Mortgage Modifications and Foreclosure Defense

Homeowners beware! Applying for a loan modification does not protect you from your lender’s attempts to foreclosure your home.

For so many American homeowners these days, paying the mortgage has created a financial hardship. For some, making the payment is no longer possible. In more and more of these instances, homeowners are turning to their lenders to seek a downward modification of the terms of their mortgages. Typically, it is a reduction in the interest rate that is most likely to be obtained, which will reduce the monthly payment.

The loan modification application process is onerous and frustrating. After completing a loan application and providing the lender with a small stack of financial documents, it is quitecommon for the lender to continually request additional information and documentation. Lenders will state that they have not received documents that you know you sent, or will tell you that the documents that you sent are no longer current and must be updated. This can go on for weeks, months, and sometimes, years. Why does this happen? The lenders are understaffed and overwhelmed. In some cases it’s a matter of competence. In a larger sense, the lenders are dealing with a crisis which, in their long histories of lending, they have not had to deal with before and, quite frankly, they are not good at it.

In most cases, homeowners don’t make their mortgage payments while their modification applications are pending. Technically this is a default under the terms of the mortgage. Despite the representations made by the lenders’ customer service representatives, lenders can, and will, start foreclosure proceedings even though they are considering the modification application. Sometimes a homeowner will be told, upon receipt of the foreclosure papers, that they need not respond to them. As long as the modification application is in, and kept current, lenders have sometimes told their borrowers that they need not take any further steps in the foreclosure proceeding. This is false information and, if followed, can lead to disastrous results, including loss of the home.

Whenever a homeowner receives a foreclosure notice, known as a “Summons and Complaint”, defensive action must be taken. Applying for a mortgage modification is not sufficient. Where no defensive papers are submitted, the lender will simply barrel through the foreclosure process and sell the property on the courthouse steps. In the saddest of situations, a homeowner who has been told that a modification is just days away, may find that the home has been lost in foreclosure and the next step is to pack up and find somewhere else to live.

The bottom line is that a homeowner must respond appropriately when served with foreclosure papers. The lender’s advice must not be relied upon. By starting a foreclosure case, the lender is posing a direct challenge to title to the home and cannot be ignored. Legal counsel should be obtained immediately and appropriate action to defend against the lender’s efforts must be taken. Posted/Last Updated 3.2.2012