Loan modification craters

25 Aug Loan modification craters

Loan modification is an obvious alternative to foreclosures that leave banks owning lots of houses. Banks get a loan that is performing, even if at a lower dollar value and borrowers stay in their homes. One would think that truism would have penetrated the corporate thinking of lenders. However, I have no evidence in support of that proposition.

I wrote earlier about a client who had actually been offered a loan modification, the first one I had actually seen. When the final papers arrived for signature, they came burdened with new and impossible conditions: the borrower was to pay off IRS liens junior to the loan being modified and was to obtain the signature of officers of the two junior mortgage lenders, agreeing to the modification. Huh?

The best one can say for this fiasco is that the entity handling the loan modification is understaffed or under prepared. I can’t find that the lender’s offer has worsened my client’s position, but in the end, the problem is unsolved. Bankruptcy undoubtedly awaits.

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Cathy Moran, Esq.

I'm a certified specialist in bankruptcy law (California State Bar Board of Legal Specialization) practicing in the San Francisco Bay Area for more than 30 years. In addition to practicing bankruptcy law, I train new practitioners at Bankruptcy Mastery.
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