A very interesting article on the Mortgage law Network appeared that you should be aware of.
And banks are failing at an alarming rate. When a bank is taken over by the FDIC, the FDIC is protected by law from “side deals” made with borrowers which might tend to reduce the value of your loan to them. What does this mean? It means that some deals made with banks to help modify a mortgage to save your home could be in jeopardy.
Under federal law, the FDIC is formally only “on the hook” for a deal made with you — where the deal tends to reduce the ultimate value of an asset, as a reduction in interest or principal in your loan might — if several (potentially impossible) steps are taken. Section 1823(e) of the FDIC’s law provides that to bind the FDIC in the event it takes over your lender, the deal must be (a) in writing, (b) executed by both parties (often simultaneously with the bank taking on the loan), (c) approved by the board of directors of the bank with such approval reflected in the corporate minutes, and (d) continuously appearing in the records of the bank. Many of those requirements are out of the control of the typical consumer.
If you have a modified mortgage or are looking to get your loan modified and you have a concern that your lender might fail, please, please read Bank Loan Modifications and FDIC Traps For the Unwary.
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2 thoughts on “Just Because Your Bank Modified Your Mortgage Doesn’t Mean It Will Stick”
My house is worth less then my mortgage ($3,100), my expenses are more than my income (loss of $900/mo). I have never missed a mortgage payment but have 20k in personal savings and checking, 60k in a business account (S corp with different tax ID) and about 60k in mutual funds. When my ARM adjusts in January my payments will go up another $600.
Would a bank ever approve a loan modification considering my liquid reserves? 60k in my business account is under my business name, do you think it is necessary for to report this in my personal financial statement as requested by my lender?
It would be best to ask your specific lender for their modification criteria. Not all lenders participate. But what is more alarming is that in order to maintain your current situation you are spending down assets. That is not a prudent move if their is no end game in sight. The 60K in the S corp is not a personal asset of your. The corp is a separate legal entity. However, the corp is an asset of yours since you are probably the only shareholder.