In 2008/2009 the U.S. Government started the Home Affordable Modification Program (HAMP) in response to the “mortgage crisis”. The program allows for home owners that are behind on their mortgage payments to “negotiate” a modification of their mortgage with their lender. At first glance, this sounds like a great option for homeowners to save their homes from foreclosure. However, when you look at how the HAMP program has performed historically, it really benefits a small percentage of homeowners.
When I meet with potential clients who have attempted the HAMP program, I usually hear the same story—the homeowners made application for a mortgage loan modification with their lender; the lender repeatedly requests more information or information the homeowners provided already; and after many “back and forth” communications, submissions of documents with their lenders, the homeowners are either denied or give up on the process. Because their attempt to apply for a mortgage loan modification with their mortgage lender took so long, the homeowners are now many more thousands behind on their mortgage.
The Bankruptcy Act of 1898 was the beginning of what developed into the current U.S. Bankruptcy Code. Chapter 13 of the U.S. Bankruptcy Code is a remedy that stops the home foreclosure process and allows the homeowner to cure their mortgage arrears or past due payments over a period of 3 to 5 years. Most often, the homeowner will pay their lender the regular monthly mortgage payment, then pay the mortgage arrears/past due payments through the Chapter 13 bankruptcy process.
Let me give you an example to illustrate what I experience with my potential clients: Suppose a homeowners regular monthly mortgage payment is $1000.00. The homeowner experiences some type of “life intervention” (sick and couldn’t work for a while so lost income; lost job; lost spouse’s income after divorce or death; etc.). Let’s assume the homeowner became 4 months behind or $4000.00 past due. The home owner contacts the lender and applies for a mortgage loan modification. While the homeowner is struggling with the lender’s loan modification process, the homeowner gets further and further behind. The homeowner either gets denied, or gives up on the process. At this point, the homeowner typically feels helpless because they are so far behind they fear losing their home. I’ve met with clients who tried this process, gave up on it, and met with me when they were as much as $60,000.00 behind on their mortgage payments.
The other side of this story goes like this: Homeowner gets $4000.00 behind on their mortgage payments, meets with me and files a chapter 13. With the Chapter 13 the homeowner has stopped the home foreclosure process and for as little as $150.00 per month can repay the amount they are behind on their mortgage to save their home.
If you are behind on your home mortgage and are thinking of applying for a home loan modification with your lender, think again. Before you do anything, call us at 717-200-HELP and schedule your free bankruptcy consultation. With fifteen offices throughout Central Pennsylvania and Maryland, we can meet with you at the office most convenient for you.