How a client ultimately ended up in foreclosure is often times a sticking point for many of them. In some instances, it’s because a series of unfortunate events occurred – a death in the family, unexpected medical expenses, or loss of income. Other times, it’s because the Bank’s incompetence that quickly got out of hand – overcharging or paying in advance the property taxes or insurance, which leads to the Bank incorrectly believing that a mortgage payment was late or all together missed. There is a certain amount of principle in fighting tooth and nail when the Bank made a mistake or refuses to be flexible, despite our client’s best efforts to find an equitable solution that works for both sides. However, I want to discuss today the option of a modification and how in the long run, it could be the best remedy for you and your family.
For the clients who want to keep their homes, winning a foreclosure case is a great solution, but it might not always be the best solution in the long run. Case law changes on a regular basis, and unfortunately there are more options for the Bank to try and foreclose again than not. What this means is, in some circumstances, a “win” at trial just means that the Bank will get to try and foreclose again – months later, or maybe years later. But it’s a dark cloud hanging over your head and one that is unlikely to go away on its own.
A loan modification however, tends to be a more permanent solution. Once the modification is approved and accepted, the loan is current. So long as you continue to make your payments on time (and the Bank doesn’t botch anything up), you’ll be in a performing loan and you’ll stay out of foreclosure. However, like all things in life, there are pros and cons to every decision. For some clients, accepting a modification from the Bank is akin to admitting that the Bank was right and our client was wrong. For those of you who believe the Bank caused the foreclosure, this might be a hard pill to swallow. Moreover, you might not want to continue doing business with someone who has wronged you. Even still, the modification offered by your Bank might not be ideal terms. The interest rate might be too high, the Bank may roll in all of the arrears into a large balloon payment, or the Bank might even try to force you to pay their attorney’s fees. Sometimes, the modification offered isn’t ideal. But sometimes, it might be the smarter play.
Whatever your grievances are with the Bank and your foreclosure case, accepting a modification gets you out of foreclosure. If the goal is to keep the home, stopping the bleeding is a solid step in the right direction. If you are unhappy with the terms of the modification, or if you don’t want to do business with the Bank any more, getting out of the foreclosure case opens up several other options that otherwise might not be available. For example, you could try and refinance with another lender – maybe a local credit union that you can establish a more personal relationship with. Alternatively, as time goes by, maybe your financial situation improves and the modification becomes a little more affordable. I’ll also let you in on a little secret – many “Banks” or “Plaintiff’s” in foreclosure cases exclusively handle loans that are in default. Meaning, if your loan is current and out of foreclosure (because you accepted a modification), the Bank/Plaintiff or loan servicer may transfer your loan to a completely different Bank or loan servicer, one that may treat you better. Finally, accepting a modification, even if you aren’t thrilled by it, may have a positive impact on your credit scores, which could ultimately lead to being able to secure better financing in the future.
I’ve had several clients who weren’t thrilled by the idea of a modification from a Bank that caused their foreclosure, but after considering the options, they ultimately accepting the modification offer and are no longer in foreclosure. Some of those clients have gone on to refinance their home with another lender for better terms, sold their home and captured the equity instead of being forced to short sell it, or used the modification as a stop-gap until their finances improved and were able to pay the loan off all together. Winning is great, but a strategic modification with long term goals in mind may be the better option for you.
If you are facing foreclosure and want to consider all your options, contact us to set up and appointment. Loan Lawyers has help over 5,000 South Florida homeowners and consumers with their debt problems, contact us to see how we may be able to help you.