Mortgage Modification Denied - Who Cares?

          They lost the paperwork again?  

Will the Mortgage Modification get approved before the Sheriff Sale?

              WHO CARES!   Bankruptcy can provide you with a safe harbor!

Many homeowners have fallen behind on their mortgage, and could soon be on the path to foreclosure without permanent help.    Many homeowners have attempted to get mortgage modifications through the government sponsored foreclosure relief programs but have been denied.    Upon denial, these homeowners are at risk of losing their homes.

What is a Mortgage Modification?

A modification of a loan which is secured by a mortgage that is a permanent change in one or more of the terms of a loan, allows the loan to be reinstated, and results in a payment the Borrower can afford.   Different programs have different criteria but all of them require the lender to use specific financial analysis criteria when determining a borrower's eligibility for the Loan Modification Option.  However, the program guidelines say homeowners can be denied for a number of reasons, including further reductions in income, missing trial payments or not being able to document their income.  Anyone who has participated in these programs can testify that in many cases, servicer errors, such as losing the supporting paperwork and incorrectly calculating income, have caused denials.

Usually, these programs puts eligible homeowners in three-month payment trials, at which point their mortgage servicer determines if they qualify for a permanent modification.  The problem is that these servicers don’t tell the homeowner if they are denied,  servicers ask for immediate payment to cover the difference between the reduced and full payments.   For homeowners who were current before entering the trial period, they could end up worse off because of the trial.   Unfortunately, if homeowners disagree with a denial, they have little recourse other than send in a new loan modification request.

How Does Bankruptcy Assist Me In Getting A Mortgage Modification?

Mortgage modification is still available when you file for bankruptcy.  You can be considered for modifications under the Making Home Affordable Programs such as The Home Affordable Mortgage Program (HAMP) before, during, or after you file for bankruptcy.   If you apply for modification through these programs while your are in bankruptcy, your servicer may allow you to submit your bankruptcy schedules in place of the lengthy application that is generally required.   Your application must be considered.

Bankruptcy may make a modification more affordable if your attempts to modify your mortgage have been hampered by 

• excessive unsecured debt, such as credit card or medical bills,

• second mortgages or junior liens, or

• mortgages on rental or investment property which exceed the value of the property.

If you are already in a trial modification when you file for bankruptcy, your mortgage servicer is required to work with you and your attorney to obtain any trustee or court approvals necessary to complete the modification process.  This includes extending the trial period for up to two months to give you time to obtain court approvals. If you are approved for a modification during your Chapter 13, under certain circumstances, your servicer may be able to waive the trial period and enter directly into a permanent modification.

If you receive a Chapter 7 discharge prior to obtaining your mortgage modification and did not reaffirm your mortgage debt, your mortgage holder is required to consider you for a modification without requiring you to reinstate your personal obligation on the loan. This makes modification less risky because if you ever default, the mortgage holder can take back the property but cannot obtain a deficiency judgment against you for the difference between the amount recovered from the sale of the house and the amount you owe at the time of the foreclosure.

Finally, the bankruptcy filing creates the automatic stay which keeps the mortgage company proceeding with foreclosure.  The debtor can use a Chapter 13 bankruptcy as a safety net, in the event the debtor can never get approved, and force the lender to allow the cure of the mortgage over a 3 – 5 year time frame.  During this time, the debtor can repeatedly apply for the loan modification.

How do I get started?   

Call Steven P. Taylor, P.C. | Indiana Bankruptcy Lawyer

The first step in the process is finding an experienced bankruptcy attorney. We understand that for many clients, Saturdays are the only days they have off, so we make ourselves available. We welcome the opportunity to meet with you to talk to you about your situation at no charge. More than anything, we look forward to helping our clients get a fresh start so that they can start living their lives again.

Contact the law firm of Steven P. Taylor, P.C. today in his Indianapolis Bankruptcy office at  (317) 271-1111 or in his Kokomo Bankruptcy office at (765) 868-0807 for a free consultation about whether you should file for Chapter 7 or 13 bankruptcy to discuss bankruptcy and mortgage modifications in Indiana or email us your questions.

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Steven P. Taylor, P.C. | Indianapolis Chapter 13 Bankruptcy Lawyer

Contact the law firm of Steven P. Taylor, P.C. today at (317) 271-1111 or (765) 868-0807 for a free consultation about whether you should file for bankruptcy in Indiana or email us your questions.  Steven P. Taylor will assist you in determining whether a bankruptcy is the best path for you, and will guide you through the bankruptcy process