In 2009, foreclosure rates in most states throughout the country, including Florida, realized huge increases. As the stock market plummeted, so did the employment rate, leaving thousands of American families wondering how they could meet their monthly mortgage payments and stay in their homes until their financial situations improved.
One seemingly practical answer to this problem for many homeowners was to enter into a home loan modification agreement with their lender. A mortgage modification agreement basically allows the homeowner to make smaller payments for an increased period of time. This strategy typically lowers the homeowner’s financial burden in the short term and allows them to keep their homes.
One odd reality of home loan modifications is that many lenders will not begin the loan negotiation process unless the homeowner stops making monthly scheduled mortgage payments. Therefore, when a homeowner calls their bank, they are told that the first step in the process of saving their home is to stop making payments. Many homeowners have done just that without fully understanding the possible consequences of doing so.
The Atlantic details one family’s experience with the home loan modification process and the frustrating drama it has become. They called their mortgage lender, who happened to be a major banking institution, and were told that they needed to stop making payments in order to start the loan modification process. However, once the family stopped making payments, the bank filed to foreclose on the property.
The family took the bank to court over the foreclosure and false promise made by the bank. They were fortunate to have a judge who acted quickly in their case and approved it for trial.
This family relied on the instructions that were provided by the bank and now they risk losing their home. Is this a fair banking practice? We will let you know if there are developments in this family’s case.
The Atlantic: “Justice Foreclosed,” Andrew Cohen, Jul. 25, 2011