Are You Giving the Bank a Bridge Loan?

Josh and I were talking today about loan modifications and Josh made an interesting comment: that loan modifications are really bridge loans, except that in the context of foreclosures, they’re temporary financing until the bank decides to foreclose. This seems especially true in the case of trial period loan modifications.

By the way, I hate it when Josh gets all prophetic about the next round of bad housing news – like a lot of you, I just want this mess to be over. Yet he’s been consistently right about a lot of things. Check out this post on gold prices.

So, back to loan modifications: awhile ago, I wrote about the connection between the Net Present Value (“NPV”) and Loan Modifications. The reason more people aren’t getting permanent modifications (aside from the servicer’s confusing paperwork) is because the bank already knows that it’s more profitable to foreclose based on the NPV calculation.

Knowing that it’s more profitable to foreclose, the bank will still qualify you for a trial loan modification to keep taking some money (some is better than none) from you as long as they can, until they finally tell you that you don’t qualify for some mysterious reason. Then they begin foreclosure proceedings.

Are you giving the bank a bridge loan until they foreclose on your house?

I think loan mods are done. Toast. Adios, goodbye. Good luck getting a permanent one. If you write to me for help finding a decent loan modification attorney, don’t be surprised if I tell you that you’re wasting your time. Why get a modification without a principal reduction that just keeps you in debt longer?

Given that people aren’t getting loan modifications, homeowners have other options: short sales, bankruptcy (even if you just file for the automatic stay and dismiss it later – a lot of people could really be more creative using a mix of these strategies to stall foreclosure), fighting a judicial foreclosure yourself, and my personal favorite: suing lenders and mortgage brokers for the bad loans they wrote and securitized.

An attorney representing borrowers in these lawsuits mentioned to me that borrowers have recouped damages in lawsuits against mortgage brokers, sometimes as much as $100,000 as claims made against their insurance policies.

Believe it or not, the cost to retain legal representation and file the lawsuit for predatory lending is about the same as hiring an attorney for a loan modification, and in the long run, could save you money. If the cost of representation each month is less than your house payment, well…..you do the math.

The goal in litigation is to get the note holder to settle for more favorable loan terms – meaning, a principal reduction and permanent rate reduction, depending on your specific situation. You’d need to get a loan audit first and then go from there.

So, if you’re tired of being jerked around by the bank and getting nowhere, maybe it’s time to push back. Don’t spend any time feeling guilty about suing the bank for money you think you owe – the bank doesn’t care an ounce about you and your family when it comes down to foreclosure. (Take a look at this post and imagine how your children would feel if they lost their home!) The bank will throw you out and not think twice about it.

The gloves are off, folks…it’s time to get serious if you want to save your home.

Related posts:

1. Video: Are You Giving the Bank a Bridge Loan? ...
2. “Trial Period” Loan Modifications are Just Another Scam I’ve been hearing rumblings lately about how many people are easily getting into “trial period” loan modifications and the occasional...
3. Federal Mortgage Program Isn’t Helping the People Who Need it the Most Many homeowners were hopeful earlier this year when the President announced the Making Home Affordable program. A key part of the...
4. Net Present Value and Loan Modifications We recently posted a blog article that talked about why loan modifications weren’t working. In that article, we talked about...
5. Homeowners are the Losers in the Bailout With foreclosures increasing and short sales increasingly difficult to get approved by the banks, many homeowners are at a loss...
6. Foreclosures Are More Profitable Than Loan Modifications? The Washington Post printed an article today stating that in many cases, it’s more profitable for the lender to foreclose...
7. The Other Reason You Didn’t Get Approved for a Loan Mod: the Pooling and Service Agreement Have you attempted to get a loan modification under the government’s Home Affordable Modification Program (“HAMP”) but been turned down?...