Picture this scenario: you were involved in a foreclosure action some years ago, but it went nowhere. You applied for a modification, but it didn’t happen for you. You never retained an attorney, you never appeared in the action, but nothing really happened. All of a sudden, you get served with a notice discontinuing the action. You know in your heart that it’s not over. After all, you still owe the money you borrowed and you wouldn’t imagine that the bank would just forget about it. It sure seems like they forgot about it, though.
You’re in a constant state of flux. You have this foreclosure hanging over your head all day and the stress is causing you to be up all night. The real estate sharks are still all over you, calling and mailing and knocking on your door. Your credit is still completely shot and you’re feeling the effects of that. You really wish this thing would just go away, but of course, it’s not.
Then, out of the blue, you get something in the mail. It’s a blank modification application from your lender. Fill it out and you’ll be considered for a modification, they say. They’ll knock off a bunch of interest, they say. It doesn’t matter that you didn’t qualify before; if you apply now, you can avoid foreclosure, they say.
Or, even better – you get offered a modification. No application needed. It’s a “streamline” modification, they say. “Look at these affordable terms,” they say. If you can make these three trial payments, you’ll be fully modified, they say. Once you sign the modification agreement and send your payments in, you can avoid foreclosure, they say.
They say a lot of things.
Why are they doing this now, after all these years? This modification that they offered you now after 5 years is the one you would have gladly taken at any point along the way. It almost seems too good to be true.
It’s a trap. Don’t fall for it.
When things seem too good to be true, it’s probably because they are. Think about when you first applied for a modification. What did the bank say? They probably said that you have insufficient income to support a modification. They cited their underwriting standards and for one reason or another, you didn’t qualify. That was after you submitted round after round of documents to the bank’s attorneys. Every time they were supposed to make a decision, they asked for more documents. It was a nightmare.
But now, without submitting anything, you’re approved? How could that be? What happened to the underwriting standards? You’re not making much more money than you were before (maybe you’re making less!) and the indebtedness has gone up over the course of the last few years. So why did they offer you this modificatio
They don’t want you to get a free house.
Now, as I explained here, not everyone’s situation is going to lead to a free house. It’s rare. It does happen, though. If you haven’t paid your mortgage in what seems like forever, and the foreclosure action is going nowhere fast, the statute of limitations is running. Once the statute of limitations runs, you can get a free house.
If you agree to pay a modified loan, the statute of limitations no longer applies.
It can be argued that applying for a modification restarts the statute of limitations.
The bank’s statute of limitations problem becomes your free house. Do the math – even if you get some crazy modified term, it’s better than the bank losing the mortgage altogether. If you default, they can start a new, clean foreclosure action with no statute of limitation problem. Modification in this case benefits only the bank.
Don’t fall into the trap.
Jason Sackoor is a real estate attorney in Queens, New York concentrating on foreclosure and real estate litigation. You can check out his website, e-mail him, or call his office at (718) 767-3333 to set up a consultation.