Loss Mitigation | Helping Homeowners with High Interest Rates
In 2008, the US economy suffered a subprime mortgage crisis, triggered by a large decline in home prices after the housing bubble collapsed, leading to mortgage delinquencies, foreclosures and the devaluation of housing-related securities. As the economy struggled to recover, homeowners were left to deal with high interest rates and declining home values. Recognizing the need for clarity, the Bankruptcy Court for the Western District of Pennsylvania created a Loss Mitigation Program in late 2012, which offers homeowners the potential for mortgage modification in a program overseen by the Court.
The Loss Mitigation Program was created to provide clarity, while essentially “fast-tracking” the process for both the borrowers and the lenders. Following the “mortgage meltdown” in 2008, many mortgage companies created internal mortgage modification programs. However, many homeowners find the process overwhelming as they are faced with an endless “paper chase” and little or no results.
According to the Special Inspector General for the Troubled Asset Relief Program (SIGTARP) watchdog group, individuals who chose to participate in the government sponsored Home Affordable Modification Program (HAMP) program are defaulting at an “alarming rate”. HAMP was designed to help homeowners to modify their FHA-insured mortgages, reduce payments and avoid foreclosure. The watchdog group reported that as of the end of March 2013, over 312,000 program participants have defaulted on their mortgage – despite their enrollment and approval into the HAMP program. The US Treasury is unable to provide a single reason as to why the default rate is so high; however, several participants report that they only received a temporary modification to their mortgage during their trial period.
For the most part, it seemed as though the mortgage creditors wanted to provide some relief and the homeowners were looking for a lifeline, but the two interests could not come together for one reason or another. You may be asking yourself, how a homeowner can find permanent relief that will allow them to keep their homes, rather than delaying a default? The Loss Mitigation Program was created in response to these chronic modification problems.
Here’s how the Loss Mitigation Program works: 1. A client files for protection under the US Bankruptcy Code to protect all assets and likely shed other debt in an attempt to focus available disposable income toward retaining residential real estate.
- A licensed bankruptcy attorney would then file a motion to enroll into the Loss Mitigation Program. The mortgage modification is essentially under the bankruptcy umbrella. Your assets and financial interests are protected while the modification is sought under the Court’s supervision.
- After the loss mitigation application has been approved, the court signs an Order with rigid guidelines for the borrower and the lender. As a result, your mortgage company must operate in good faith examining the current status of your mortgage and your mortgage modification packet. Deadlines are clear for the lender and the borrower. These rules and directives make the mortgage modification process transparent for the borrower.
- ALL correspondence goes through an electronic “portal” which the Court can monitor and ensures all parties are acting in good faith. The portal streamlines the process, reduces costs, and saves time for all parties.
The rules indicate that the loss mitigation period should be usually complete within sixty (60) days, unless the borrower or lender seeks additional time. The deadlines and timing are crystal clear. Borrowers and lenders are highly discouraged from “dragging their feet” as there could be serious consequences.
Each mortgage situation is quite unique. Results are not guaranteed and vary based upon each individual situation. “Success” in the Loss Mitigation Program is a relative term. In other words, the result of the program could be the realization that the homeowner simply cannot afford the property under any reasonable circumstances, resulting in a Deed in Lieu of Foreclosure, or surrender.
When a homeowner enters the Loss Mitigation Program, he or she should expect a clear, expedited decision from the lender so they can move on with their life one way or the other. Nothing is more frustrating than being in mortgage “modification limbo” for months, if not years. The Loss Mitigation Program creates a level playing field for the homeowner, where you can make a realistic decision on residence affordability.
If you are interested in learning more about mortgage modification and the Loss Mitigation Program, contact Foster Law Offices, LLC via phone at 814-724-1165 or visit us online at www.mrdebtbuster.com to schedule a free consultation. A licensed Pennsylvania attorney will sit down with you to review your situation and determine whether bankruptcy and potentially the Loss Mitigation Program is an appropriate solution.
We have offices conveniently located in Erie, Meadville, Franklin, Mercer, New Castle and Warren.
Disclaimer: Foster Law Offices, LLC is a debt relief agency, helping people file for relief under the United States
Bankruptcy Code. The information contained in this article is provided for informational purposes only, and should
not be construed as legal advice on any subject matter.