is going wrong for many people. The first thing to realize is that you must meet certain requirements to be accepted so don’t waste your time unless you are confident that you are eligible for a loan modification. Secondly, don’t expect too much. You may not get that principal reduction, or it may not be enough to be worthwhile. Lastly, even if the lender reduces your payments, if there is no principal reduction, you could be stuck with this mortgage for a long, long time and not be able to sell your house for many years if you are upside down.
Of more immediate concern with your loan modification is that the lawyers who served you all that paperwork from the court will most probably continue with the foreclosure process while you are attempting your loan modification.
There have been a number of disconcerting cases reported recently where even though the loan modification was approved, the foreclosure case continued through the court and the lender foreclosed on the property! The property was sold even though the loan modification had been approved and accepted by the lender.
How could this happen?
Until the loan modification is approved, it is common procedure for the bank to continue with the foreclosure process. They don’t know whether you will fall out of the program at some stage and they want to keep all their options open. Secondly, both the lenders and the law firms representing them have so many cases that they may not get to the file in time to stop the foreclosure even though they said they would. Finally, while the bank may service the loan, a law firm is handling the foreclosure and another investor actually owns the loan. Communication between the various parties often breaks down.
So what should you do? Never trust what anyone from the bank tells you. Always get it in writing. Call every day. Contact the attorneys who sent you the foreclosure papers and make sure that the bank has told them and that they have stopped the foreclosure. Don’t leave anything to chance!
Find out about your options regarding foreclosure and loan modifications.
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