Q: Yes, I am definitely in Loan Modification Hell, and as a bible-reading Christian, I know what that is supposed to look like.
In 2006, I built a $1 million home, paying $650,000 in cash. At the time I was a top salesperson in my industry, earning hundreds of thousands of dollars each year. Starting in mid-2009, homes in my neighborhood started going into foreclosure or being sold as short sales. The $1 to $3 million homes my neighbors owned started selling for $350,000 to $650,000, wiping out all my equity.
I had a 30-year fixed-rate mortgage at around 6.75 percent. I decided to refinance into a new 30-year loan at 4.65 percent. After two months, the new lender told me that I couldn’t qualify for a refinance because I had previously refinanced my loan and the new finance rules precluded me from an additional refinance.
I lost my great job and was unemployed for awhile. I got another job selling, but I can’t really make the same kind of living as before. And, I apparently don’t qualify for a loan modification because I either make too much or too little, depending on whoever I speak with on a particular day.
My savings have dwindled from $100,000 to $5,000. I can’t get a loan modification. I’ve lost $650,000 in equity thanks to the foreclosures in my neighborhood and can’t refinance my property due to some obscure rule about how many times you can refinance your mortgage.
It seems to me that the big banks aren’t really helping anyone out. What are our real rights as homeowners and taxpayers?
A: I’m sorry to say that as a homeowner and taxpayer, your rights are quite limited. Despite the much-applauded governmental attempts to get banks to modify loans and help borrowers, the banks are not legally required by anyone or any regulatory agency to help you. There are encouragements or inducements in place to give banks an incentive to work with their customers, but there is no legal requirement.
And in many cases, those incentives are not enough to get the banks to help a borrower out.
You probably don’t qualify for a loan modification because you can still afford to pay your mortgage, even if the cash you have on hand is almost gone. If you can afford to make your payments, even if money is tight for awhile, then you should do that and wait until the rest of the foreclosures in your neighborhood are sold and prices begin to rise or stabilize.
If you can’t afford to stay in the property, then you’re going to have to look at selling the home either for what you owe or in a short sale. You could also do a deed-in-lieu of foreclosure, or finally, a foreclosure to get out of the property.
I’m sorry that you have found yourself in this most difficult situation. If you feel as though you were legally precluded from getting a loan modification, and that you meet all of the necessary qualifications, you can file a complaint with the OCC, at www.helpwithmybank.gov.
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