If you tell people that you're trying to get a loan modification to avoid foreclosure and keep your home, inevitably some of them will offer advice, whether they know what they're talking about or not.
Acting on bad guidance for something so important can be harmful to your chances of getting the outcome you want.
Here's some of the worst advice we've heard about loan modifications and foreclosure:
"Stop paying your mortgage to get a loan mod"
Homeowners who are current on their mortgage have been told that they need to stop paying their mortgage to be eligible for a loan modification.
This is wrong.
You do need to show that you've had a hardship that's making it hard to afford your mortgage, but you do not have to be in default to get a loan modification.
If you stop paying your mortgage, you will have negative entries on your credit report. You will also accumulate fees, which can be substantial. And your bank won't accept payments again until you either pay for the missed payments and fees or get approved for a loan modification. So think twice before you choose to stop paying your mortgage.
"You don't need professional help to get a loan mod"
Often mortgage servicers will tell homeowners that they don't need an attorney. They say that they'll work with you and getting professional help isn't necessary. It is true that you can get a loan modification without professional help, however it may be more difficult.
If you choose to work on your case on your own and you don't have extensive experience with loan modifications, you may unnecessarily fail. An experienced lawyer will know what the bank needs to see to approve you and can give you the best odds of getting what you want.
Also, while you're working with the bank to get a loan modification, the foreclosure case against you could still be moving ahead. Having an attorney to defend you from foreclosure while working to get you a loan modification offers you the most protection.
There are some free not-for-profit services available for homeowners that need assistance with modifications, but they may lack the resources to give your case the attentions it needs. Sometimes you get what you pay for.
"If you lose your home to foreclosure, trash the house!"
I'm not aware of anyone actually advising people to trash their house after losing it in a foreclosure sale, but there are examples of people doing it that could inspire others. For example, some homeowners have taken everything out of the home that's of value, such as copper pipes and light fixtures.
Others have done things to damage their home before leaving just for revenge, such as leave fish to rot in the attic, pour cement down the drains, or knock holes in walls with a hammer. While that may be cathartic, it could end up costing you in the form of a deficiency judgment. If you work with the bank or winning bidder, they may even offer you a few thousand dollars to leave the home in good shape.
Loan modification and terms are guaranteed
There are cases of businesses telling homeowners that they were guaranteed to to get a loan modification with a lower payment or some other terms. The people saying this were scammers.
No one can guarantee you that you will get a loan modification at all, much less that it will have certain terms.
People who offer you advice generally just want to help. Unfortunately, some of them won't know good information that can actually do that, and others don't have your best interests in mind. Wherever it comes from, believing bad advice about getting a loan modification or avoiding foreclosure could cause you to unnecessarily lose your home, which is probably your biggest asset.
So make sure you act on good information from reliable sources. You may be able to avoid foreclosure and get a great loan modification.