With so many homeowners struggling to pay their mortgages, one of the options they turn to is a loan modification, but while this seems like a great idea, unfortunately, very few are approved.
Less than one percent of loan applications have been accepted as permanent modifications. Many homeowners end up in the trial period only to be denied a few months later or get a loan modification reducing their monthly payment but by such a small amount, it really doesn’t help.
Unfortunately, there is another major flaw in the loan modification process of which most homeowners are unaware.
While the bank is working on your loan modification (this can take months), you may not be making your mortgage payments or not be paying them in full. As you become more delinquent, the bank will start foreclosure proceedings even though they are working on your loan modification.
Some banks and their investors have set guidelines, which only will allow a foreclosure to be postponed a certain amount of times regardless of the reason. Therefore, if you are finally denied a loan modification, but have used up all the foreclosure postponements in the process, you will not be able to do a short sale or deed in lieu. Instead, you will be forced into foreclosure.
I recently had this exact situation with one of my clients. He had worked with the bank for months on a loan modification. During the process, foreclosure dates were issued and postponed.
The bank finally denied the loan application, and advised him to do a short sale, but the next foreclosure date was just 12 days out. He contacted us right away. We had a buyer, and were able to present the bank with the complete short sale package just days before the foreclosure.
Sounds good so far. We submitted it to the bank in time to postpone the foreclosure, just as the bank had advised. We were told that because the foreclosure date had been postponed six times while the bank was working on his loan modification, and that was the maximum times allowed, the foreclosure could not be postponed for any reason.
Often, banks’ rules and regulations don’t seem logical, and this is no exception. My client’s home was going to be foreclosed in just two days. He was devastated. He hadn’t even thought about moving out yet.
The bank kept giving him false hope, telling my client they would work with him. He did everything they asked, including doing a short sale. In spite of what the bank told him, he and his family were going to be homeless in just two days. We were denied the postponement three more times before finally getting it postponed just hours before it went to the courthouse steps.
If you are in the process of a loan modification, or thinking about applying for one, make sure you talk to your bank. Find out what their guidelines are so you can avoid finding yourself in the same situation as my client.
If you would like more information on loan modifications, short sales and foreclosures, visit www.ArizonaShortSaleToday.com. You also can contact Lorraine Ryall, Realtor CDPE, CSSN, at Coldwell Banker Trails and Paths Premier Properties by calling (602) 571-6799, or send an e-mail to Lryall@TheHome4YouAZ.com.