Loan servicers giving grief to many homeowners

When you run into difficulty paying your mortgage, you have enough on your plate without having to worry about problems from the lender's end. Nonetheless, some of the same abusive practices that the nation's largest banks were penalized for in a $26 billion settlement in 2012 are again on the rise, this time among mortgage servicers.

 

Servicers are specialty firms that transfer payments from borrowers to lenders; they have substantial influence in issues affecting a mortgage, and may decide whether or not a mortgage modification will be granted or a foreclosure will proceed. Servicers wield a great deal of power, and unfortunately many of them are now misusing it by pumping out sloppy paperwork, charging erroneous fees and wrongfully foreclosing on homes.

Servicers less likely to grant a mortgage modification

According to the mortgage industry publication Inside Mortgage Finance, specialty servicing companies had three percent of the market in 2010. As of early 2014, they had snapped up 17 percent of the mortgage servicing market.

It can be frustrating for homeowners when the rights to their mortgage change hands, as they may be asked for the same documentation again and again. It can also be far more than an inconvenience. Figures from the Departments of the Treasury and Housing and Urban Development show that since 2009, loan servicers have been less likely to approve mortgage modifications than the nation's biggest banks.

For example, since the Home Affordable Modification Program went into effect in 2009, Bank of America, CitiMortgage and Wells Fargo approved 44 percent, 43 percent and 35 percent of mortgage modification requests, respectively. Ocwen Financial and Nationstar, two of the largest loan servicers in America, approved just 23 percent and 22 percent.

Chapter 13 bankruptcy can be a real solution

Dealing with a specialty servicer that has purchased the right to collect your mortgage payments can be a headache. Having your mortgage transferred to a servicer can also mean a real financial setback.

Perhaps the best way to solve your mortgage problems once and for all is to purse Chapter 13 bankruptcy. In Chapter 13 bankruptcy, you file a repayment plan with the court that spans a three to five year term. Under the repayment plan, debts are consolidated, and your total monthly payments might even be lowered. At the end of the repayment term, most types of remaining unsecured debt are discharged completely. Chapter 13 bankruptcies generally do not involve liquidation, meaning you get to keep all your assets.

Chapter 13 bankruptcy can save your home from foreclosure even if the foreclosure process has already begun. Simply by filing for bankruptcy, a legal instrument known as an automatic stay goes into effect. An automatic stay temporarily halts all creditor action, including foreclosure. That gives you time to craft a Chapter 13 repayment plan. Under your plan, you can make up for past due mortgage payments, and as long as you keep up with your mortgage obligations while your Chapter 13 repayment plan is in effect, the foreclosure will be defeated.

All too often, loan modifications are a false promise to homeowners, particularly considering the recent spate of problems with loan servicers. Modifications might not materialize, or might not help enough to save your home. On the other hand, Chapter 13 is a real, reliable solution to foreclosure and debt. To find out more about Chapter 13 bankruptcy, and to explore whether it is the best route to pursue given you individual circumstances, contact a bankruptcy attorney today; doing so just might save your home.