Mortgage modification jitters? Seek help

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Dear Debt Adviser,
After working with the bank for more than a year, we were denied a mortgage modification. The bank is trying to put us in another program to repay the loan that we are behind on. The bank’s collection department has constantly called us throughout the mortgage modification process as if they did not know what was going on with our account. Now the collection department has turned our account over to a law office for foreclosure. We don’t understand. What can we do? We are both working now and can pay our regular mortgage. But, the mortgage modification department told us to keep paying the amount we were paying while in modification until we get in another program, and that’s what we have done. Help! We have kids and need our home.
— Angela

Dear Angela,
I understand your frustration. A year of working with your bank to solve your mortgage loan problems and ending up with nothing is terrible. On the positive side, it is good news that you are both working and can once again afford to make your mortgage payments. What you need now is assistance getting your lender to move forward with a new modified mortgage that you can afford.

Everything you have done was right. But there are some things that you didn’t do that I recommend. You contacted your lender when you knew you would have trouble making your mortgage loan payment. Good. You have followed their lead in working through the loan modification process. Also good. However, somewhere the process has broken down and it doesn’t sound like you are anywhere near a solution.

From my experience, this is not unusual. Many times a bank’s collection department operates independently of the mortgage modification department. Not only can there be little to no communication between them, but even within the modification department, a call can be passed around to the next representative that answers the phone, resulting in more delay, lack of follow-through and the sort of mess you find yourself in. I strongly recommend that you contact the Homeownership Preservation Foundation at (888)995-HOPE — the Homeowner’s HOPE Hotline — and get some professional help.

The foundation is an alliance of several HUD-approved, nonprofit, credit counseling agencies that have experience and expertise in helping families like yours cut through the red tape and arrive at a solution. Each Homeowner’s HOPE Hotline counselor has been trained and has a strong understanding of the mortgage industry. They are certified by either the Association for Financial Counseling and Planning Education or the National Foundation for Credit Counseling, and their services are free. Because they have contacts at most of the major lenders and know what information needs to be provided, they are much more likely to get to a final and favorable decision than the uninitiated consumer. Be prepared with all your original mortgage loan information and any paperwork that you have concerning the loan modification that was denied. Your credit counselor will review your situation and work with the bank on your behalf to iron out the details of what the bank can offer to ensure you remain in your home. Seeking assistance from a counselor helps to even the playing field with your mortgage lender.

From what your lender is telling you, it sounds as if you may qualify for a program that will allow you to avoid foreclosure and pay what you owe on your mortgage. That is, if they can complete the paperwork on their end and get it approved before the other arm of the bank forecloses on you. Your counselor will help you shorten the process. Be sure to stay in communication with your counselor and your lender until you have reached a resolution that is workable and affordable for you.

No single solution works 100 percent of the time. So, my last bit of advice is that if your lender fails to come up with a modification and stop the foreclosure process soon, you should call your U.S. congressman and senators. They should be happy to help make a call and wake someone up at the bank. At the same time, I’d start looking for a competent and experienced attorney to review your mortgage documents and apprise you of your legal options.

Good luck!

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