Loan Modification Program
Recently, I’ve encountered two persons who are in the loan modification process. One, I’m happy to say, is now, after a grueling 7-8 months, in the second month of paying his modified house payment. At the end of three months, if he has handled that new payment well, the modification will become permanent. I’m so thrilled for him.
The second, however, was not so fortunate. This person is an elderly widow who has lived in her house for over 35 years. At some point before her husband died, they refinanced the house, but, in my opinion, someone took advantage of them.
I don’t know all the details, but when I met her, this dear woman was in danger of losing her home. She had applied for a loan modification and was told that in order to qualify, she must be in arrears in her monthly mortgage payments. They advised her to quit making her payments, so they could secure the modification for her.
After about 6 months, she was informed that her chances of being granted the loan modification were favorable. That was less than two months ago. Last week, she was informed that the modification has been denied, that her house has been sold, and that she has 10 days to vacate the property! What on earth happened? Why is there so much confusion surrounding this process?
When I went digging for answers, I found that many loans are packaged or securitized and then sold to groups of investors. What homeowner hasn’t gotten at least one of those letters informing us that our loan is now owned by someone other than our original lender.
In my business, when I ask people who their lender is, they often aren’t sure, because the bank that is actually servicing their loan is usually no longer the one who actually owns it. In fact, in many cases the loan has changed hands multiple times.
Ordinarily, that shouldn’t pose a problem, but when it comes to loan modification, lenders who actually hold the mortgages are now threatening to sue service providers who modify or change the loan contracts in their effort to bring relief to their borrowers.
There is a difference of opinion as to whether or not these loans can legally be changed, even in specific, appropriate situations, but Chairman of the House Financial Services Committee, Barney Frank, says that those attempting modifications are running into problems that are not easily resolved.
In seeking financial relief, one should proceed cautiously through this maze called “loan modification.” You may be one of the lucky ones, like the first client I mentioned.
But if you’re going to pursue such a course, do your homework. Stay in constant touch with the modification providers. Seek advice from mortgage and financial professionals.
Investigate other alternatives to accelerating your equity and lowering your debt. Don’t get caught, as my second friend did — after months of waiting — “out in the cold.”
Tags: client, house payments, loan modificaton, process, widow