Q: I’m in a situation that hasn’t led to foreclosure yet, but it could. My husband is out of work and we’re just falling further and further behind on our mortgage payments. We just contacted our bank about a loan modification but that hasn’t happened yet (we borrowed the money on an option-ARM loan, and our loan terms have reset to a higher monthly payment). But now I’m seeing all of these reports on banks screwing many foreclosures. Could we use that as leverage — if it comes to that? – K. Carew, Pittsburgh
We’d also recommend that you look into loan forbearance, which lets you restructure your home loan until you can get back on your feet, money-wise. That should keep you in your home until your husband gets another job and could help you avoid foreclosure outright.
As far as all the news in the past few weeks over “screwed-up” foreclosures by banks, we’d recommend being very careful about using that news.Yes, banks have had trouble with the “robo-signing” issue, where some lending company analysts signed off on foreclosures without even having read the loan documentation. Big banks like Bank of America (Stock Quote: BAC) and JPMorgan Chase (Stock Quote: JPM) have already suspended tens of thousands of foreclosures while they review their procedures. Also, many states (like Texas and California) are already calling for their own investigations into the robo-signing issue. Presumably, foreclosures in those states may be put on hold until all of this is cleared up.
Some more good news for homeowners facing foreclosures came yesterday when Wells Fargo announced that it would spend an unprecedented $772 million to modify “underwater” mortgages that originated from loans that might have used “deceptive marketing” to get borrowers to sign loan agreements that may not have been in their best interests.