Can Someone Get A Loan Modification During A Pending Foreclosure?

It is not infrequent that I have received a telephone call: “The sheriff’s sale was last week. Can you help me save my home?”

I reply, “Why did you wait?”

The  typical answer is: “I was working with the mortgage company on a loan  modification. They said it looked good, so I didn’t do anything.”

Once there is a sheriff’s sale (or more technically a judicial sale), a Chapter 13 cannot save your home, but before that date, filing bankruptcy can aid you in getting a loan modification.

SAD FACTS

  1. Foreclosures  and loan modifications work on different tracks. The train that gets to  the station first wins. Often, the Bank will orally suggest that a loan  modification is very likely to be approved; but it’s a mirage. The  mortgage company continues on with their foreclosure action, until your  home is gone.
  2. The Consumer Financial Protection Bureau  (CFPB) has a provision that is supposed to stop the foreclosure while  there is a pending Loan Modification application until a) the servicer  {mortgagee} informs the homeowner that you are not eligible; b) the  homeowners has rejected the workout option offered; or c) the homeowners  does not comply with the terms of the workout deal {such as not making  payments during the trial modification}. A recent report shows that  certain mortgage servicers continue to dual track. We still get calls  from homeowners saying they were given optimistic assurances that their  loan would be modified but the sheriff’s sale was held anyway
  3. Mortgage  companies don’t really want many loan modifications. That is why they  make it complicated; often “losing” files; returning documents for minor  reasons; making it a long drawn out process. If they really wanted to  help they would streamline the process both in terms of paper work and  time. They would have counselors working with you to be sure everything  was in apple pie order before going to the actual decision makers.
  4. Foreclosure lawyers make more money when they actually complete the foreclosure.
  5. Mortgage  companies are not your friends. If they can take your house back then  sell it to another party, they make their money twice: first, by taking a  money judgment against you, and second from reselling your property and  (possibly) giving a new loan to the buyers.

THE IRONY

Most  people don’t know you can file a Chapter 13 and still proceed with your  loan modification. Many Chapter 13 clients are able to get their loan  modified while still in the Chapter 13 case. Because you are in a  bankruptcy, the creditor has to stop its foreclosure action and give you  time and space to modify the loan. Even filing a Chapter 7 will stay  the foreclosure temporarily, and give you a better chance at that loan  modification because your budget will improve if you do not owe any  other creditors.

CHAPTER 13

A Chapter 13 stops the foreclosure dead in its tracks.

To  be eligible you have to have sufficient income to pay your current  mortgage, pay some amount to the Chapter 13 trustee to catch up the  mortgage arrears, and have enough money to cover your other expenses.

For more information on Loan Modification During Foreclosure, an initial consultation is your next best step. Get the information and legal answers you are seeking by calling today.

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