A mortgage modification (sometimes called a loan modification) is a change to the terms of a mortgage that is made to perhaps cure the default on a mortgage or to lower the monthly payment. And as a result of the financial crisis over the last decade that stemmed partly from the sub-prime mortgage meltdown, modifications are a frequent technique to help borrowers in trouble.
Unfortunately, sometimes modifications go wrong. In this post we will give a couple examples and provide you with information that might help you decide if a modification is appropriate in your situation.
To begin, not all loans are eligible for a modification.
Lenders use specific financial criteria when investigating whether a loan is eligible for a modification. Some considerations include whether the borrower has experienced an increase in living expenses or decrease in income, whether the borrower’s surplus income is over a certain threshold, whether the borrower has successfully completed a trial payment plan, and whether the borrower has received a previous modification.
If you are curious whether your loan is eligible, your first step is usually to contact your mortgage company. It should have an application process by which you can apply to see if you are eligible. You may also want to speak to an attorney or accountant about your options and the application process.
Be diligent to avoid errors by the mortgage company.
Unfortunately, mortgage companies sometimes make mistakes when doing mortgage modifications.
For example, one homeowner successfully obtained a modification in 2010 from JPMorgan Chase Bank and began making payments. Despite the homeowner faithfully making payments every month, over the next three years, Chase declared the loan in default over 30 times, scheduled six different foreclosure sales that were all eventually canceled, and eventually foreclosed on the home in August of 2013.
In another case, CitiMortgage agreed to reinstate and modify a loan that it had foreclosed on. The homeowner paid almost $90,000 over the next five years on the reinstated loan. In December of 2013 when the homeowner went to sell the house he discovered that the house was not in his name. CitiMortgage never told him that Freddie Mac had purchased the house at the foreclosure sale for the full amount of the debt. The homeowner had been making payments on a debt that he didn’t owe, on a home that he didn’t own. When he called CitiMortgage after discovering that the house was not his, he was told that CitiMortgage doesn’t handle title issues.
The homeowners described above are currently in court fighting for their rights and we are hopeful they will prevail.
These problems underscore the need to engage legal counsel.
These unfortunate situations don’t have to happen and they shouldn’t happen. Yet they are happening on a regular basis. For that reason, it is always a good idea to engage an attorney with experience in the mortgage industry if you are seeking a modification. He or she can help you avoid issues like the examples above.
If you’d like to speak to an attorney who can help, contact one of our Real Estate Attorneys today.
*This article is very general in nature and does not constitute legal advice. Readers with legal questions should consult with an attorney prior to making any legal decisions.