Challenged homeowners: working with mortgage lenders

On behalf of The Rollins Law Firm posted in Personal Bankruptcy on Thursday, May 8, 2014.

A recent critic of bank lenders who play rough with distressed consumers grasping for solutions to avoid foreclosure and stay in their homes makes reference to a so-called “kill switch” that can stop hard-barking bankers and other mortgage holders in their tracks.

Namely, that is bankruptcy, which results in a legal automatic stay that has material consequences in the relationship between a challenged homeowner and a creditor who is demoing payments and, quite often, threatening to foreclose on a property.

Jorge Newbery is the chief executive officer of a nonprofit company that buys pools of underperforming mortgages from banks. Newbery’s organization then works with besieged homeowners to find solutions that will help them stay rooted and avoid having to turn their lives upside down with unwanted relocations.

Of course, that is not always possible, but Newbery notes that it could be the case far more often if banks and other mortgage lenders conducted themselves in a more equitable way.

Most pressured homeowners in Mississippi and elsewhere don’t customarily look to bankruptcy as the first option when they face significant financial challenges. Where their homes are concerned, they often seek to work with lenders to modify original loans. Many times this can be accomplished by revaluing a property to reflect its true current market value rather than an inflated value from years ago.

Many lenders resist the opportunity to work with homeowners who are making best efforts, though. Indeed, and as Newbery notes, lenders often offer only “negative modifications” that actually up the ante on mortgages payments and interest.

And thus the kill switch, which can stop all such activity for a period and hopefully result in an equitable resolution for the lender and, importantly, the borrower.

As Newbery says, pressing that switch is sometimes the best move a homeowner can move when a lender is simply playing hard ball.

Bankruptcy can indeed be a powerful card to play for distressed homeowners. It is a complex process, though, entailing a number of relevant considerations. An experienced bankruptcy and debtor-empathetic attorney can help a client fully understand and take advantage of this lawfully mandated debt-relief tool.

Source: Huffington Post, "Bankruptcy: the foreclosure kill switch," Jorge Newbery, April 22, 2014

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