First of all, the intention of this post is NOT to offend anyone or step on anyone's toes.
I just had to air this one out after hearing some of the most outrageous (not to mention downright FALSE) comments made by some of my clients and other Homeowners.
Myth #1: The home across the street from me is identical to mine and sold for $100K less than what I paid....so my lender has to reduce my principal to reflect the reduced value.
Fact: Many Homeowners across the country are dealing with this phenomenon on a daily basis. Values have sunk heavily in many parts of the country and are continuing to sink in other parts. But, the reality of the situation is this - your lender is likely well aware of market trends in your area BUT that does not mean they have an obligation to reduce your principal balance. Period. End of Story.
Myth #2: If I stop paying my mortgage, it will FORCE my lender to lower my payments, interest and/or principal balance.
Fact: Really??? If you stop making your payments, you are, in fact, FORCING your lender to start foreclosure proceedings. Failure to make payments, for any reason is grounds to start the foreclosure process. The fact that you may have a very good reason (i.e. death, job loss, etc) is still not justification in the eyes of the lender. The best thing you can do is call the lender and explain the situation. Many banks and servicers will opt to work with the current homeowner, but they are NOT required to do so.
Myth #3: My best friend has a loan with the same bank that I do and she received a loan workout, so I am guaranteed to receive one also.
Fact: Just in case I haven't made this clear already, this fact may be true and it is also totally irrelevant. I hear this so many times from so many different people. Each situation is different and there is no way to know what factors played a role in your friend's situation. Even if those factors were made apparent, the lender still does not have to do anything for you - although you share the same lien holder.
Myth #4: If I hire an attorney, I am guaranteed to receive a loan workout.
Fact: While it may be true that attorneys tend to garner more respect than the average Homeowner when it comes to negotiations, the best attorney in the world CANNOT guarantee you a loan workout. The bottom line is this - the agreement is between the Homeowner and the Lien Holder - there is no way for any 3rd party to guarantee that the lender will change the terms of its agreement with the Borrower. At a typical cost of $3-$5,000, in most cases that money would be better spent going towards the mortgage.
Myth #5: I am in the process of a loan workout, so my property cannot/will not be foreclosed.
Fact: If you are behind on your payments, foreclosure proceedings can start and/or continue AT ANY TIME. I truly wish banks would do a better job of fully explaining this to Borrowers. I can't tell you how many clients I have spoken to that are in the process of a loan workout only to be summoned to court to respond to a foreclosure proceeding. Most are truly baffled because they thought they were "working something out with the bank." Truthfully, the loss mitigation department and the foreclosure department often don't communicate. I have actually had more than one Homeowner have their homes sold at the auction - DURING the loan workout process!!!!
BOTTOM LINE: While many lenders are doing all they can to help Borrowers keep their homes, any and all efforts made by the bank are purely voluntary. No matter which attorney is hired, no matter what your hardship is and no matter what the market conditions are - the banks still don't owe us a thing!
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