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BY MAXWELL LAW FIRM, PLLC

What is a loan modification?

A Loan Modification is a permanent change in one or more of the terms of a mortgagor’s loan, allows the loan to be reinstated, and results in a payment the mortgagor can afford. Basically, its the restructuring of a mortgage for a borrower who faces a long-term financial problem but can demonstrate the ability to meet the modified payment terms.

What is foreclosure?

The legal process by which a mortgagee, or other lien holder, usually a lender, obtains a termination of a mortgagor’s equitable right of redemption, either by court order or by operation of law (after following a specific statutory procedure). This usually occurs after a default from the borrower and notice of this default by the lender that they intend to foreclose.

Is it possible for the bank to foreclose on my home even though I have a loan modification in the works? why?

Yes, I have seen this numerous times. This because the law and the initial mortgage agreement empower the lender to foreclose based on the default. The same action some banks will suggest that you take in order to show hardship (Default), in order to process a loan modification. Typical foreclosure statute does not address loan modification; therefore, having one in the works will not stop the process. The only two things that stop foreclosure, once its underway is 1. redemption-the act of payment of the debt in full, or 2. bankruptcy.

Why would the bank foreclose if they are offering you a loan modification?

Because they can arbitrary deny your loan modification application and if you are in default you will not be able to make current or past payments. The bank does less work and makes more money if they foreclose. The amounts you have paid are lost and they can sell the home to a new purchaser and make a lump sum and be free of the debt for good. Not to mention that once they foreclose, they will be able to sue you for the deficiency. A deficiency is the difference between what you owe and what they received from the new purchaser. Either way the bank profits.

If you are on the verge of foreclosure consult with a qualified Bankruptcy Attorney in North Carolina call Maxwell Law Firm, PLLC at 704-780-1100