I recently reviewed a proposed Mortgage Modification Agreement for a couple whose home is in foreclosure. The homeowners have been trying for over six months to work out a long term loan modification that would reduce the interest rate on their loan, lower the monthly payments and dismiss the foreclosure action. They had submitted all of the paperwork the lender required and had extensive email and phone conversations with the lender regarding the specific interest rate and terms of the modification. They were assured time after time that their request for a loan modification on the terms they had been discussing would be approved.

When the homeowners finally received the proposed loan modification agreement - it bore no relation to anything that had been discussed. The agreement did not modify the interest rate or payment terms of the loan at all nor did it require the lender to dismiss the foreclosure action. The agreement required that the homeowner make three consecutive, monthly payments (in the same amount of the monthly mortgage payment they had been unable to pay!!!) and that these payments would be used to pay the lender's legal fees. The agreement indicated that the loan would be reviewed at the end of the three months - but did not obligate the lender to modify the loan at that time nor were the foreclosure proceedings to be dismissed or stayed during the three month period.

Bottom line: this was not a mortgage modification but a poorly disguised ploy to get the lender's attorneys' fees paid. Just because a document is titled as a Mortgage Modification Agreement or a Loan Modification Agreement does not mean that it actually lives up to its name. It is critically important that homeowners attempting to modify their mortgage loans have an attorney review any proposed modification documents to ensure that a loan modification on the terms the homeowner is seeking really has been obtained.