If you are thinking about filing for bankruptcy, it is important to know the pros and cons of bankruptcy before you file. For most homeowners, they would either be filing under Chapter 7 or Chapter 13 provisions.
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Homeowners who are behind in payment and are seeking a loan modification needs to be vigilant.
Here is a story from the Becks about they were being forced into a corner by their bank.
Ron and Cherene had been in their home faithfully paying their mortgage for 16 years. Ron ran a successful cabinet company, so their income was more than enough to stay current on the home. But sometimes life gets in the way. Their business was hit hard by the recession. So they tightened their belts to make ends meet.
“We took every bit of our daughter’s college budget, and then we were just living on a shoestring budget.,” says Cherene. “And then our daughter got sick, and it just spiraled downhill. We weren’t paying ourselves, we were just keeping the lights on.”
Ron told us, “That’s where we got behind on the payments, because if it’s between my child and the house, she’s gonna come first every time.”
So, Ron and Cherene missed two months of payments on their house. On the third month, they tried to start paying again, but their bank refused.
“They sent the check back. That’s what infuriated me, more than anything, is that we weren’t that far behind. We were only two months behind, and I had all these side jobs I’d been working to get caught up, and in the third month I was able to send in a check. But they sent it back.”
That’s when their bank started them on a months long bureaucratic goose chase that would give Kafka a migraine. The bank refused to take the Becks’ payments for months, causing the Becks to fall even further behind, thus making them candidates for a loan modification that would add another 20 years to their mortgage. Ron struggled to navigate a labyrinth of customer service.
“They stretched us out so long. There was a house note that we were continually getting, constantly. And they kept billing the interest up on it. And we said to the bank's rep handling our account, why are we getting these notes?” And he said, “Disregard that, don’t pay any attention. Once the modification is signed, you won’t be seeing these anymore.” We were still racking up interest, but he said to disregard it because we were in this trial period.”
Then the bank started accepting the Beck’s payments again, but diverted them to a “suspended account,” without telling the Becks for months.
“They weren’t even applying none of our payments to the account, so all that money that we gave them, where did it go? Where is the money that we’ve been paying on this?”
Cherene adds, “And why were we not told that, by the people that were handling us from day one, why did they not tell us what was going on?”
Ron: “And not even mention to us that we had the option to get caught up, it was like they were forcing us into this modification, they were saying it was the modification or nothing, from the get-go.”
Their bank stalled and stalled and made the Becks sit on hold and sift through red tape for months until they had leverage over the home. Then they finally asked the Becks to come in and sign the loan modification.
“So I went to their office, and the girl that came in, another bank's rep, she let us know the truth. Bless her heart, she just sat back and she said, “This is ridiculous. I’ve never seen anything like this. “Something ain’t right here.” So I pushed the contract back to her and I said “ I’m not signing this, y’all do what you got to do. Take it into foreclosure, just do what you gotta do, cause I’m not doing this.”
The contract was patently ridiculous. The modification was structured so that an that an additional 26 years was added to the mortgage, with a meager $20 reduction in monthly payments. It was basically a whole new mortgage. They would have been 90 and still in that home.
Across the industry, banks have been getting away with usury and unfair lending. Ron and Cherene’s story is happening all across America. Legislation that was meant to give people going into foreclosure relief has been used by banks to game the system and force people to sign their life away. This needs to change. Loan modification practices have to be reformed.