Mortgage Workout or Bankruptcy?

The mortgage industry’s voluntary response to the foreclosure crisis, we will work with the borrowers ourselves, thank you very much, Uncle Sam, ( We don’t want your input unless you are sending us money.) is a smashing success.  So the mortgage industry reports.

Not so fast, my friend!

The comptroller of the currency stated the government statistics did not match those of the mortgage trade groups.

“Virtually none of the data had been subjected to a rigorous process to check for consistency and completeness.”

There is no rhyme nor reason that I can detectto figure out which mortgages, and in what situations, someone will be offered a workout option.

One client filed Chapter 7 bankruptcy after the foreclosure sale was complete.  This meant the mortgage company spent about $2,000 out of pocket for attorney fees and the other costs of holding a foreclosure sale.

Then, out of the blue, they sent a letter offering to deed the property back to my client, with a new mortgage for a lower, fixed rate, instead of the old ARM mortgage, and a lower balance.

Another client had been trying to do a workout with his mortgage company for months, getting nowhere.  Then we filed a Chapter 13 bankruptcy days ahead of the foreclosure sale.

Within a week, we received a letter from a law firm offering workout terms if my client qualified, with worksheets to fill out and submit.

The main culprit, who the heck owns the mortgage?

The mortgage securitization process chops up mortgages into bits and pieces, puts them in securitized truste which are collateral for bonds.

Finding someone with authority to actually make changes in the mortgage terms is impossible for most of my clients.

Then, some are told, well, you are behind in your payments, so we cannot talk to you about a workout unless you are current.

Others are told, well, you are current, so you do not qualify for loss mitigation (another term for workout) until you are at least 3 months behind.

Of course, being three months behind messes up your credit score.

It is important to remember that all of the people at the mortgage company, workout, loss mitigation, whatever, work for, the mortgage company.

They are not your representatives.

If you are confused, and who would not be, consult a consumer advocate with experience dealing with mortgages.  Maybe a bankruptcy can help you, maybe there are other alternatives, TILA violations, or other laws, that can help you keep your house.