Loan Modification Denied? What Next?

Real Estate Agent with Re/Max Gold, DRE #10410348/#01346951 DRE#10410348/#01346951

We've been talking with a lot of home owners lately who have tried to do a loan modification.  Some were denied and out of frustration have decided to let their house go to foreclosure.  Many people make emotional decisions without seriously considering their long term effects. 

In the situation where a homeowner has been denied and they let it go to foreclsoure, can they or should they consider, other options? Yes!  Before letting the house go to foreclosure consider what's the impact on my credit?  Can a "Short Sale" help me?

A foreclosure will remain on your credit report for seven to ten years.  It usually takes 5 years before new mortgages maybe obtained.  With a short sale, however, you may be able to purchase a new home within 2 years assuming you keep other payments current and no 60 day+ late payments.  A "Foreclosure" on your credit will impact your ability to get new loans (such as a car, new credit cards, or a loan for an emergency) or even employment. 

Do everything you can to avoid foreclosure.  A short sale may be an option highly worth considering.  Some of the benefits of a short sale include:

Less impact to your credit score.  Lower the credit score translates into higher interest rates which means higher payments and the items you purchase will cost more.

May be able to purchase a home in 2 years vs. 5 years or longer.  Under Fannie Mae guidelines, seller's may be eligible to buy another home in 2 years instead of 5 years.  Possibly sooner if you don't have a 60-day+ late pay.

Be Pro-Active vs. Reactive.  You take control of your situation rather than the Bank.  Why pay more for future higher priced items with credit when you don't have to.  A short sale has less impact on your credit score.

We recommend home owners consider the financial implications of letting the house go to foreclosure before making an emotional decision to do so and might regret down the road.  Perhaps a Short Sale may be a wise decision.

Consult a professional tax advisor or attorney for advice.  For more information or a FREE, no obligation, consultation, contact us at (916) 956-4912


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Briggs & Associates Realty
BRE License #: 01346951/01410348
9280 W Stockton Blvd., Ste. 110
Elk Grove, CA 95758

Comments (4)

Matt Listro
National Credit Fixers - Matt Listro - Vernon, CT
Your Credit Repair Expert

Hi Diane and Doug: Actually FHA's rule on foreclosures is that you must be 3 years out of foreclosure to qualify for a new loan.


Oct 01, 2009 08:51 AM
Lori Mode
The Mode Real Estate Group - Elk Grove, CA
Real Estate Made Simple

Diane and Doug - I have also been talking to several homeowners lately who are frustrated trying to modify their loans and you are absolutely right, they seem to be making decisions because of the frustration to go ahead and let the bank take the property through foreclosure.  I spoke to one the other day who had just completed a modification and it raised their payment by $200 a month!  Although, I explain how damaging foreclosure can be to their credit, by the time we talk to them it seems they are just so frustrated that they feel they have no choice.  It's very sad and I wonder just how many of these homeowners are out their in our area. 

Oct 02, 2009 06:01 PM
Mayra Espinosa Realtor San Mateo Pacifica Homes
Mayra Espinosa Broker- Realtor | Call 650-996-8961 - Pacifica, CA
San Mateo County Real Estate | Buy | Sell | Invest

I know several friends that where trying to do loan modification and have been denied. Now they are trying to get a lawyer to take a look at their loan papers to see if there error when the loan documentation was process. I don't know it this is going to help them or not. Thanks for the post!

Oct 03, 2009 01:45 PM

Hi Mayra can you please give an update what happens with help of the lawyer. iam also in the same exact situation and wondering what to do. please reply back when the find out or how did it go. thanks in advance 

Oct 30, 2009 03:55 AM