The homeowner frustration with loan modifications! Be sure that you understand what is happening during your reduced payment period!
This story is from Dave Halpern in Kentucky with a real life example.
More and more I am getting calls from distraught homeowners bewildered by their lender’s behavior.
Here’s the typical cycle:
- Borrower submits request for loan modification.
- Lender puts the borrower on reduced trial payment.
- The reduced trial payment is hundreds of dollars less than the regular payment.
- 6 to 12 months later the lender denies the loan modification.
- Lender notifies the borrower that there are thousands of dollars of accrued interest owed; the difference between the months and months of regular payments and the trial payments.
So, not only is the loan mod denied, but now they are in serious arrears. Sometimes the resumed monthly payment is higher than the original regular payment!
A live example:
- Original regular payment: $1,247.00
- Trial payment: $847.00
- New payment after loan mod denial: $1,432.00
- New arrearage about $6,000.00
Sellers are asking;
- Why did it take a year?
- I could have moved on with my life. Why did the lender give me false hope for a year?
I don’t have good answers for them, except to welcome them to the world of dealing with banks and foreclosure workouts.
At this point, the sellers are so angry and exhausted from the process that they’re willing to walk away. However, in most cases the next best step is a short sale.
If a professional Realtor who specializes in short sales is involved, the lender lets the house sell for market value, even if it generates an amount short of what is owed. If done properly, the lender will forgive the deficiency balance forever.
Dave Halpern
Broker, Louisville Short Sale Expert
(502) 664-7827
Need a short sale? Click here for help
Hi Lyn: I have run into this too. Where is the protection for the consumer? I'm afraid there are lots of people out there that have ended up in foreclosure because of this.
This is such a sad scenario which just keep repeating and far too often simply results in loss to everyone involved. This simply takes the heart out of the consumers.
Lyn - Loan mods don't work, and it appears that they weren't expected to from the start.
John: Totally agree, all smoke & mirrors.
Wendy: There is a subcommittee that just came to the same conclusion the other day. What will happen to the lenders? Nothing as usual.
Tish: Consumers feel it's hopeless & it really is because hardly any are ever granted. False hope.
Lyn, this shell game is ethically wrong, and the banks don't care. It's no wonder the frustration of trying to do the correct thing, and being disappointed can lead to walking away from the home...and more to the point owners are saying we are walking away from this F$*king bank.
Steve: Shell game is a great word for it.
Lyn, thanks for the re-blog.
It's not just a financial issue. If it was hopeless, the borrowers needed to move on. Family issues, kid's school year and many other issues depended on the bank's decision.
Yeah it is horrible whether by stupidity or greed that the bank does this, but on the other hand if the people were going to lose the home, at least they got more time. Better would be if they knew this could happen.