Do we REALLY need to be destitute and in default to be approved for a Mortgage Loan Modification?

by Richard
(Santa Barbara, Calif)

You have stated earlier that they will look at accounts that are in default, but if you're still
making mortgage payments on time, they will essentially put you on hold. I wish you had more
documentation about this. Can we rely on the info given above so we know its better to stop
making the payments?

Mortgage Loan Modification Answer:

It is illegal for anyone to tell you to go delinquent in order get approved for a mortgage loan modification.

It is well known that banks give less priority to loan modification applicants who are still current on their payments. It is not impossible to get approved for a loan mod while current on your mortgage payments, but it seems that banks tend not to think that you are in hardship if you are still able to make your payments. Going delinquent does have the consequence of ruining your credit, and only you can determine if it's worth it. Of course, credit repair is always an option, and your credit can be restored.

You may be in imminent danger of default, but if you are still making your payments, your loan is still a performing asset for the bank.

If you are currently using your savings and cash reserves to pay your mortgage, it is your choice if you want to deplete them first and then go delinquent when you absolutely have no way of making your payments anymore. That is your choice. Whether it's a wise choice or not, it's up to you.

The only way to really find out is to go ahead and apply for a loan modification while still current on your payments and see what your bank says. You will have an opportunity to re-apply if denied.

Since you are in California, you can apply through a No Upfront Fee Loan Modification Company and risk no fees upfront.

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Jul 29, 2011
There is another option
by: Anonymous

Due to the wonderful current status of banks in this great nation, many families are struggling with their finances. They find that many companies aren't very understanding of their current circumstances. Even when those circumstances are extenuating!! Many times these families were doing great until some uncontrollable and unforeseen chain of events happens. Then they are in a situation they weren't prepared for. Often these families turn to the banks hoping that someone there will be sympathetic to their circumstance, only to find out that usually they aren't. Many times they are promised a loan modification and after making a few payments, they are informed that they no longer qualify and that their home is going to be foreclosed on. It is a very sad situation and it is happening all over the place every day. The statistics are horrifying!! There are a few companies out there that are offering these homeowners a short sale of their property, but how does that really help anyone??!! These families purchased these homes because they love them and have made memories that are irreplaceable there. The best bet is to get an attorney that actually knows what he is talking about when it comes to foreclosure defense. The trouble there is that with all the changes constantly being made to those current laws, most lawyers are clueless!! There is a company I have found that is actually working with a network of attorneys to address this very issue. They are acting as the liaison between the homeowner and the attorneys to make sure that all the needs and concerns of the homeowner are being met without it costing the homeowner some crazy amount of money. It is companies like this that need to be recognized for all they are doing to fix all the wrong being done by the banks. This particular company is located in Texas but is nationally accredited and has a network of attorney's across the country. They are called Foreclosure Rescue. Their website is and they?ve been helping countless families. I have personally seen them put banks into submission!!! They are definitely a company to look into if you are experiencing any trouble at all with your mortgage. Even if you think it is too late, they are really good at what they do and want to keep as many people as possible in their homes!

Apr 25, 2011
The Current state of Loan Modifications
by: Dean

The new guidelines for the HAMP, HAFA, HUMP are published at Basically, the loan servicers have deadlines by which to respond. The guidelines say that you do not have to be in default, but in imminent danger of default. To further strengthen these guidelines the Federal Reserve and the Office of the Controller of the Currency/Office of Thrift Supervision entered a "cease and desist" order on April 13. Basically this order said the loan servicers will stop loosing documents, establish procedures to ensure all applications are responded to, establish internal controls of the processes, establish a single point of contact for modifications, stop "manufacturing" missing loan documents and falsifying signatures in court presented documents. Read the orders here:

Look at the list and select the Order entered for your loan servicer.

When using savings to pay mortgage, my recommendation is to NEVER use retirement funds - 401K, IRA's, 403b etc. as these are protected assets from creditors in all cases. Loan servicers can NOT require you to use these as a condition of modification.

Hope this information is helpful.

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