This is a guest blog post by Charles R. Gallagher III, Esquire
Don’t expect the bank to stop the foreclosure lawsuit because you have applied for a modification.
For those in foreclosure, a loan modification often appears to be a safe way out of trouble. Loan Modifications can lower payments, interest or sometimes even the principal amount of the loan. However, securing a loan modification is not an easy process and is fraught with peril.
Here’s Why Loan Modifications Fail:
Bank Collection and Loss Mitigation Departments Don’t Communicate
If you are in foreclosure you are, no doubt, familiar with the collection methods of the bank, numerous telephone calls, letters, inspections and all around harassment. If you are lucky enough be communicating with someone at the bank that can provide foreclosure assistance, you are dealing with the bank’s loss mitigation department. While it’s clear that you are communicating with two separate bank departments, don’t count on them communicating with each other.
There are countless stories about approved modifications and settlements that failed to stop a foreclosure. Collection departments at banks are charged with overseeing the foreclosure process. Conversely, loss mitigation departments are not involved in the oversight of foreclosure cases. As a result, they don’t communicate with each other. Making matters worse, collection departments communicate with outside foreclosure counsel, so they could give the bank’s attorney marching orders to proceed to a foreclosure sale at the very moment that the loss mitigation department approves a loan modification.
Protect Yourself From Foreclosure By Taking These 4 Steps When Communicating With Your Bank:
1. Ensure that all of your communications with the bank are in writing.
2. Better yet, ensure that your communications are sent via certified mail to ensure they were received. Don’t count on a phone call to protect your rights.
3. Write down the first and last name of the bank representative with whom you are speaking.
4. Keep a log of all communications with the bank. This will allow you to prove to the Court that you were engaged in a modification if the bank proceeds with the foreclosure lawsuit.
Lawsuit Remains Pending During Modification Negotiations
Borrowers assume that once a bank has accepted a modification application that the foreclosure lawsuit is automatically held in abeyance or stayed during the modification process. This is typically not the case. The foreclosure lawsuits continue to proceed even with the modification application.
Additionally many borrowers mistake a trial/temporary modification as a permanent modification. One of the conditions of these trial loan modifications is that the foreclosure lawsuit is not dismissed until such time as the borrower has completed all steps in order to make the modification permanent. Don’t expect the bank to stop the foreclosure lawsuit because you have applied for a modification.
As you can see, applying for a mortgage modification is no safe harbor from a pending foreclosure. However, armed with knowledge that banks don’t internally communicate well and establishing a paper trail can protect you during the modification process.
If you have questions about foreclosure or loan modifications in Tampa, St. Petersburg and Clearwater, please contact Gallagher & Associates Law Firm, P.A. for a free consultation. G&A’s attorneys are experienced in defending homeowners in foreclosure and suing banks for their violations of law.
Charles R. Gallagher III is the founder and principal of Gallagher & Associates Law Firm, P.A. in St. Petersburg, Florida. His practice includes foreclosure defense, consumer law, real estate and business litigation and insurance litigation. Mr. Gallagher is a graduate of Rollins College and Stetson University College of Law. He is a graduate of Leadership St. Pete and was selected as a Rising Star by Florida Super Lawyers and selected as an “Up and Comer” by the Tampa Bay Business Journal in 2011. He frequently lectures and serves as a media commentator on foreclosure topics.
