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Mortgages, Mortgage Modifications, and Bankruptcy Cases in Arizona

By Joseph McDaniel, Esq.

I have read a lot recently about mortgage modification programs failing to work as well as expected.

There are a lot of excellent articles about the issue all over the Internet. Here's one, for instance.

But I wasn't very surprised.

Debtors have told me for months that trying to work their way through an attempted loan modification was an utter nightmare, because the mortgage company would lose their documentation three times, and they'd be told five different stories by seven different mortgage company employees, and first they'd be told they were a shoe-in for a modification, and then they'd be told they weren't. Over a period of a year, in many cases.

In one case, a potential debtor was told that a trustee's sale would be postponed, and it was not.

Troubling for the poor debtor. Required an inconvenient quick move, and a fair amount of swearing.

So it will be interesting to see if a workable mortgage modification program gets cobbled together, or not.

In the meantime, folks are leaving houses on which they are underwater like crazy.

Some keep making payments to stay in houses that they know they'll never own in any meaningful sense, because they'll never be able to pay off the inflated mortgage amounts.

But in some cases, just staying current on the first mortgage costs less than renting another house, and the second mortgage doesn't start a trustee's sale because it's entirely underwater.

Now, sometimes the second mortgage in that situation will simply sue on the note, but that normally just precipitates a bankruptcy filing, so it's a little silly of the second mortgage company.

Full post as published by Arizona Bankruptcy Attorney Blog on September 26, 2010 (boomark / email).