If you are upside down on your home and struggling to make your mortgage payments, a home loan modification can save your home. Lenders are under increased political pressure to reduce interest, extend the payment period, and eliminate principal. Politicians believe that the foreclosure crisis is bad for their political careers.
Unfortunately, home lenders struggle with inefficiency. The typical employee attempting to negotiate a modification is poorly trained and overworked. Government guidelines and the lender's own policies are constantly changing, which adds to the confusion. In some cases, notes are transferred or loan servicers are re-assigned. It is no wonder that many times documents are lost, applications are delayed, and modifications are denied for no good reason.
Take for example the recent case of the Caceres family home in Huntington Station, New York. Two years ago Geremias Caceres, 39, was shot to death in the street in front of the house during a botched robbery as his son Denis, then 17, watched. The murderers were caught and convicted, but the family struggled after losing Mr. Caceres's income. A home loan modification was suggested, since their home value had plummeted to $180,000, almost half the amount owed on the home ($350,000).
Mrs. Caceres tried to modify her mortgage by negotiating with IndyMac Mortgage Services, and was told by IndyMac to stop paying her $3,700 per month mortgage. According to an article in Newsday, after 20 months IndyMac denied her request because Mrs. Carceres was not the
executor of her late husband's estate. Mrs. Caceres was appointed
administrator of the estate. Under New York law (and in many other states), an executor is appointed when the decedent leaves a will. When there is no will, the court appoints an administrator. An attorney knows that there is virtually no legal difference.
The Caceres case highlights the gross inadequacies of the home loan modification process. When the home loan modification process breaks down, bankruptcy can change the playing field. By filing bankruptcy, your home is protected by the federal automatic stay which prevents foreclosure during the case. Your loan is also transferred to your lender's bankruptcy department, and your attorney can attempt to negotiate a modification (often with the bank's legal department). In some cases a second or third mortgage or other junior lien can be stripped off and the debt discharged by your bankruptcy, making staying in your home more affordable.
The federal bankruptcy code offers flexible options for keeping your home. Speak with an experienced bankruptcy attorney and discuss your bankruptcy and non-bankruptcy options. Don't let the lender's poor processes cause your foreclosure.