The biggest challenge to solving the foreclosure crisis is that more and more modified loan takers are defaulting. It has come as a surprise that within a year those who have managed to modify their loans are once more defaulting.
Lenders have several options by which they can help troubled borrowers – generous grace periods, stretched out payment schemes, reduced interest rates or even reduced principal balance. But 40% of those borrowers whose payment schedule has been reduced by 20% or even more in 2008 are once more delinquent according Office of the Comptroller of the Currency and the Office of Thrift Supervision.

The most probable reason for this is that the economy continues to be weak and jobs are still vanishing. Fred Phillips Patrick of the thrift office said, “Even if you’ve gone through a modification, your situation may deteriorate.”
This trend does not portend well for the Obama government’s plan to contain foreclosures. The lenders who have participated in the plan have offered a trial modification period for 760,000 qualified borrowers since the programme made its debut last March. Only 31,000 have been able to reach the permanent status after completing the trial run and providing proof of income. Till November an equal number have fallen out of the plan or were not found eligible.

The negligible success will hardly make a dent on the overall scenario. A staggering 14% of borrowers with mortgages are hovering around foreclosure. It means pain to not just the borrowers but in a chain reaction to all as property prices fall. The worst hit states are Arizona, California, Florida and Nevada.
Recently some encouraging signs came from regulators. Nearly 20% have missed a minimum of 2 to 3 payments. It is an improvement on previous numbers (35%) during the same period during the previous year.

Another good news is that 31,000 short sales have been completed during the last 3rd quarter. In a short sale the house is sold at a price that is less than the loan amount due. It needs the consent of the lender to proceed with the sale. The numbers show a 22% spike of short sales from 2008 during the same quarter.

The numbers may be confusing but the general feeling is that things have not improved as much as they should and there are apprehensions that the worst is yet to come. Unemployment is largely held responsible for this. Without food on the table people are finding it impossible to pay mortgage dues – even at reduced rates.

Octogenarian Giuseppa Bagnarol was on her deathbed – the grand matriarch being surrounded by innumerable family members. They had all come to the retreat in Redwood City that Giuseppa had set up. It comprised of an estate of three houses sweeping down a hillside where she led a green life raising chickens. Some of her family members lived with her.

But on the night of her approaching death papers arrived ordering her and her family to clear out. The bank had initiated foreclosure proceedings and all were being thrown out.

There was a burst of emotions as the family pointed out to the critical hour. The sheriff had to be called to bring back order. A day later the old lady breathed her last.

The family members were angry not only because of the inopportune hour of serving the notice but the preceding financial mess that had led to this knock. In the eye of the storm was the peddling of such exotic mortgages for Guiseppa to ink. It was clearly an instance of taking advantage of the seniority of the borrower.

Guiseppa’s daughter Carolina Bagnarol had filed a suit against many lenders who had taken advantage of the advanced years of her mother. The loans pushed her speedily down in to more and more debts with each mortgage until she had reached the point of financial ruin. In the legal suit it is alleged that Guiseppa was repeatedly persuaded to take dangerous loans staking the family property.

In the past few years about 70% of the seniors have been wooed to take new dangerous mortgages according to a survey conducted by AARP. Ultimately it all lead to foreclosures.   Senior attorney Jean Constantine Davis of AARP said, “Older people seem to be targeted in part because they own their houses and have owned them for a long time and have equity in their houses.” When Guiseppa Bagnarol signed the papers she was nearly 80 years of age and suffering from the signs of dementia.

Attorney Michael Rooney representing the family said, “This is one of the most egregious cases I’ve ever seen. The terms were so horrible – negative amortization and adjustable rate – no one would believe this loan was good for her.”

The case of Bagnarol is not an isolated one – these were very popular during that time. They were peddled under a bevy of names – Option/ARM and Pick-a-Payment. By it the borrowers could choose a schedule that required minimum payments to be made. The balance was then tagged on to the principal and thus making the original loan heavier and heavier. The borrower was sure to drown when the monthly payments would finally start to catch up with reality.

