Nagle Law Group
Are you wasting your time pursuing a Loan Modification? It’s Time to Grab Back the Upper Hand with your Lender.
The residential real estate market is in turmoil once again. In addition to half of the metropolitan Phoenix area homeowners being “underwater”, the banking industry is again creating turmoil with the disclosure that lenders and their servicers may have been cutting corners in order to expedite the foreclosure process. On top of all of this, callers to my office continue to voice frustration with lenders and the inability to get a straight answer to the question: do I qualify for a loan modification?
Of course, this is after the homeowner is forced to stop making payments, and taking a hit on his credit, just to start the dialogue. But why even bother with a loan modification? I would like to suggest that it’s a waste of time. Let’s go back to the start of this article: half of us are underwater on our mortgages. A portion of this underwater group is that group who, in the short term, would benefit from a loan modification. But loan modifications are, in most cases, simply a short term fix for the larger issue facing the homeowner. Reducing your monthly payments doesn’t resolve the issue of being underwater. Few of us ever stay in our homes until the mortgage is paid off; what this means for most of us is that if not now, then at some point in the future you will have to ask your lender(s) for “permission” to sell your home because the unpaid mortgage is still larger than the value of the house .
I am not trying to suggest the course of action to be taken (other than the suggestion that a Loan Modification will in no way solve the long term financial challenges with your home). What I am suggesting is for all homeowners to first ask themselves the paramount question: does it make good economic sense to stay in our home? By asking this question first, then the next steps can be taken with confidence. Many homeowners I see have already been burned by the lender by not agreeing to a loan modification. These clients have already had their credit negatively impacted and now feel “forced” into having to decide to walk away. But this is the decision that should have been made first and would have led to a less stressful attempt to modify the loan. After all, if you have already decided to allow the house to go to foreclosure or to try a short sale, then you have the upper hand emotionally when dealing with the bank, for you are able to say to the bank, “either modify my loan or else you can have it back.”
Robert Nagle is a partner with Nagle Law Group, P.C., focusing on residential transactional and debt management matters, and can be reached at 602-595-3156 or robert.