The banks are not in business to help you and no better way do the banks exemplify this than by offering Temporary Loan Modifications. The banks offer these temporary loan modifications under the auspices of pre-qualifying you or giving you the ability to prove that you can afford a reduced payment, however the bank does not tell you that the moment you begin paying the reduced payment they count you delinquent. Even worse, once this delinquency period reaches three months, the bank has the ability to foreclose on your property. All this while you diligently make your payment each month unknowingly to a lender that is preparing it's lawyers to sale your house.
Banks will go so far as to tell homeowners that their modification is still under review or that their property will not be foreclosed on despite the opposite being true. The most disappointing aspect about this scam aside from the blatant lies that are being told to homeowners is that the homeowners are placing all of their hope with the lender and the loan modification process only to be faced with foreclosure and ultimate eviction. A temporary loan modification was never meant to transition into a permanent modification, or it would start as a permanent modification. The purpose behind a temporary modification is to place the borrower into an abject situation that he is unable to recover from. In a temporary modification, the lender immediately counts you delinquent when you make the reduced payment and then makes the difference between your original payment and your modified payment as an outstanding arrears amount. In most cases, the very fact that a homeowner needs a loan modification indicates that he is struggling to make the monthly payment, therefore when a temporary modification is given to that borrower.
As an example, a family contacted us with the following facts.
Lender: Bank of America
Months Behind: 0 when they were offered a temporary modification
Original Monthly payment: $2,480
Temporary Modification Payment: $1,550
The Lender stated that the temporary modification would last three months in the paperwork: January, February, and March, however according to the Borrower stated on the phone if the Borrower made the payments timely, the Borrower would be granted a permanent modification. The paperwork did not mention anything about a permanent modification, however stated that Bank of America was under no obligation to engage in any additional agreement. This Borrower made it very clear to the lender that they would no longer be able to make a payment, the lender put the Borrower in a position where they could make a payment and then made it very clear that they had no intention of approving a permanent modification. How did this help the Borrower? It certainly helped the lender extract additional payments from the Borrower.
What's worse? After the three month period, the lender was completely unresponsive stating that the documents were still under review, therefore the Borrower continued to make the modified payment. This went on for ten months until the Borrower received foreclosure paperwork in the mail indicating that the Borrower was ten months delinquent and had an arrears amount of just under $15,000 that would have to be paid in full within 25 days or the property was to be put up for sale.
Where did the arrears amount come from you ask? The lender took the difference between the original payment $2,480 and the modified payment $1,550 which equals $930 and counted the Borrower delinquent for ten months at $930. After adding in attorney costs and fees and penalties, the Borrower was now just under $15,000 in arrears and given less than 25 days to pay in full. The lender never had any intention of helping the homeowner keep his home, however set the homeowner up to loose the home.
The Lenders have the right to foreclose during the temporary loan modification process therefore, if your lender is proposing a temporary loan modification or forbearance agreement you must have a competent foreclosure defense attorney review the documents. Additionally, do not believe that the foreclosure process on your home has been postponed, delayed or put on hold.
If you ever speak to a bank representative and he tells you that your foreclosure is on hold, ask them to send that to you in writing. When the lender refuses to do so, please realize that your home is heading toward foreclosure and seek aggressive representation as soon as possible.