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When a Loan Modification Goes Really Bad

A conventional loan modification is probably the least likely method to succeed. The government has you believing that the banks will modify your loan. But, the ruling the government put out is only for a temporary relief and the ruling has no teeth. Many people have been blindsided by this. They thought they were getting relief from foreclosure, but while in the temporary loan modification period, there is nothing to stop the bank from foreclosing.

Imagine how you would feel if you thought your loan modification saved you from foreclosure then a knock on the door from a stranger happens. He tells you, that you have "x" amount of time to vacate, he bought it at the trustee sale. That has happen.

A friend of a colleague of mine had that very scenario happen. That is when we discovered that the loan modification program was mostly bunk.

In reality, the lending institutions make more money by foreclosing than they would ever make with a loan modification.

Often a loan modification will not be even consider by the lending institute until the owner is behind on payments. The loan servicer will suggest that an owner stop making payments to make the eligible for a conventional loan modification. They would like to you be 2 payments behind first. That kicks off the foreclosure process.

What they don't tell you is; when you fall 2 payments behind and the foreclosure process is kicked off you, the owner, will get hit with, up to, $10,000 in foreclosure penalty fees. Any wonder why the lenders want you to fall behind?

So, now an owner has fallen behind the 2 payments and hidden in this mess is the penalties. They apply for hardship loan modification. Up to now the lenders have been all "touchy feely" with the owner, stating everything will be OK. But what happens if, after they apply, they get turned down for the modification. This has happened on many occasion. One time, when the owner tried to appeal the decision, after being instructed to stop making payments, he was told this lender does not participate in the loan modification program.

President Obama crafted the "housing rescue plan", which is devised to slow down foreclosure. They only hang up with this is; the banks need to buy off on it. And, any many cases, the banks are completely ignoring this program. Some go as far as to give really bad advice.