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Should I Try to Negotiate a Deal with my Mortgage Company to Stop Foreclosure?

Many economists believe that the Great Recession of 2009 and 2010 was caused by the real estate crash that caused many home values to drop dramatically.  For most of the early 2000’s mortgage money was fairly easy to come by home prices skyrocketed because more and more people took out mortgage loans - often beyond their ability to pay.

When prices crashed, many homeowners found themselves owing tens of thousands of dollars more than their homes were worth.  This “negative equity” coupled with job losses and reduced household incomes has left many hardworking families facing foreclosure and little incentive to try to save their homes.

In 2009, some members of Congress introduced legislation that would allow bankruptcy judges to modify the terms of mortgages. Under these proposed laws, bankruptcy judges could reduce principal balances to an amount equal to the value of the home and could reduce monthly mortgage obligations.  Not surprisingly the mortgage industry fought these proposals and they ultimately did not pass into law.

Mortgage Negotiation: Dead on Arrival

During the debates in Congress about the nation’s mortgage crisis, the mortgage industry promised that it would make a concerted effort to negotiate in good faith with homeowners to modify mortgages.  The federal government also created a modification program called the HAMP Program that provided guidelines for mortgage lenders to follow in modifying loans, while retaining certain federal guarantees.

It has been our firm’s experience that the mortgage industry has not been willing to negotiate in good faith.  Statistically very few mortgages have been modified nationally and our clients report very little success in this type of negotiation.

Our clients advise us:

• that lenders ask for the same documentation over and over and delay making any decision
   
• that lenders will start the foreclosure process and promise to consider a “stop foreclosure” proposal, only to deny the deal a day or two before the actual foreclosure sale
   
• in the few cases where deals are proposed the terms are very restrictive and offer little benefit to the homeowner

If your house has been scheduled for foreclosure, there is no reason not to try to negotiate a deal with your lender.  However, we recommend that you set a “drop dead” date whereby you either have a deal or you do not.  This date should be no less than 1 week before the scheduled foreclosure.  Chapter 13 will stop a foreclosure but you do not want to find yourself scrambling to gather the information you need to start your Chapter, or worse, to struggle to get your credit counseling certificate.

This website copyright 2011 by Ginsberg Law Offices, P.C.  All rights reserved. No reproduction of the original content on this site without express permission of the site owner.  Please direct inquiries to Jonathan Ginsberg, Ginsberg Law Offices, 1854 Independence Square, Atlanta, GA 30338.