January 10th, 2010

Loan Modification is not always as it Appears! I was so surprised last week when I received a call from a friend of mine regarding her mother’s trying times. As a senior who is self employed, the economy, health and family issues have created a difficult financial situation.

Mom has been living in this home for over 30 years. She has raised her children, started a business and is now helping raise her grandchildren in this home. Unfortunately, with the market changes, she has negative equity in the home. Recently Mom has had to have surgery which has caused her to be unable to work. One of her children has moved into to help with the monthly bills and her recovery but is still struggling to make the mortgage payments. Sounds like Mom is a perfect candidate for a Loan Modification!

For many months Mom has been making partial payments and the lender has been accepting them! Mom received a call from the lender last week stating don’t bother to make any more payments, we are starting the foreclosure process. WHAT? No Loan Modification attempt? They asked about Loan Modification and were told they do not qualify. But why? You do not meet the guidelines. With more prodding and pushing this is the only answer they were able to get.

Confused, they called to find out what more they can do. We determined that the loan on the property is not currently serviced by FNMA or FHLMC which are the servicers that are required to participate in the Home Affordable Modification Program. (HAMP) Most other servicers are participating, however, see the Making Home Affordable Website for numbers to call to find out if the servicer is currently participating.

With that information in hand, Mom contacted a free HUD-approved housing counselor to see if she would still be able to qualify for the HAMP. After meeting with the HUD counselor, Mom found out the 2nd that she has on the property is not showing on her credit report and the debt is not being counted against her income! So it currently looks like she has $100,000 of equity in the property that is not really there, and a hefty payment that is not currently being counted as part of her debts!

The counselor says there is hope! Mom still may be able to get a Loan Modification! The counselor referred Mom to an elder advocate that will be able to negotiate more than the HUD counselor can! By not giving up and not taking “NO” for an answer may help Mom keep her home!

Loan Modification is not always what it appears! If you have been told by your lender that you do not qualify for a Loan Modification, be sure you take the time to explore all of the options before giving up!