Stop Paying Your Mortgage to Get A Loan Modification?

1282174_grey_split_foyer_wslab_rock_trim.jpgThis is the advice self-declared mortgage modification “experts” (and even some mortgage servicer employees) are giving desperate homeowners seeking loan modifications, according to clients coming into my office. As a MD bankruptcy attorney, I’ve met clients say they have been told this is the way you get the attention of the banks to get the modification they want (as opposed to merely detailing the hardship in the application statement).

Possibly missing mortgage payments does underscore the financial hardship showing that is a necessary requirement of a loan modification, but it also a high risk strategy: Once you start falling behind on mortgage payments, the lender has the right to declare an “acceleration” of the loan – the whole balance of the loan becomes due and payable immediately.

Then, once the loan is “accelerated,” the lender is not obligated to accept your payments or even to accept your payment of the full amount of the arrears. Often lenders will return any payments to the homeowner with a letter noting that it is not enough to pay off the full balance of the loan. After “acceleration” and a failure by the homeowner to pay off the full loan, foreclosure is the lender’s next step.

Not paying your loan to get a modification is a high-risk strategy. Do it at your peril.

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