Loan Modification Service or Disservice from The Government?
There’s a “push me, pull me” mentality around this whole loan modification situation. On the one hand, desperate homeowners and Barack Obama’s administration are pushing for changes in the way banks help people. On the other hand, the government and administrators are also making loan modifications more difficult. Why this schizophrenic behavior? Some people are trying to abuse the system, no doubt. Others are clearly in a pickle AND the current administration is stuck between a rock and hard place.
Here is just another example of the loan modification nightmare. Now, homeowners will be required to go through a trial period before the borrower will be allowed to permanently modify their loans. In other words, the banks want to make sure that the homeowner can still make their payments on time, otherwise what’s the use in modifying the loan in the first place?
The key point for loan modifications is to help borrowers who have fallen behind, late on their payments or just can’t afford their payments. There are plenty of scenarios in which this creates a hardship. For example, when the borrower purchased the home, it may have been “overvalued.” The property may have been valued at $400,000 when initially purchased. But, today it’s only worth $200,000. The real problem here is that the loan amount may be for $300,000. Thus, the homeowner is making a mortgage payment on a $300,000 loan, when the house is only worth $200,000. This is called an “upside down” situation.
Another example of unaffordabilty requiring a loan modification is loss of job. In this scenario, which is all too common right now, the borrower or borrower(s) have lost their jobs and can’t make their payments. The “catch-22″ here is that borrowers need to be able to show ability to re-pay. Well, how in the heck can someone show ability to “re-pay”, when they’ve lost their jobs? Couple that with having their credit ruined and you can quickly see that this is an untenable situation.
This new loan modification requirement for a trial period is just another barrier that administrators have put up to make it harder for borrowers to modify their loans permanently. Some may argue that it’s a good thing. However, I think it’s just another way for the banks and the administration to shirk their responsibilities to help the homeowners.
Let’s dissect this trial period. The trial period means that the lender gives you typically a three month period to test whether our new payment will succeed. In other words, if they’ve modified your loan to a lower payment and in three months you’re still unable to pay, the lender can reverse the loan modification.
Some people want to know whether the trial period is a requirement. If your loan is a Fannie Mac loan, then, yes, it is required if you’re part of the government’s program. The trail period could be as long as four months if you are current with your loan.
What about a foreclosure? Can the bank continue with a foreclosure? If you are in a trial period the lender is required to stop the foreclosure while the loan modification trial period is in effect. But, if you’re unable to complete the trial period, the lender can start up a foreclosure at any point.
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I have been awaiting a yes or no answer on a mod request through WAMU/now CHASE for over 4 months. I have now received a trial period of threemonths at my old mortgage amount. I am 7 months behind, at around 8% on 470,000 k approxamately including teh past overdue months. It would make more sense for chase to modify rate and possibly term, and re-cap the overdue, fees and atty fees, Especially in the market I am in Bellevue WA 98007.
I agreed via fax to pay the trial period of $3520 mo …..BUT this is no reduced or modified amount! My original mortgage P&I was 3300???? What does this mean
HELP in WA !!!!
i am three in half month in on a three month trail and have not heard anything. how di=o i know if my paymwnt has been modified or not
You have the right to contact your bank or mortgage service agency directly to ask that question. And, they are required by law to answer you. In addition, if they have put your home into any type of foreclosure proceeding, it MUST be filed at the county records. You can also check that route, as well.
I am at my wits end just getting CitiMortgage to stop my for foreclosure sale after being approved for the HMP program.
After a long history of losing my paperwork twice, saying I was approved as of May 1st but than they lost the approval and I received foreclosure notice, it seems CitiMortage is either totally incompetent or is doing all they can to go thru with Trustees sale in direct violation of the terms of HMP and Fannie Mae Servicing Directives who owns my mortgage.
I note that the South Carolina Supreme Court at the request of Fannie Mae, issue a Restraining order in May 2009 and than an administrative order to stop all pending foreclosures while HMP modifications are in progress (the trial period). Unfortunately I am not in SC but it shows the seriousness of the issue when Fannie Mae had to get a Court order to force compliance with its own rules to servicers.
My trial period was again approved on 7/24/09 but for awhile they refused to take my first trial payment. They say that they first have to stop the pending foreclosure and than send me the Fannie Mae Form 3156. But with weekly or more frequent calls since July and many levels of supervisors, e-mails being sent assuring me the foreclosure action would be stopped in a few days, it never happens. Last week I was told they contacted someone within the Trustee office that does the sales and it would be taken care of the next day. Guess what it wasn’t and still isn’t.
They can’t officially send me the Form to formally start the modification period (although I finally did get them to accept my first trail payment before its due date) until they say they stop the foreclosure action which they seem too incompetent to know how to do. They admit the paperwork problem is on their end.
On other forums there are reports of folks losing their homes based on promises broken by CitiMortgage and all their “lost” paperwork within Citi. It has been widely reported servicers get more money from doing a foreclosure sale than they do for modifications.
I have a question about the trial period what if the trial periord payment is still a stuggle do you make the payments and after the trial you tell them it still hard to maintain that payment? Or once you have made those payments for that time you are then stuck with the high payment
In a way you are stuck between a rock and hard place. If you miss your payments during the trial period, the bank has the option to immediately put you into default In that case, you lose no matter what. On the other hand, if you can’t keep it up after the trial period, you are stuck with a high payment. But, it is best to try to maintain as long as possible until they fix the payment. At that point, you not only have a “reset” on the default period but a better chance to go back and negotiate again. This advice should be reviewed with your financial adviser as well as not all banks operate in the same way.
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