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Bankruptcy Can Help When Your Modification Doesn’t Work

Loan modifications have been the topic of conversation for awhile now. They were first in the news because the banks weren’t taking them seriously. Many homeowners were submitting loan modification documents to their mortgage companies and then waiting 6 months to a year before they heard back. If they checked in, they were told that their documents had expired (no surprise when it takes them so long to review them). It was a vicious cycle of submitting paperwork, letting it get out of date, submitting updated paperwork, etc.
One of the big problems with the above scenario is that while all this is going on, the homeowner isn’t paying the mortgage (as advised by the bank because no modification would be considered unless the payments were three months behind or more). If the modification is eventually approved, sometimes the back payments can be rolled into the end of the loan and everything will work out fine. Too often, though, homeowners are told their modification is not approved, and by the way, you need to catch up on 9 months of payments in the next 30 days or we’re going to start a foreclosure.
More recently you may have heard that some of the big banks settled with the courts and now have strict guidelines they must follow in regard to the loan modification process. Namely, that an application needs to be reviewed within 30 days of receipt. This was a big win for homeowners, and I have heard that more modification are being approved and it’s all happening much more quickly.
But what happens after the modification is approved? It’s always the last we hear about the process. But does everyone really live happily ever after? According to a recent article in The New York Times, no. Apparently more than half of the homeowners who get loan modifications are back to being delinquent only 18 months later. A year and a half is not a long time, and to be right back where you started might say more than you want it to.
If you’ve completed a loan modification and are back to being behind on your mortgage, you may really want to analyze whether or not you can afford your home. Just because you want to stay in your home, doesn’t mean you should. Sometimes you need to make a financial, rather than emotional decision. In many cases, what you owe on the property exceeds the value, and this is another big red flag. When you file bankruptcy, it enables you to surrender your home back to the bank and discharge any liability for deficiency that might occur when the bank forecloses. Very often things happen that are beyond our control, and in these cases we need to take stock and do what’s best for ourselves and our families moving forward.
To set up a free consultation with an attorney, you can contact Greenwald and Hammond through our website, or call us at 303-731-4234.
Submitted by:
Kerry Hammond, Esq. Bankruptcy Attorney

Tags: Loan modification, New York Times, default, deficiency, foreclosure, home value, surrender


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