So you’ve finally been approved for trial mortgage modification after fighting with the mortgage lender for months. But what does that trial mortgage modification really mean to the future of your home and the prospect of avoiding foreclosure .
Here’s a reality check:
When a mortgage company says that they are giving you a temporary mortgage modification what they are really saying is that “after 3 months of sticking to these terms we may not approve you for a permanent modification. If you are not approved for a permanent modification you will be liable for all late payments plus fees and we’re probably going to foreclosure on you if you don’t pay up.” What fees? That’s where the problem lies for homeowners in trial modifications. Let’s say you’ve been paying on your mortgage faithfully for the past 15 years but your spouse recently lost their job.
The mortgage company says “okay, for three months we will reduce your $2,000/month mortgage to $1,000/month and if you are approved for a permanent mortgage modification, then it will stay that way.” However, what often happens is that after three months the mortgage lender comes back to the previously good standing homeowner and says, “Oh you weren’t approved. You’re now $3,000 in the hole, plus you owe us a lot of fees, please pay up now.”
Homeowners who are smart will plan for the possibility that their permanent mortgage modification will not be approved. Do you have the money to repay the delinquent amount? Are you willing to file bankruptcy? If you filed a Chapter 13 bankruptcy , you would have the opportunity to pay back the delinquent mortgage payments over the course of 3 to 5 years plus keep your home. Be smart and prepare for the worse.