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Can A Bank Refuse To Honor A Loan Modification?

Getting a loan modification can be a complicated process. During a modification, homeowners put up with their mortgage lender’s never-ending requests for documents and financial information because a loan modification may be their only hope to avoid foreclosure. Once the modification process is underway, there may still be additional complications. In some instances, a mortgage lender may engage in illegal behavior and refuse to honor a previously-agreed upon loan modification.

Loan modifications have helped thousands of homeowners avoid foreclosure and make their mortgages affordable. However, many mortgage servicers will make more money by pursuing a foreclosure than they would by modifying the mortgage loan. As a result, banks and mortgage servicers do not make the modification process easy and may attempt to avoid their responsibilities under the loan modification agreement.

One of the loan servicers’ more common schemes to avoid modification involves changing mortgage servicers in the middle of a modification. For example, a homeowner may have received a loan modification from Wells Fargo. Halfway through the trial modification period, Wells Fargo transfers the loan to Nationstar for servicing. Nationstar may claim that it had no idea that the homeowner was in a modification and could refuse to honor the modification agreement. Nationstar could then attempt to foreclose on the property.

As of 2014, federal law requires loan servicers to honor existing loan modification contracts. While this law helps homeowners, many loan servicers will still attempt to get out of an existing modification and will hope that a homeowner will not have the resources to sue the company for a breach of contract.

In addition to changing loan servicers in the middle of a modification, some loan servicers will intentionally delay the modification process until it is too late for a homeowner to get help. The loan servicer may claim that they did not receive certain documents, or may ask the homeowner to submit the same documents multiple times.

Also, the loan servicer may suddenly stop refusing to accept payments on an existing loan modification. The loan servicer may point to minor clauses hidden in the contract that allow the company to refuse payments, and will use these clauses to pursue foreclosure or require the homeowner to seek a new modification agreement.

If a mortgage servicer or bank refuses to accept payments or rejects an existing mortgage modification, you must act quickly to protect your rights. If you stop making payments because the bank refuses to accept them, the bank will likely argue to the court that you were the one who breached the agreement. The longer you wait to contest the mortgage servicer’s actions, the more likely that the bank’s arguments will be believable.

By hiring an attorney, you can show the court that you are a victim of the bank or mortgage servicer’s actions. Fighting back against these practices can help you keep your house and force your mortgagor to honor your loan modification agreement.

If you are unsure if your bank or mortgage servicer’s actions are illegal, contact Loan Lawyers today. Our Florida loan modification attorneys will review your agreements, and can help you fight back against breaches of your modification contract. To schedule your free and confidential consultation, contact our office today by calling (888) FIGHT-13 (344-4813).

  • ABC News
  • American Civil Liberties Union
  • CBS 4
  • CNN
  • Daily Business Review
  • Florida Trend's - Florida Legal Elite 2014
  • Florida Trend's - Florida Legal Elite 2014
  • National Association of Consumer Advocates
  • National Association of Consumer Bankruptcy Attorneys
  • NBC News
  • National Consumer Law Center
  • The New York Times
  • Avvo
  • Avvo
  • Avvo
  • Avvo
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