Can Your Bank Foreclose You While You're Processing a Loan Modification?

Many homeowners are having trouble keeping up with their mortgage payments.  As a result, they are turning to their lenders, seeking loan modifications to find a way to reduce their monthly debt obligation.  Oftentimes, those homeowners have already stopped making mortgage payments.  Instead they are working with the lender in good faith to reduce their monthly expense.

Unfortunately, the banks take a long time to process loan modifications.  They are notorious for losing paperwork, asking for the same documents repeatedly, and not giving clear time frames for resolution.  In the meantime, homeowners are waiting with baited breath to see if they will catch a break.

However, many homeowners have found that they wait and wait and wait, only to find that the loan modification process essentially went nowhere.  Instead, while the loan modification application is still pending, the bank foreclosed on the home.  Since these homeowners were working with the bank in good faith, they are shocked when the home is suddenly foreclosed.

Can banks do this?  Sadly, the answer is yes.  If your loan doesn't fall within the purview of the Home Affordable Modification Program (HAMP), then the banks can certainly "dual track" your loan.  In other words, while they are working with you to modify, they can also work towards foreclosure, assuming that there are no other state laws that prevent this.  On the other hand, if your loan modification does fall within HAMP's requirements, dual tracking is not allowed.

The good news is that many state attorney generals and other agencies are working to fix this; they don't want banks to "dual track".  After all, homeowners are often blindsided when they lose their home to foreclosure, thinking that they were safe while the loan modification was processed.  So far, banks have agreed that they will halt foreclosure proceedings once a temporary modification is approved, but many regulators don't feel that this is good enough.  Instead, they want foreclosure proceedings to cease during the modification process altogether.

It remains to be seen whether state attorney generals and regulators are able to stop dual tracking.  In the meantime, if you have applied for a loan modification, do not ignore any foreclosure notices you receive!

New Committee Formed to Investigate the Fairness of Foreclosures!

Last week, the Illinois Supreme Court formed a committee to look into the mortgage foreclosure process in Illinois.  This new 14 person committee will include a representative from the attorney general's office, bankers, attorneys, and judges. 

The committee will be charged with investigating foreclosures in Illinois -- specifically, the committee will look into how various counties handle foreclosures differently, and what legislative proposals affecting foreclosures are making their way through the Illinois General Assembly. 

The Illinois Supreme Court hopes that the new committee will provide recommendations on improving the foreclosure process overall.  As it stands now, many homeowners are confused about the court process that accompanies foreclosure.  Additionally there is a great deal of variation in the process between counties.  While the court is not trying to standardize the process throughout Illinois, it may be beneficial to have certain rules that are the same across the board.  Hopefully the committee will be able to propose such rules to help streamline the foreclosure process. 

Once the committee does its job and new standards are implemented, however, foreclosures will not go away.  All we can hope for is that the process becomes easier to understand for homeowners!

Proposed Law Would Allow Automatic Cook County Senior Citizen Property Tax Exemption

As you may or may not know, last year the Illinois legislature passed a law which required senior homeowners in Cook County to start re-applying for the senior citizen property tax exemption for their homes on an annual basis, effective in the fall of 2011.  Many people, particularly seniors, were not happy about this.  After all, if a senior citizen fails to apply for any reason, his or her property tax liability could increase substantially.

The legislature has been working on a fix, however, and while it may or may not make it through the House, the Senate recently approved legislation allowing senior exemptions for Cook County senior homeowners to renew automatically, as they did prior to last year's law.  The bill has been passed on the House, and as of yet there is no word on whether or not the House will approve it.

In the meantime, seniors should exercise diligence and apply for the senior exemption or risk losing it! 

Can the Home Affordable Refinance Program (HARP) help bring your payments down?

Many homeowners are trying to refinance but are unable to for a variety of reasons.  If you have been denied a traditional refinance because the value of your home has declined or you owe more than your home is worth, the Home Affordable Refinance Program (HARP) may be of assistance.

In order to qualify for the HARP program, your mortgage must either be owned or guaranteed by Fannie Mae or Freddie Mac.  Additionally, you must meet the following criteria:

1.  You are current on your mortgage payments.
2.  In the last year, you have never been more than 30 days late when making a mortgage payment.
3.  You do not have an FHA, VA, or USDA loan.
4.  Your mortgage is for more than your home is currently worth.  However, the outstanding amount of your mortgage is not more than 125% of the current value of your home.
5.  You can demonstrate that you will be able to afford the new payments.

Note that if you do qualify for a refinance under HARP, you will still need to submit a loan application and a refinance fee, just as if you were obtaining a refinance through normal channels.  The loan will be underwritten to see if you are qualified to obtain a loan in general.  Just because you meet the criteria listed above, there is no guarantee you will be refinanced under HARP if you do not otherwise qualify for a refinance.

The HARP program is available until June 30, 2012.