How NOT To Apply For Mortgage Modification

I talk to people all the time about mortgage modification.  I talk to clients about it, I talk to other lawyers about it, I talk to industry experts about it.  Everyone agrees that the process of applying for a mortgage modification is tedious, onerous, and takes more time than it should.  In other words, the process itself is stupid. You could tell me any number of stories of lost paperwork, repetitive paperwork, broken promises, and ridiculous outcomes, and I would believe them all.  Stupid rules, stupid results, stupid requests–I’ve seen them all.  And here is the problem with all that.  It can leave you in worse shape than you were when you started.  And there may be nothing you can do about it, if you don’t protect yourself from the beginning.

Let’s say you have run into a little rough patch, and you are falling behind in your mortgage payments, or you think that’s going to happen.  So, you go to your lender to apply for a mortgage modification.  Let’s say you are 60 days behind when you send in your application.  Your lender takes six months to process your application (and, by the way, that’s not out of the ordinary).  And they turn you down, for a totally bogus reason, say because by the time they got around to looking at your application, your paystubs were more than 90 days old.  Or they deny receiving documents that you sent them.  So, now you are eight months behind in mortgage payments.  But, they say you can reapply, since the reason they turned you down was because the paystubs were stale.  So, you take another 30 days to put all the paperwork together again, and this time you are wiser, and you continue to update those paystubs (and tax returns, and so forth).  But this time it takes them another three months to give you an answer.  And in that three months, your income has started to improve, and that’s the problem.  This time they say that you don’t qualify for a modification because your income has gone up. So now you are eleven months behind on your mortgage payments.

But that’s okay, since your income has improved  Now you think you could make the old payments, and you ask them to simply allow you to resume making regular mortgage payments.  They take another six months to give you an answer, and the answer is still “no.” So now, you are over a year behind in mortgage payments.  And the lender now says that if you don’t catch that up (plus pay a bunch of fees they’ve added during the time you were applying for modification) they are going to foreclose.  They’ve dangled the prospect of a modification in front of you for eighteen months, until you are so far behind that you can’t possibly catch up, and then they pull the rug out from under you.  They can’t do that, can they? Yes they can.  And they do–every day of the week.  A mortgage modification is never guaranteed.  In some cases, even if you qualify, you can be turned down.  Even if you qualified at one time, you may not now.  And even if you have legitimate complaints about the way your application was handled, you may not find a sympathetic ear to listen to your story. In the situation I’ve outlined above, the mortgage lender comes across as the bad guy.  That may be the case, or maybe the lender is just overwhelmed with applications while lacking the experienced personnel who can process them.

But there is another problem with that story, and many people just don’t see it.  It’s this:  If you aren’t making mortgage payments for eighteen months, what happened to that money? Now clearly, at first, the problem was that there wasn’t enough income to pay the full mortgage payment.  But it’s not often the case that NO money was coming in.  So if you can’t make your full mortgage payment, what are you doing with the money that is available to pay the mortgage?  And if your income improves to the point that you CAN make that payment, but can’t make up the arrears, the question still applies–what are you doing with that money if the mortgage company won’t take it? The answer is that you should be saving it.  As much as you can when things are tight.  The whole thing if you can, even while you are applying for a modification. I always ask clients what they’ve been doing with that money, because the answer is important to determining whether I can help save the house.  If the answer is that it’s in your savings account, we’re in business.  If the answer is that you’ve been using it to pay down other debt, like taxes or credit cards, it’s not ideal but at least you’ve reduced your total debt.  If the answer is that you’ve used that money to fund college tuition, or vacation, or dental surgery, I’m not going to be thrilled, but at least you did something with it.  But, if the only answer I get is a blank stare, I know it’s not going to be an easy problem to deal with. Here’s the bottom line when you have exhausted all other possibilities and your home is in foreclosure:  Chapter 13 bankruptcy may offer you a chance to catch up your mortgage arrears, but you have to be able to make the regular mortgage payment, plus an additional payment to catch up the back payments.  If you have simply absorbed the regular monthly payment into your normal household budget with no savings or debt reduction to show for it, either you couldn’t afford your mortgage payment to begin with, or you are going to have to make deep cuts to your standard of living to make both the mortgage payment and plan payment.  Either way, its not an easy thing to face.

So go ahead and apply for mortgage modification, especially if you can’t afford your mortgage payments.  But don’t forget that someday, if you are going to keep your house, you are going to have to make a payment in some amount.  Build your saving, stay on your budget, and give yourself the best shot and the most options if that modification doesn’t pan out.


Däna Wilkinson (pronounced "Donna") is a bankruptcy lawyer practicing in Spartanburg, South Carolina and serving South Carolina's upstate region, including Greenville, Spartanburg, Gaffney, Union, Anderson, Easley and Pickens. She has been in practice for more years than she cares to count, but it’s more than 20 years. Däna has been a bankruptcy lawyer from the very beginning of her career as a lawyer.

Däna went to law school at the University of South Carolina, where she was Student Works Editor on the South Carolina Law Review and a member of the Order of Coif. She started doing bankruptcy work while still a student, working for a bankruptcy boutique firm whose members included a Chapter 7 panel trustee, and recognized experts in Chapter 11 reorganizations. She enjoyed the work from the beginning, and upon graduation took a job as a law clerk to the Honorable Rodney Bernard, bankruptcy judge for the Western District of Louisiana. Judge Bernard had spent a number of years on the bankruptcy bench, and was an excellent teacher and mentor. Upon Judge Bernard’s retirement, Däna stayed on for a time as clerk to the Honorable Donald W. Boe, until homesickness for South Carolina struck, and she returned to private practice in Charleston. Four years later, she received an offer to return to Columbia, where she practiced until 1997.

In 1997, planning to start a family, Däna decided to return home to the Upstate, and opened her own practice in Spartanburg in 1998. Over the years, Däna represented all sorts of parties in bankruptcy: business debtors in reorganization, individual debtors, creditors and creditors’ committees, and trustees. In establishing her own practice Däna decided to focus on consumer debtors, ordinary people who find themselves overwhelmed by debt. Her focus is on the individual needs of clients, and on crafting a solution to their unique financial needs. She is committed to helping clients make a fresh start, and preserving their dignity in the process.

Däna is the proud mother of a beautiful, talented and very active daughter, who is, as her mother says, “practically perfect.” She is also active in both church and community activities, all of which means that there is a fair chance that any given blog post was written while in the car pool line or while waiting for a hearing or a meeting to start.

Däna is also certified as a bankruptcy specialist by the South Carolina Supreme Court, which means that she has taken and passed a proficiency examination on bankruptcy law, devoted her practice to bankruptcy for a number of years, and continues to take classes on bankruptcy law and related issues.

Contact information for Däna Wilkinson:

Law Office of Däna Wilkinson
365-C East Blackstock Road
Spartanburg, SC 29301
(864) 574-7944
[email protected]

Däna also blogs at

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