Mortgage modifications & institutional memory

Given the difficulty that the lenders and servicers have in keeping track of the endless documents they request of homeowners seeking loan modifications, I’ve wondered about what would happen if a loan modification was really granted. How would institutions who can’t keep track of the payments you make or the papers you submit keep track of a loan modification made with so much less formality than the original loan?

Got the answer last week. It was what I suspected. They don’t keep track of the loan modification.

This came out in two different bankruptcy cases in which the debtors had secured a loan modification before filing bankruptcy. In each case, the lender filed a proof of claim in the bankruptcy case based on the original, not the modified terms.

So, Big Bank has not updated its computer system, yet or at all, to reflect the new deal. What’s to think they will be any better at retrieving the fully executed loan modification agreement than they were at keep track of the application to modify? Both from the perspective of a lawyer who can expect to handle such cases and from the view of each borrower who got a precious modification, it’s pretty scary.

Related posts:

1. How To Punish Big Mortgage Company? Full Disclosure In All Ohio Cases Of Funds Received
2. Will the Chapter 13 Trustee Allow Me to Modify My Mortgage If I Can Get the Mortgage Company to Offer One?
3. Helping Families Save Their Homes in Bankruptcy – Mortgage Loan Modifications For Homeowners in Chapter 13