It's unfortunate that a good idea such as mortgage modifications has gone bad in the hands of greedy mortgage lenders. What was designed to give homeowners facing foreclosure a chance to save their homes, has in many cases done more harm than good.
Below are four ways that so-called mortgage modifications are harming many borrowers trying to fight foreclosure:
- Some of the temporary mortgage modifications given to homeowners facing foreclosure are nothing more than pacifiers used to calm a jittery debtor. Borrowers are promised that their applications for a permanent mortgage modification is being reviewed and many borrowers wait hoping that they will avoid foreclosure with a permanent modification, but that rarely happens. What does happen is that many of these hoping and waiting homeowners end up in foreclosure anyway.
- Mortgage companies do not stop their foreclosure process just because a debtor is in a temporary mortgage modification. Even if their mortgage modification application is being reviewed they have been known to foreclose on the property even before they make a decision. This not only harms the borrower financially but causes untold amounts of stress and grief.
- Even if the mortgage company has not foreclosed on the property by the time they come to their decision, if they reject the mortgage modification application the borrower will be in even more debt. Once a permanent mortgage modification is rejected, the debtor must then pay back all of the months they missed while paying a reduced mortgaged during the temporary modification phase.
- Many debtors use the money they save during the temporary mortgage modification phase to pay other debts such as credit cards . This is really unfortunate because if the debtor is not approved for a permanent modification they can still lose their home to foreclosure if they don't payback all of the unpaid mortgage payments immediately.
Fortunately for debtors who have been harmed by these temporary mortgage modification programs, filing Chapter 13 bankruptcy may help them save their home from foreclosure and discharge other debts. Chapter 13 bankruptcy will allow the debtor to repay delinquent mortgage payments overtime while avoiding foreclosure.