Quite a bit of attention has been given on this forum to the difficulty of getting a mortgage modified. A few of the posts have suggested alternative paths to mortgage modification and of course second and third mortgages can be “stripped” or removed through chapter 13 bankruptcy.  However, many Americans are still pursuing the traditional path to a mortgage modification which unfortunately remains dealing with the bureaucracy of cold, heartless, “too big to fail” banks. Yes, the same banks who gobbled up taxpayer funds to stay afloat are still by and large unwilling to agree to meaningful mortgage modifications (defined as permanent write down of principal that allow a borrower to avoid foreclosure). On a national level, the percentage of mortgage modifications that have become permanent are shockingly low with most major metropolitan areas seeing less than 10% of eligible participants given long term relief. 

Nearly half of the permanent home loan modifications under the government’s plan to help troubled borrowers come from a single company that handles less than three percent of the eligible mortgages: little known Ocwen Financial. The larger players such as Bank of America are still nowhere to be found. Furthermore, it is important to understand that even in the event you are approved for a temporary mortgage modification you will likely be liable for the reduced amount of your payments if the permanent modification is not approved. For example, if your normal payment is $2,000 and your lender agrees to a $1,300 monthly payment during a trial period, you will owe the bank $2,100 at the end of that trial program if the change is not approved on a permanent basis (and it usually isn’t). That’s right, lenders aren’t willing to forget about the full mortgage payment during a trial period, they only delay its due date for a few months……..then they demand that it be paid in full……in a lump sum payment that most struggling homeowners simply cannot afford. Ironically, it pushes many homeowners right into foreclosure or bankruptcy.