The Covid 19 pandemic pushed many homeowners into delinquency.  Most were sent into forbearance with a promise of a permanent solution….however, the contrary actually happened.  When the pandemic foreclosure moratorium ended, mortgage servicers took a different aggressive approach which has caused foreclosures to skyrocket.  Here is what’s behind it all….

1. The foreclosure moratorium was just extended way too long!  The Federal government kicked the can down the road, with no end game solutions set up.  Homeowners fell further and further behind.  The banks and mortgage servicers felt cheated by the system, so their patience and cooperation with loan workouts has been very limited.
2. The home equity explosion from 2020 to 2023 has pushed many banks to say “Sell and pay us off in full”….”Or get out”.  Remember that this was definitely not the case during the 2008 to 2012 Financial Crisis when underwater mortgage debt ravaged the market.
3. The recent incredible rise in mortgage rates has killed the mortgage business on the front end.  The revenue drought on the front end of the market has forced a hard core collection game.
4. Unlike the 2008 to 2012 Financial Crisis, there are no set government programs for loan modifications.  There is absolutely no incentive for the banks to participate….it actually costs them a tone of money.

So what are the options for leverage on getting a loan modification done?  The CFPB has implemented a series of rules in regards to foreclosure and the independent state laws regarding mediation also.  The roadmap on both of these is not very clear…pretty complex stuff that leaves most homeowners in the lurch.  Feel free to reach to our office at 414.737.7116 for free insight on this topic.

The perils of Chapter 7 bankruptcy and loan modifications

The Great Recession that wreaked financial havoc on so many families, has left deep battle scares. Some of the most complex scars surround Chapter 7 bankruptcy and home ownership. Many home owners have been ill advised on the actual repercussions of mortgage loans and discharged debt. Since the bankruptcy law reformed in 2005, exemption of independent debts during the bankruptcy process was made nearly impossible…..mortgage debt is NO exception. Though reaffirmation of the debt is an option, it is nearly impossible to achieve successfully. Many clients that come to our firm, do not realize that their mortgage debt was discharged along with their other debts. Many are misinformed by their bankruptcy attorney, since this is an area of complex conflict. Most bankruptcy attorneys realize that the mortgage debt is a nightmare to handle throughout the process, so they stay away from it. Many attorneys will say “just work something out with your lender” or “just continue to make the payments”…this is where the real nightmare for the home owner begins. First and foremost, you must understand that the debt is gone and a zero balance is due. You still have title rights to the property, which secure your right to sell it. The lender must still foreclose to remove you from title…they reserve the right to do that at any time. Through the recession and the long recovery period, many lenders were hesitant to foreclose since property values declined so rapidly. Serious money was due to lost, so many lenders opted to keep people in their homes. Many lenders sent collection notices on payments due…some are still playing this game. They want you to make payments on “loose end” agreements. Offers that contain ambiguous, deceptive terms and high balloon payments run rampant. Most agreements put clients in a worse position financially than prior bankruptcy and ruin any chance of a pure recovery. Lenders tend to trap clients in this position because it enhances the ability to sell the debt at a very high profit margin. You must remember that the trade value on distressed mortgage debt is worth a lot more than servicing the debt itself. Many people find themselves making payments for years into a subsequent black hole, since they are deceived and sold on a “handshake” deal by their lender. Though primary banks like B of A and Wells Fargo are guilty of the described actions, the problem has spiraled out of control in the no bank service sector. Firms such as Ocwen and Nation Star have a long list complaints against them and have been sued many times over. Though achieving a real loan modification is the goal of many home owners post-bankruptcy, the recording of the new note and agreement is HIGHLY important. If the loan modification is not recorded, it is not valid. Regardless of what any attorney, banker, counselor or your Uncle Jerry may advise…the new loan modification MUST be recorded to be valid. Otherwise you run the risk of the lender swooping in and foreclosing at any time…regardless if payments are mad or not on the alleged modification deal….it could be 20 days from now or 20 years from now. With real estate values rising rapidly, many people have been trapped in modification deals that are worthless…since the motive of the lender is to foreclose. As you can see, this is a very complex issue that should be handled solo. We have handled hundreds of such cases successfully and are here to help – 877.777.2217.