A large number of homeowners that have either tried on their own or hired companies or attorneys to try to get their home mortgage loan modified have been or will be rejected due to the amount of other debt they have. Some of these companies or law firms may have let greed cloud the judgment of what is in the homeowner's best interest.
If the homeowner has a large amount of credit card or other debt, many lenders will reject them for this reason. These are essentially being looked at like a refinance, if you don't have regular income or have large other bills, they will not approve you. They don't really care that it is your home or that you want to keep it, it is a matter of probability that you can make the payment if they work with you.
This is not to say that you should not try to get a modification, but realize that the number of actual modifications or trial plans in existence reported to the government is very low, so lenders are not just giving them away as some would make you believe.
In many cases, these homeowners would have been better off pursuing a bankruptcy from the beginning. It is still possible to save your home in a bankruptcy and due to the current economic climate, bankruptcy is not as much of a stigma as it has been in the past.
I have been approached by numerous potential clients after they paid and hired a law firm to try to modify their loan. Looking at their financial circumstances, it is clear from the start that they were never going to be qualified for a modification. In these cases, there are other options that should be considered, including a short sale, deed in lieu of foreclosure, or bankruptcy, that may be a better option and in the best interest of the client. Unfortunately, many of these companies or law firms may have simply been motivated by greed, not what is in the best interest of the client. In fact, the majority of people I speak with who hired a law firm never even talked to an attorney, ever!
All of our cases have always been reviewed by an attorney to determine what is in the best interest of the client. In some cases, even people who might qualify for a modification are still denied by the lenders. A homeowner needs to assess all possible options and not assume that a lender is on their side to keep them in their home.
A bankruptcy can be a fresh start to help people get back on their feet and, although every case can vary, it is possible to keep your home in a bankruptcy.
Although some of these companies may have shut down and disappeared with your money, it may be worth investigating to see if they really provided the service you paid them for, in which case you may be able to sue to get your money back or for other damages.
Chris Barsness, Esq.