There are some government regulations that require that a bank consider modifying a delinquent loan, but there is no requirement that a bank agree to modify a loan that is in foreclosure. In fact, it is reported that banks are renegotiating only 3% of delinquent mortgages. Why? It may seem that banks would be better off keeping a homeowner in the home in order to earn the interest charged on the loan account. However, national statistics indicate that mortgage foreclosures continue to rise. As it turns out, proceeding with the foreclosure, obtaining possession of the home, and selling it, is to the bank’s benefit. What the banks are learning is this: in 30% of the cases where homeowners fall behind on their mortgage, the homeowners are able to “cure” the delinquency by paying the arrears in full. No modification is made. The mortgage resumes upon the same terms as it had prior to the default. In 30% – 45% of the cases where banks have modified loan terms to allow delinquent homeowners to catch-up mortgage arrears, the homeowners end up “redefaulting”, falling into arrears again, only to have the foreclosure resume.
There are ways a homeowners faced with foreclosure can save their home. It is important to act quickly if you fall behind in your mortgage payments. The sooner a homeowner takes action, the more likely it is that the home may be saved. If a bank begins to speak with you about modification, it will likely lead nowhere. While a homeowner may believe a modification is forthcoming, or at least being considered, the foreclosure will most likely proceed in court. It lulls the homeowner into believing that a modification is possible, when it fact, it is very unlikely. And then, the homeowner is surprised to learn that the foreclosure judgment has been entered, and a sale date set. Don’t let this happen to you! Take action now.
