Within the past two years, the pressures causing my clients to file bankruptcy have changed. Where it used to be the phone calls from bill collectors and wage garnishment, now it is increasing mortgage payments and unsympathetic lenders. Lately we see the term 'loan modification' everywhere we turn. Sounds like a good idea, doesn't it?
In order for the process to work, however, one thing is key- a willing lender. There is no law that forces lenders to work with homeowners facing foreclosure, and cooperative lenders are hard to come by. No matter how much good faith a homeowner can show, how much of a hardship the homeowner is suffering, or how shockingly abusive the terms of the original loan may be, these factors don't make a difference to an unwilling lender.
It is appalling the way some lenders advise proactive homeowners that they cannot help them unless they are in default on the loan. Then, when the homeowner does what the lender suggests, the lender drums up excuse after excuse as to why the homeowner does not qualify for a modification. Maybe they make too much money. Maybe they don't make enough. Maybe they haven't shown enough of a hardship or they are too far upside-down on their home. In some cases, the lender never gives a response, but informs the homeowner their modification paperwork is in process until the day of the auction.
So, who can the homeowner trust? If they attempt to work with the lender directly, they are likely to be lost in the shuffle. If they pay for a service to negotiate on their behalf, are they getting what they paid for? How does the homeowner know those offering help with modifications aren't just a scam?
A handful of my clients have had success with loan modifications. By and large though, homeowners are finding that their lenders are not open to negotiation. This is evident by the incredible number of foreclosures in our area and across the country.
Though you and I can see logic in a lender agreeing to a fixed-rate mortgage with a reasonable payment to avoid sending a home to auction, lenders are obviously operating on a different kind of logic.
Attorney Denise K. Aguilar is an Ahwatukee resident whose bankruptcy practice is new to Ahwatukee. Denise can be reached at 480-455-1881 or 602-252-4991. Additional information regarding the Aguilar Law Firm, P.C. is available at http://www.aguilarlawonline.com/.