Wanting to Stay in Your House Can Lead You to Foreclosure

July 2, 2012 at 1:06 pm , by Russell Bradchulis

A new report from YouWalkAway.com indicates that lenders are taking longer to initiate and to complete a foreclosure. So that means that homeowners can stay in their house longer while the bank is taking their sweet time to start or complete a foreclosure. This seems like a great deal for the delinquent homeowner who already undoubtedly has a lot of other obligations they are trying to meet, and the relief of not having to make a monthly mortgage payment is a very welcome one. But the unintended consequence of banks taking longer to complete a foreclosure is that it will become less likely for a homeowner to get a loan modification as their delinquency increases.

They will stay in their house and not make their mortgage payment. At the same time their credit is going to tank even further and the lender is going to become less likely to give them a loan modification because of their delinquency. This delinquency has also increased the arrearage. There is a distinction to be made between the delinquency and the arrearage. Delinquency shows the bank that the borrower has a history of not making payments. That kind of shabby payment history is one contributor to the bank deciding to not give that person the loan modification. If they have shown in the past that they cannot make that payment they will likely not make that payment in the future, even if it is lower than the current one they should be making now. That is the bank’s perspective. The arrearage comes into play as the the delinquency continues. As the borrower continues to not make payments the amount that they are now behind increases. This is called the arrearage. So the borrower is actually given a double whammy as far as their ability to get a modification because they are proving to the bank that they are unwilling or unable to make a payment over time, and also because they are allowing their arrearage to increase. These are 2 of the main factors that prevent people from getting loan modifications.

So while on the surface it seems like it is actually helpful to homeowners to have the bank take longer to foreclose, it will actually hurt homeowners if and when they eventually seek a loan modification. At that point the homeowner should be looking for other alternatives to foreclosure. In most cases the best scenario for a homeowner is a short sale to get them out from under the debt. And it is best to seek out a qualified and competent 3rd party to handle your short sales. For more information on how to make your short sale easier, follow this link!

 

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