Could a Mortgage Modification Cost You Your Home?

The government's plan to help troubled homeowners modify their mortgage seems like a great idea, but is it costing some people their homes?

If you are one of the many homeowners who tried to get a mortgage modification but were rejected, you may want to count yourself lucky. According to the Wall Street Journal, there are many troubled homeowners in the United States who have tried to at least mitigate their financial problems by applying and signing up for a mortgage modification. Unfortunately, their lenders did not live up to their part of the bargain and the homeowners came out of the situation worse than how they went into it.

One such story is that of William and Esperanza Casco. They purchased their home with a mortgage loan about 17 years ago. The couple was current on their payments, but JPMorgan Chase, their mortgage lender, offered them a trial modification. This would reduce their payments and put more cash back into their pockets each month. After several months of making the lowered payments faithfully and according to the new mortgage agreement, the bank decided the payments were not enough. The Cascos received a foreclosure notice on their home despite their adherence to the mortgage modification agreement.

Homeowners across America are experiencing similar occurrences despite the federal government’s money that was supposed to be used to help people reduce their mortgage payments. But according to the article in WSJ, only about 500,000 homeowners have been able to make their mortgage modifications permanent. That’s a low number when the program was designed to help about three times as many people as that.

A spokesperson for JPMorgan Chase said that the bank worked with the Cascos to help them qualify for a permanent mortgage modification. After several attempts, they were unable to make that happen so the bank had no choice but to foreclose on their property.

The WSJ article goes on to discuss how there are a number of federal lawsuits that have been filed in Boston. These lawsuits are contending that some of the major banks and mortgage lenders are not fulfilling their end of the contract under the Home Affordable Modification Program, or HAMP. The lawsuits go on to say that under this government program, the banks are supposed to give permanent mortgage modifications to troubled homeowners who make the payments during the trial period. Very often, this is not happening and homeowners are ending up in more trouble than they were originally in.

What’s worse is that many homeowners, according to attorney Shennan Alexandra Kavanagh, have lost their homes as a result of trying to modify their mortgages. The lowered payments that these homeowners paid as required in the agreement were applied to their original mortgage balance which the homeowners were unable to pay. Just in Massachusetts, Kavanagh believes there are tens of thousands of people who can get in on the class-action lawsuit.

Have you had any experience with a mortgage modification lately? If so, was it a good experience or a bad one? Did you come out ahead financially? Let us know your thoughts below.

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Comments

  • Swarm The Banks

    November 13, 2010

    The first sentence in your article, "If you are one of the many homeowners who tried to get a mortgage modification but were rejected, you may want to count yourself lucky." is classic.

    And yet, just for the honor of being "rejected", a homeowner would have to fall 3 to 4 months behind in their mortgage payments just to be eligible to apply for HAMP.

    In many instances, that 3 to 4 months of getting behind could lead to http://www.parallelforeclosure.com in which the banks begin foreclosure proceedings before the homeowner has even applied for HAMP.

    So, as biting as your first sentence is, it's actually being nice compared to what may have actually happened to those who did apply and got rejected for HAMP, since the parallel foreclosure clock started ticking even before a homeowner could become eligible to apply for HAMP.

    You can keep up with several dozen foreclosure blogs at http://www.swarmthebanks.com

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