Loan Modification Update

If anyone has been following my posts about loan modifications, then they would know that when the big five mortgage servicers and the states attorneys general announced their big settlement, I was optimistic about my client's chance of obtaining a loan modification. 

The summaries of the settlement which are published on a site that I linked to through the United States Trustee, led me to believe that people who had the ability to pay would be able to save their homes through a modification process if their loans were being serviced by any of the banks involved in the settlement.  Unfortunately, it didn't take me long to discover the gaping hole in the settlement, that loans serviced by these banks, but owned by Fannie Mae or Freddie Mac were not affected by the settlement.  Most people do not know who owns their loans.

With all the information that I provided to the bank on behalf of my client, I was quickly informed that my client did not qualify for the relief under the national mortgage settlement because the loan was owned by Fannie Mae, of course the servicing bank reassured me that other relief programs would be considered. 

The terms of the settlement are not really relevant here.  The lawsuit itself raised issues as to the way these five mortgage servicers dealt with real people seeking much needed relief.  The idea that the bank should act in good faith while the homeowner is seeking alternatives to foreclosure resulted in the banks agreeing to halt the foreclosure process while borrowers were being considered for alternative relief options.  Unfortunately, you cannot expect the same treatment if your loan is owned by Fannie Mae or Freddie Mac.

So while I am supplementing the bank with updated and additional client information, the foreclosure action began.  The bank has reassured me that the foreclosure sale isn't until August so there is no need to stop the action.  Phew!  Because who has ever heard of a mortgage lender foreclosing on a home, while a modification agreement was in the works?  Oh wait...I have.  Numerous potential clients have consulted with my office or called my office to complain that their house was sold while they believed they were in the midst of a trial modification.  Wasn't that type of action, at least in part, alleged as bad behavior by the banks in the complaint by the state attorneys general in the first place?

I am not sure what percentage of loans serviced by the big five are owned by Fannie or Freddie but I guess if yours is, you shouldn't expect anything as a result of the settlement.  Ultimately my client opted for chapter 13 bankruptcy protection, the filing of the case stopped the foreclosure sale, the arrears are going to be cured through a five year plan (interest free) rather than being added to the principal of the mortgage, where she would wind up paying interest over the life of the loan.  The hopes of getting the mortgage payment lowered are now fading, but the amount that they would have been lowered was rather insignificant in the scheme of things.

If you have been given the runaround by your mortgage company and really want to keep your home, contact the attorneys at Greenwald & Hammond to set a free bankruptcy consultation.

Submitted by:

Mindy Greenwald, Esq.