Texas Bankruptcy Blog : Texas Bankruptcy Lawyer & Attorney : Fears Nachawati law Firm : Chapter 7, Chapter 13, Consumer Bankrutpcy : Dallas, Fort Worth, Austin, Houston, San Antonio

National banks that took federal bail-out money also agreed to participate in government home modification programs. These banks have created in-house loan negotiators to assist in home-loan modifications, which may reduce loan principle or interest to adjust the loan to an affordable rate. Many American homeowners have applied for these programs, but few have been approved. In many cases the empty promise of home loan modification leaves the homeowner in a worse position than when he started.

It has become clear that these banks are simply not playing fair. Several lawsuits have been filed against national banks alleging fraud. A federal lawsuit was recently filed by the State of Nevada Attorney General against Bank of America, the nation's largest home loan servicer, alleging deceptive practices. Additionally, a class-action lawsuit against Bank of America is pending in Massachusetts federal court. These suits claim that Bank of America deceived consumers into depleting their savings by making mortgage payments based on false hopes they'd be eligible to modify their home mortgages. The lawsuits allege that BOA accepted $25 billion from the U.S. government in 2008 as part of the Troubled Asset Relief Program (TARP), but has failed to participate in programs such as the Home Affordable Modification Program (HAMP) aimed to minimize foreclosures.

If you are in need of a home modification, review your options with an experienced bankruptcy attorney. Many bankruptcy debtors are able to strip away a second or third mortgage, or pay past-due payment over three to five years. Bankruptcy debtors can also apply for government programs such as HAMP during the bankruptcy case, while under the protection and supervision of a federal bankruptcy court judge.
 

In response to many criticisms of its Home Affordable Modification Program (HAMP), the Obama Administration recently announced significant changes intended to speed the modification process and clarify eligibility. Under the new guidelines, mortgage lenders must pursue early intervention to determine borrower eligibility under HAMP, and may not refer any loan to foreclosure until the borrower has been determined ineligible for the program. New timeframes have also been implemented and homeowners can expect a modification decision within 30 days.

The new HAMP guidelines require participating lenders to use principal reduction as a primary means of reducing borrowers’ payments where loans are more than 115 percent of the current home value. Borrowers that are current on their mortgages may qualify for refinancing at a low interest, fixed rate loan insured by the FHA, provided that the lender agrees to reduce the principal for the total combined debt to no more than 115 percent of the home’s value. This provision is meant to encourage lenders to reduce principle for those property owners with negative home equity.

Another important change is a clarification that debtors in bankruptcy must be considered for HAMP. A request for consideration for a modification while in bankruptcy may be made by the debtor, the debtor’s attorney, or by the bankruptcy trustee. This provides a yet another tool for the bankruptcy attorney to save a home mortgage from foreclosure and negotiate terms that the debtor can afford.

To qualify for a loan modification under HAMP, the borrower must:
• Be the owner-occupant of a one- to four-unit home;
• Have an unpaid principal balance that is equal to or less than $729,750 for a single-unit home (other limits apply for multi-unit homes);
• Have a first lien mortgage that was originated on or before January 1, 2009;
• Have a monthly mortgage payment (including taxes, insurance, and home owners association dues) greater than 31% of your monthly gross (pre-tax) income; and
• Have a mortgage payment that is not affordable due to a financial hardship that can be documented.

The combination of a bankruptcy and a HAMP loan modification may help some borrowers save their homes and stabilize their family finances. If you are in financial trouble, consult with an experienced bankruptcy attorney and discuss your options. Don’t be a victim of debt! Take control today.