Bank’s Modification Procedures May Hurt Homeowners

The nation’s foreclosure crisis is continuing to wreak havoc on the lives of many homeowners. In 2010, 33 states saw an increase in their foreclosure rates, with Arizona, Nevada, New Jersey, and Utah reporting the biggest jump in home foreclosures. People are continuing to lose their homes to foreclosure in record numbers. A surprising fact in these foreclosures is that many of these foreclosures occurred while the homeowner was negotiating with their bank for a loan modification to lower their mortgage payment. Banks are employing a loan-modification procedure that may prompt a foreclosure being filed against the homeowner. The homeowner that is being proactive in contacting his lender is sometimes ill-informed or mislead with respect to the impact of their seeking a modification.

During the loan modification process, some banks commence a foreclosure action while the loan modification is being evaluated. The practice has been responsible for accelerating foreclosure for many homeowners, including ones who were directed to pay lower payments during the loan-modification trial period and then were penalized for failure to pay the full amount when the loan modification failed. It seems that the banks want to foreclose and are only going through the motions of loan modification as newspapers periodically report the success rate of modification programs. The problem with the banks pursuing foreclosure at the beginning of a loan modification process is that the homeowner is often caught off guard about the impact of their pursing a modification. The Homeowner frequently believes that they are safe from foreclosure because they have made arrangements for a loan modification with the bank, but in reality the bank has placed them in default while they are negotiating for a modification. And since the homeowner is in default on the bank’s records the bank will commence foreclosure proceedings.

It is very important for homeowners considering a loan modification to understand how the process works and to be fully aware of all its implications. Banks seem to be less than forth-coming concerning how they will treat a mortgage that is in the modification review program. The homeowner needs to be aware that what they think is a responsible step in saving their home may lead to the loss of their homes if the modification is not approved by the bank.

Please keep in mind that this is only a summary of a recent mortgage modification results. If you would like more details about this or other foreclosure/creditor collection practices, please do not hesitate to contact me at thughes@lavellelaw.com or at (847) 705-9698 to talk to about how we can help you.