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Our meandering economy has pushed the finances of many families quite literally to the breaking point. When reserves have been exhausted, homeowners struggle to find a way to pay their mortgages. Often people look to loan modifications to avoid home foreclosure.Unlike a refinance of a home, a loan modification does not create a new loan. Loan modifications are simply changes made to the existing loan. The terms of the loan are renegotiated to make it more affordable.The Challenge of Loan Modifications

All too often, however, the loan modification process can be fraught with frustrations. Recently, the Los Angeles Times shared the journey of one San Bernardino woman, whose struggle to save her home took her foreclosure and back, and brings up questions as to why, after two and half years, she is still struggling to get her loan modification completed.

After refinancing her home several times during California’s housing boom, Karen Mena and her husband found themselves struggling when his construction business failed. After exhausting her line of credit, Mena applied for the Home Affordable Modification Program (HAMP) in 2009.

Mena’s struggle with HAMP was fairly typical. The loan modification process was continuously hindered by roadblocks like:

  • Paperwork wasn’t received
  • Incomplete, missing or outdated financial documents
  • Improperly completed paperwork

By August 2010, Mena was threatened with foreclosure. She applied again for a loan modification. Despite the bank’s promises that they would not go through with the sheriff’s sale while she was undergoing a loan modification process, her home was foreclosed in December.

Shortly after being informed of the sale, she received a letter from her mortgage company advising her that she’d been accepted for a HAMP trial period. Throughout the rest of the year, Mena fought to get her home back. In late October, Mena learned that the foreclosure had been retracted. She is still working on completing her loan modification.

Unfortunately, Mena’s situation is not unusual. The loan modification process can be extremely challenging. Yet for some families, the struggle is worth it – especially when they can get help from California loan modification attorneys.

Bankruptcy as an Alternative to Loan Modification

One of the criticisms of loan modifications is that they do not eliminate any of the principal owed. For homeowners caught in upside down mortgages, they can use bankruptcy to remove second and third mortgages, putting them on even better financial ground once the bankruptcy is complete.

Even when mortgages are not underwater, Chapter 13 bankruptcy can be an effective means of shedding other debt while getting caught up on the most important obligation, a mortgage, without fear of foreclosure.

If you are facing foreclosure and are looking for ways to save your house, you should speak with a Los Angeles bankruptcy attorney to review your options.

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