My friend needs some advice

[TRfromillino]

I have a coworker, who stopped paying her mortgage last November. She was down to a single income in the home and just couldn't afford it. She's not filed for bankruptcy and seemed content to just let them take her house which isn't worth nearly what she owes on it. Long story short, she's now changed her mind and has been working with the lender on loss mitigation and they called her today, saying that they would be doing the 3 month trial pay and if she qualifies after that, they would lower her interest rate, tack on the arrearages to the back end of her note, blah blah blah. None of these payments however are applied to her payment. (Guess they just go shopping?) And if they didn't approve her, then she could go ahead and do a short sale.

I had all kinds of warning bells go off when she was telling me all this, but all I could think of to say was that I hadn't heard good things about the trial payments and at least get something in writing before she sent them any money. Can you help me give her some wisdom on this. She doesn't have a lawyer, going at it herself. Thanks if you can help!

[justbroke]

They can't take her money and go shopping. What they are trying to say is that the payments would not bring her current, and would go into a "suspense" account until either she caught up, foreclosed upon, sold, or a modification was approved. (This is why banks don't like "partial" payments on mortgages. They put any "partial" payment into a suspense account until the entire amount is collected and matches the total due.)

She can certainly attempt the trial if she wants to keep the home. If she has no intent on keeping the home, the trial payments could be a waste of money/time. What I mean by "could" be? If she uses it as a delay strategy, it could be "worth" that amount of money to slow down a foreclosure. However, we have learned that many banks continue the foreclosure process even when you are in a trial period (although they won't actually sell until the period is over).

This is a financial decision and she will need to run the numbers front to back and back to front. Is the home worth saving? Can she actually afford the payments? This is important especially since I will tell you that most modifications end up in foreclosure anyhow.

[TRfromillino]

Well, I believe she thinks she would like to keep the home because if they actually lower the interest rate, and she gets new home insurance, it makes it more affordable. But there is certainly no guarantee that will happen. I look at her whole situation overall after what I'm going thru, know what she makes which is much like me, but I don't have a car payment or cc payments on top of that. I will tell her tomorrow what you said. I think your last statement says it all. Thanks!