Repercussions in Hardship Loan Modification Process
by Jon from Anaheim, California and by Concerned Homeowner
Ask Kate about experiencing repercussions from the hardship loan modification process: Unintended and unwelcome consequences, the dread of repercussion sums up Jon's current dilemma. He asks how much his credit score will suffer if he misses 3 mortgage payments to gain the attention of his loan servicer. Another homeowner's modification is denied over the value of a 2001 pickup truck. (Yes, you read that right!)
Q 1: Home Modification Strategy By Jon from Anaheim, CA
Hi Kate, I would like to request your professional opinion with my situation. I lost my job a year ago now. I'm living on a little savings I was able to put in the bank for times like I am in right now.
But I'm running thin so I applied for home modification on February 2013. I'm still current with my mortgage payments and have never missed or been late in any of my payments.
Now I feel like I'm having a run around with my servicer, telling me every time I called they are still working on it and has not come up with a decision or they will call me.
I can no longer afford my current payment so I was thinking of not paying my mortgage for few months, hoping that it will make them speed up the process and make a decision.
But I'm struggling on the depth of repercussion for doing so.
I would like to ask on how much of an impact this will cause my credit score if I missed 3 months of payment as well as likelihood of getting a refi down the line in case I get a better deal with missed payments in my record.
Please advise if this strategy will be more beneficial or damaging for me. Thank you. Hope to hear from you soon. Regards, Jon
Ask Kate answers: Home Modification Strategy
Hi Jon, Your story leaves me appalled at the position homeowners find themselves in today. If it's any comfort, you are not an isolated case.
Before anyone calls me a bleeding heart, I assure you I am totally aware of the commitment a borrower makes to pay back a mortgage. Equally, I understand that banks are in the business of turning a profit.
H-o-w-e-v-e-r, homeowners are bearing the brunt of the financial collapse brought on by the failure of banks to act wisely.
I am referring to the reckless higher-ups who negotiated irresponsible Wall Street contracts without the well-being of homeowners in mind.
Not only that, their brashness continued with robo-signing and other illegal acts until complaints from foreclosed borrowers led to the Independent Foreclosure Review and National Mortgage Settlement
Please keep in mind when I say big banking's attitude toward struggling homeowners is shameful, that I don't say it lightly. Raised as the daughter of a banker
, financial responsibility has always been of the utmost importance to me.
In fact when I was in lending, I prepped my borrowers before getting a mortgage. They left my office firmly determined to never
be late on their payments. I'd tell them to sell a car, forgo furniture, whatever it took, before incurring late fees. So it is not without forethought that I criticize the banks for their disrespect of homeowners.
Enough of my rant. What about Jon?
Be Realistic about Mortgage Modifications - Take Care of Yourself
Jon, the banks are inundated with modification requests. Yours is one of many in an overflowing stack. You are not much more than a potential contributor to their delinquency statistics.
Not that mortgage modifications never come through for homeowners. Sometimes, approvals seem to be the luck of the draw. Other times, being the squeaky wheel draws the lender's attention to the modification request.
But since being on time with payments does not appear to speed up your loan modification process
, here is what I suggest. Continue your mortgage payments if
you still have enough money to feed yourself and keep the lights on. If not, don't agonize over your inability to pay the mortgage.
It boils down to prioritizing basic necessities.
But won't being late on mortgage payments negatively impact your credit
? Yes. But consider this! Credit history is
repairable over time. For example, using secured credit cards to re-establish credit. Generally speaking, it takes a minimum of 2 years to repair credit
to the extent that you could get a mortgage approval. Of course, it will also require elbow grease and persistence on your part.
One thought! I'm not suggesting you discontinue paying the mortgage if you can afford the monthly payments. Strategic default can backfire on homeowners. But if your savings is draining fast, think long and hard about depending on the bank to lower your house payment in order to afford your basic necessities.
The bottom line? Take care of yourself.
I would also encourage you to call the Making Home Affordable counselors. Ask them to help you work with your mortgage servicer. Go here to learn about getting individual assistance from free HUD counselors
Q 2: Refinance or Modification after Divorce for Better Loan Concerned Homeowner
Hi Kate, I hope you can help. My ex-husband and I are on a mortgage together. I lived in the house and made payments through November 2007 (never late). He moved in afterward and we revised our divorce agreement that he would then take over the mortgage payments and be responsible for them.
At some point, he was supposed to refinance to remove me from the loan especially so he wouldn't affect my credit if his payments became late, which they now have.
We had a bad loan (adjustable rate)- we've owned the house since 2001 - purchased is at $328,000 and we still owe $324,000 and have made payments all these years.
He has tried to refinance or get a modification and remove me from the loan for a better rate and better payments to start to make some progress on the principle.
He has been told so many things. You can't do anything unless you are several months late, then you can't do anything until you are current, then you can't do it because you have too many assets (the asset was a 2001 pickup truck).
He's talked to many people at Chase and they just won't help. They say they will and many months go by and they look into it and when they finally get back to him they say they can't do anything.
We are in an amicable situation and I want to resolve this for both of us. He's doing the best he can, but I'm being affected and I don't have any control over it.
Any suggestions on what we can do?
Ask Kate answers: Refinance or Modification after Divorce for Better Loan
Whoa, paying off only $4000 over 12 years must be discouraging. I can imagine you want this process over!
If you follow my mortgage blog
, you'll see my announcements of the Making Home Affordable local homeowner event schedule
. Watch for one near your hometown.
There is no replacement for meeting face-to-face with the loan servicers and trained housing counselors. I've seen them process and approve mortgage modifications in one sitting! Fannie Mae and Freddie Mac representatives attend also.
Otherwise, you are going to have to make your HAMP application stand out from the crowd: How the squeaky wheel gets loan approval
You'll also want to read about these homeowners who are in a similar situation. Removing Spouse from Modified Mortgage
(in the comment section) and Mortgage Assumption after Mortgage Modification
Ditto for what I told Jon (see above). Call a Making Home Affordable housing counselor for help working with your lender!
Best wishes for getting off the mortgage,
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