His lender then said it had misplaced his paperwork and he needed to resubmit all of it. Finally, last December he received word that he did qualify for a loan modification and needed to make three of the lowered payments (in January, February and March) on time and he would receive the “final-final” paperwork.
He did all of this, and then in April, the bank sent him a letter denying his loan-modification application.
There is no way he can make his house payment. He is beside himself. It is against his principles to “walk away” from this mortgage, but feels he has no choice. Do you have any advice? Last year, my daughter was fortunate to have gotten a loan modification.
Thank you for your help. None of this makes any sense, and it is a sad situation out there for so many people.
Unfortunately, your son isn’t necessarily entitled to a permanent loan modification, even if he was approved on a temporary basis. If the bank thinks it will make more money by foreclosing, then that’s what it will do. The bank doesn’t have to think about what’s in your son’s best interest, or whether his loan is affordable.
It sounds as though your son was actually approved for a temporary loan modification. Back in 2008, 2009 and most of 2010, those were granted with (and sometimes without) a brief look at the documents. But then the banks would go through the documents with a fine-toothed comb.
President Obama said that if troubled homeowners made the three temporary payments on time and in full, they would be approved for a permanent loan modification. Unfortunately, this wasn’t true. The loan-modification program has been a voluntary program, and the banks get to decide who gets a loan modification. Some banks have been slightly better than others about helping consumers, but overall the loan-modification program has helped only a small fraction of borrowers who applied.
It sounds as though your daughter was lucky. As for your son, while his wife signed over her share of the property, unless your son refinanced the mortgage (which is unlikely), she is still on the loan note. That means her credit will be trashed along with your son’s credit if he stops paying the mortgage and does a strategic default, allowing the home to fall into foreclosure. So it’s in her best interest to help your son find a solution to this problem.
While your son feels that he is betraying his principles, he may not have any choice. The economy is extremely tough and there are a lot of folks who would much rather be paying their mortgages even if the property is underwater. That doesn’t seem to be an option for him.