Our Mortgage Loan Was Modified and the Monthly Payment Went Up. – Sandra

“Dear Steve,

My husband and I had a financial hadship situation last year and got behind on our morgage payments to Countrywide (now Bank of America). Early this year, we started the loan modification process and in July we were notified that the loan had been modified. I was very disappointed since they only included the balance due to the principal and allowed us to keep our current interest at 5.85%. The mortgage payment was increased and they kept the interest-only- adjustable rate type of loan we had. Basically, nothing changed, just that the loan was made current.

We were hoping that the loan modification would help change the terms of the loan or reduce the payment. Now we are on a worse place, because between this loan, the second mortgage, and the HOA dues, we pay $1650, which we can barely afford.

At this moment, everything we have paid has gone only to interest, so the principal has not decreased in 4 years, and our house value is a lot less than what we owe. We are thinking it would be best to do a short sale, or just leave the place, rent an apartment, and let it foreclose.

Your Question Do we have any options? What do you think we should do?


Dear Sandra,

I’m sorry to hear the the modified mortgage loan is a stinker but I’m not surprised. The majority of modified mortgages provide little, if any, real relief.

So they brought your loan current, but back to a payment you still can’t afford so that’s not a whole lot of help.

I think the time may have finally arrived when you do need to evaluate some other options. A short sale is always possible if you have a buyer and you are willing to repay the forgiven balance of the loan that was necessary to sell the house. Additionally, if you just let the house foreclose you will be hit with a big bill that you can’t pay.

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Probably the most logical and sensible approach would be to meet with a local bankruptcy attorney and discuss a game plan on timing this mess so you can get out of the house and drop the big bill you will be hit with into a bankruptcy to discharge that debt and end your continued financial liability for this house which you cannot afford.

Once you and the attorney agree on a game plan you can move out into an apartment and then let the house default.

Find a local bankruptcy attorney you like, schedule an appointment and go in and discuss the matter face to face.

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Damon Day - Pro Debt Coach

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Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here.
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