One of the things we used to hear homeowners tell us the most about how they were going to avoid foreclosure was that they were going to complete a loan modification.
The conversation would go something like this:
Homeowner:
We’ve already got it taken care of.
Second Chance Home Heroes:
Oh, that’s great to hear! What did you do?
Homeowner:
A loan modification.
Second Chance Home Heroes:
When did you get your approval letter?
Homeowner:
We just sent the application in.
Second Chance Home Heroes:
Hmmmm, how long ago was that?
Homeowner:
Right after we got the foreclosure notice.
The Problem with Loan Modifications After a Foreclosure Notice
This is the crazy part… where the math doesn’t line up.
- Foreclosure notices have to be sent out and posted 21 days before the auction date.
- Loan modification applications have to be submitted at least 37 days before the auction date.
So whenever people would say they did it after they received their notice, we already knew it was doomed to fail. Not to mention the poor success rate of loan modifications anyway…
What Mortgage Companies Don’t Tell You
But here is what really grinds my gears…
The mortgage company doesn’t tell you that they won’t consider the application. Actually, they will even encourage you to submit it, even after the deadline.
You’re probably scratching your head and wondering why that is… Well, they receive funding for every application they receive, whether or not it gets approved.
And here’s the kicker: They do not receive any funding for actually approving the applications.
Seems pretty backwards, don’t you think?
The Retail Credit Card Analogy
Think about retail credit cards. They don’t care if you get approved or not; they just want you to submit the application because that’s what their boss is measuring their performance by. A retail credit card is still better than this, though, but that’s a discussion for another time.
Key Takeaways
- Timing is everything. Loan modifications after the foreclosure notice won’t work due to the strict deadlines.
- Mortgage companies profit from the number of applications they receive, regardless of approval.
- Loan modifications have a low success rate and may not be the golden ticket to avoiding foreclosure.
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