The Making Home Affordable Modification Program has had a low success rate in helping homeowners modify their mortgages and save their homes. However, even homeowners unable to save their homes under this program have received some benefit for their participation in the program. First, while you are applying for a loan modification you will not be required to pay your mortgage. This means that homeowners pursuing a modification may have two to three months without a mortgage payment, which will allow them an opportunity to save their money in case their modification is not approved. In addition, during the modification process lenders will usually suspend foreclosure proceedings that have already begun. As a result, homeowners who were facing foreclosure can remain in their home a little longer, allowing them an opportunity to prepare for a transition to a new home.
Category Archives: loan modifications
THE TROUBLE WITH LOAN MODIFICATIONS
A quick search of the internet will show that loan modification programs have been generally unsuccessful. In my practice as a bankruptcy attorney, I encounter debtors every day who are trying to save their home through a loan modification. After months of submitting and resubmitting documents, jumping through one hoop after another, they are usually turned down for their loan modification and end up filing bankruptcy to save their home.
If the success rate of loan modifications is low, then why do the lenders even bother with these types of programs? I suspect it is more about public image than helping people save their homes. Before considering a loan modification, homeowners who are behind on their mortgage payments should contact a bankruptcy attorney to discuss their options. Chapter 13 bankruptcy is available to nearly all homeowners as a way of stopping foreclosure and catching up on mortgage arrears. Loan modifications allow homeowners to get current by putting that mortgage arrears back into their mortgage. This can be a costly process involving fees and additional interest. In Chapter 13 bankruptcy, homeowners can repay their mortgage arrears without refinancing their loan, and without paying interest on the arrears.