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In Fear of Foreclosure?

April 2011 - By Catherina Chang Watters | Mark Nejame contributed to this article.

By now, most homeowners facing foreclosure are aware of the federal government’s Home Affordable Modification Program (HAMP) which offers a way to avoid foreclosure for those who wish to keep their homes and meet certain eligibility guidelines. HAMP has come under public scrutiny for disappointing results in terms of homeowners who have obtained successful modifications and the numerous complaints that Lenders are inconsistent in their treatment of applicants. The program has rules intended to provide borrowers with a timely decision on whether they are approved for a modification, but it does not provide a way to enforce those rules. Unfortunately, this has caused serious problems for many homeowners in fear of losing their homes.

According to the latest figures from the Treasury Department, as of the end of February 2011, there were just over 557,000 active permanent HAMP modifications in place. This is much less than the original 3-4 million foreclosures the program was initially supposed to stop and only a fraction of the total 8-13 million expected by the end of 2012, which will mark the conclusion of the program.

A wave of law suits have been filed against several of the nation's largest mortgage servicers. Allegations include:

  1. Starting foreclosure proceedings before evaluating whether or not to grant a loan modification
  2. Not responding to applications and requests for assistance
  3. Incorrectly telling borrowers they needed to be in default before they could get a modification
  4. Rejecting applications without a reasonable explanation
  5. "Dual tracking" or proceeding with a foreclosure while a borrower is under review for or in the process of completing a loan modification
  6. Systematically slowing or thwarting a homeowners’ requests for a modification
  7. Providing In-House modifications or refinancing plans while the homeowner is under the impression they are receiving a HAMP modification.

While under review for a modification, it is not unheard of for homeowners to receive calls or letters in the mail offering refinancing options. This results in complete and total confusion for the distressed homeowner who is already desperate to keep his home and under extreme pressure to take whatever options are offered to him. In many of these cases, the homeowner ends up signing an agreement that reduces his monthly mortgage payment, promises a principal forbearance, but then stretches out the loan term for another 10-20 years, so in reality he is paying for the forbearance, plus extra fees and costs associated with the refinance, and perhaps has even agreed to a higher interest rate. The homeowner has merely bought himself some extra time, but has not improved his financial situation. Many times, his situation is now worse.

So what is the answer? The best strategy is to contact an attorney who has had success negotiating HAMP modifications and inquire about your legal rights. If you are struggling to make your mortgage payments and your family is suffering as a result, you may be a perfect candidate for HAMP. It is not necessary for you to commit financial suicide by exhausting your family's savings and maxing out your credit cards so you can put food on the table and pay the bills. Trust an experienced attorney to help you navigate the hazards of the modification process safely and effectively. If you want to save your home, help is here.

Catherina Chang Watters, Esq.
Mark NeJame contributed to this article