Sarah Friedland a student of Hunter College of Manhattan got an official letter from a lawyer protesting against her producing of a documentary film exposing the sub-prime scandals of Brooklyn. The letter told her to stop and desist from saying untrue things about his clients, the developers.

Initially the tone of the letter scared 29 year old Friedland. She said, “At first I was a little intimated. Then I got mad.” Later she came to know that the same letter had been dispatched to two others who were working with her on the film – Kahil Shkymba and Joy Nayo Simmons.

The trio had begun work on the documentary naming it ‘Subprimed’ from February 2008. At that time Ms Simmons who is employed in the office of Councilman Charles Barron informed a class in Hunter that 14 families on two of the streets in East New York were at risk from foreclosures. The common link in these 14 properties was the same sets of developers.

The story was extremely explosive and by the time the warning letters reached the trio in June the students had already poured in money and many hours into the making of the film. It was however still in an unfinished state. The legal threat did not cause any worry to 42 year old Shkymba but it would entail expenses and hassles to go through the defense.

The story unfolded for the fourteen homeowners when signs on lampposts drew their attention shouting “No Money Down! No Closing Costs!” The sellers of house were HPD, LLC. At a quick glance the sellers seemed to be the Department of Housing, Preservation and Development of the city. But in reality it was a private firm owned by two brothers – Michael and Joseph Makhani.

In the documentary Makhani is queried if the name of the firm is deceptive suggesting and hinting that it is a government agency. Makahni saucily replies, “If the client is stupid, that’s not my problem. We’re not going to have classes to teach people how to read.”

Another person interviewed is Nathaniel Hill who is a limousine driver. He said that he purchased a two-family unit from HPD paying $663,000 for it in 2006. Just prior to the closing he was asked to come with cash ($18,000) although it was not applicable to his mortgage. At the point of closing he came to learn that his monthly commitment would not be $3,000 as he had been previously told but it would be much higher – $4,189. The annual earnings of Hill amounted to $34,000 and it calculated to two thirds of his annual mortgage expenses.

If you want to modify your loan then your lender should have following qualification. You should keep following things in mind when you speak to your lender:

• Commitment to the lender
• Commitment to the house
• Ability to pay(this is considered to be one of the most important requirement)

If your lender has above qualification then your lender would not have any difficulty in modifying your loan. If the lender has this qualification then the lender would be able to satisfy the needs and the requirements of the borrower. If the lender does not have above qualification then the lender would have difficulty in modifying your loan and the lender would not be able to satisfy your needs.

Hardship letter should be included in your modification package. Hardship letter should contain the details regarding the number of loan, find the causes of default and you should find the review that caused the hardship. You should find your ability to pay the mortgage. Hardship letter should contain detail information about the borrower and it should contain detail information about the reasons about the events that declared borrower as evade. It should enclose the details about the property that is owed by the borrower.

Your hardship letter should contain the no of the loan, the causes of the default and many other things. It should contain the information about the borrower. It should contain details about the difficulties that are faced by the mortgagor. It should enclose things like property problems, marital difficulties, the reasons that lead to unemployment, the reasons behind the failure of the business, adjustment regarding the payments and other. These are the things that the hardship letter should include.

You can take your own time to discuss about the difficulties that are mentioned in the hardship letter. Try to discuss about the events that lead to financial crises and try to explain the events that made you default. You should try to explain these reasons in details. If you want that your lender should help you then it would become necessary for you to make the lender understand the situations that declared borrower as default.

If possible please mention the reasons that lead to hardship. There can be many reasons that can declare the borrower as default. If you need more pages to write then you should attach a page but you should write the details of the event that declared you as “default”. This letter should express the causes that declared you as evasion and you should describe these causes in details which would help the lenders to understand the reasons that declared you as default. It is important for the lenders to know the reason for missing the payments.

Hardship letter is the letter which is considered to be the key behind the success. If you are not able to discuss the events that declared you as default then you won’t be able to take the benefits of the advantages that are provided by the loan modification.