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Mortgage loan modification not perfect, but is viable option

Purchasing a home is an exciting milestone in life. Before buying, home seekers are put through a strenuous process by banks to see if they qualify for a loan. If they do qualify, then they can purchase their home. However, though the mortgage payment may be manageable at first, unexpected life events can render the payments difficult to make. The loss of a job, a cut in wages, or increased expenses from health-related issues may all affect a family's ability to pay their mortgage bill.

For such people, loan modification may be a good option if a borrower is eligible. In fact, a recent case in a federal circuit court of appeals suggests that lenders actually have to make a permanent offer once the borrower has successfully completed the trial period associated with the loan. The case stems from a situation where one man and a separate couple each applied for modifications with Wells Fargo Bank. Although both the man and couple completed their respective trial periods, the Bank offered neither the option to make it permanent. At least in the couple's case, this meant the bank foreclosed and sold the home.

The court felt that result was not fair, especially considering the parties paying the mortgage had met their end of the bargain during the trial period. For that reason, the court clarified the requirement to offer the permanent modification in a victory of sorts for the borrowers.

When a family falls behind on its mortgage payments there are several options that can be considered to prevent foreclosure and keep mortgage payments manageable. Perhaps the best option for homeowners to avoid foreclosure is to seek a mortgage loan modification. To obtain a modification, the homeowner must show economic hardship in the form of decreased income or increased expenses. Often, lenders work with borrowers to reach a modification agreement, but difficulties may arise.

An experienced attorney can help a borrower negotiate with a lender to ensure the modification is in the borrower's best interest and that it is timely made. Delaying seeking assistance may lead to foreclosure, which means losing the home, destroying credit, and making life extremely difficult. Those facing difficult mortgage payments owe it to themselves to seek help so they can stay on their feet and work towards financial success.

Source: Bloomberg Law, "Bank had to offer mortgage modification to debtors who completed trial period," Bernard J. Pazanowski, Aug. 8, 2013