Modification of a Home Loan: A Case Study.

31 Oct Modification of a Home Loan: A Case Study.

Modification of a Home Loan: A Case Study
Last February I wrote a post about a retired woman’s struggle to keep her house, and how the mortgage company refused to grant a modification. Actually, they never refused, but were so darn incompetent in processing the papers and making any determination that the foreclosure marched on, and I had to file a Chapter 13 bankruptcy to stop it.
Well, I filed the bankruptcy and an adversary complaint to attack the loan. But, that didn’t solve the problem. Basically, the loan on this lady’s home called for monthly payments that were more than she could possibly afford. When you are living on social security of $1200 a month and the mortgage payment is $818 a month; the budget just won’t work.
In our district (the Eastern District of California), if you are behind on your mortgage when you file a Chapter 13 bankruptcy, those payments must be made through the plan. So, in this case, she was obligated to make the monthly mortgage payments through the plan.
The plan I filed called for minimal mortgage payments, and was objected to for failing to adequately pay the on-going mortgage. The trustee gave me about six months to sort this out, but my continuing efforts to get the mortgage modified failed, and the adversary didn’t help much. (It did start a dialogue, but the attorney couldn’t stop the mortgage company from pushing for full payments while we negotiated or litigated the complaint.)
The judge, reluctantly, dismissed the chapter 13 case for failure to confirm a workable plan.
The foreclosure went back on calendar, and I picked up my efforts to help get a modification. Well, the loan company appeared to be working with me, and they got the foreclosure put off for a month. During that month, I submitted a new set of papers (they had lost all five of the previous sets), and called every two days to see how the process was coming along.
The foreclosure sale is set for Monday, November 3, and as of October 29th, the modification branch of the loan company has promised to have an answer in 30 to 60 days! And they told me that neither they nor their attorney can stop the foreclosure sale.
So, I can file another chapter 13 on Monday morning to stop the sale, and hope that the modification comes through before I get thrown out of court again.
In this case, however, my client has given up. Although she loves the home she has lived in for years, the stress of this process has worn her down. Since I can’t promise that she’ll get the modification, or that it will be something she can afford, she’s decided to walk away.
After the foreclosure sale, I’ll be able to get her at least thirty days to move, and that’s what she’ll have to do. The mortgage company will get this lady’s home, a house they won’t be able to sell in today’s market for anything close to the amount of the mortgage or the costs of the foreclosure and sale. But they won: they will get the house back.

Last February I wrote a post about a retired woman’s struggle to keep her house, and how the mortgage company refused to grant a modification. Actually, they never refused, but were so darn incompetent in processing the papers and making any determination that the foreclosure marched on, and I had to file a Chapter 13 bankruptcy to stop it.

Well, I filed the bankruptcy and an adversary complaint to attack the loan. But, that didn’t solve the problem. Basically, the loan on this lady’s home called for monthly payments that were more than she could possibly afford. When you are living on social security of $1200 a month and the mortgage payment is $818 a month; the budget just won’t work.

In our district (the Eastern District of California), if you are behind on your mortgage when you file a Chapter 13 bankruptcy, those payments must be made through the plan. So, in this case, she was obligated to make the monthly mortgage payments through the plan.

The plan I filed called for minimal mortgage payments, and was objected to for failing to adequately pay the on-going mortgage. The trustee gave me about six months to sort this out, but my continuing efforts to get the mortgage modified failed, and the adversary didn’t help much. (It did start a dialogue, but the attorney couldn’t stop the mortgage company from pushing for full payments while we negotiated or litigated the complaint.)

The judge, reluctantly, dismissed the chapter 13 case for failure to confirm a workable plan.

The foreclosure went back on calendar, and I picked up my efforts to help get a modification. Well, the loan company appeared to be working with me, and they got the foreclosure put off for a month. During that month, I submitted a new set of papers (they had lost all five of the previous sets), and called every two days to see how the process was coming along.

The foreclosure sale is set for Monday, November 3, and as of October 29th, the modification branch of the loan company has promised to have an answer in 30 to 60 days! And they told me that neither they nor their attorney can stop the foreclosure sale.

So, I can file another chapter 13 on Monday morning to stop the sale, and hope that the modification comes through before I get thrown out of court again.

In this case, however, my client has given up. Although she loves the home she has lived in for years, the stress of this process has worn her down. Since I can’t promise that she’ll get the modification, or that it will be something she can afford, she’s decided to walk away.

After the foreclosure sale, I’ll be able to get her at least thirty days to move, and that’s what she’ll have to do. The mortgage company will get this lady’s home, a house they won’t be able to sell in today’s market for anything close to the amount of the mortgage or the costs of the foreclosure and sale. But they won: they will get the house back.

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Douglas Jacobs is a California bankruptcy attorney and partner in the Chico law firm of Jacobs, Anderson, Potter & Chaplin. Since 1988, Mr. Jacobs has taught Constitutional law and Debtor-Creditor/Bankruptcy law at the Cal Northern School of Law. He has served as Dean of Students since 1994. He is a frequent lecturer on the subject of consumer bankruptcy law, and has spoken at both state and national levels.
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