WILL MY BANK LOWER MY LOAN BALANCE?
- Douglas M. Matton
- May 23, 2016
- 3 min read
Foreclosures continue to plague the real estate market. They also continue to be a drag the economy. Millions of people are struggling to make their mortgage payment each month.
The quickest, best and easiest way for the banks to help those struggling homeowners would be to write down some of their loan balance so that the overall monthly mortgage payment is lowered. Therefore, most struggling homeowners have questions:
Q: Will the bank write down my loan balance?
A: Unfortunately, in the vast majority of the cases, no, the bank will not do so.
Q: The value of the house has actually decreased and now I owe more than it is worth, so why will the bank not write it down to the current value of the house?
A: Short answer: greed. The banks are greedy. Period. Yes, you and I and everybody else helped out a few monstrously large banks when those banks were on the edge of going under. You know it. I know it. And our President, Senators and Congressmen know it. However, money rules politics now, and that means that the banks control our government, and actually are now able to dictate policy. This translates in to the banks not having to help out those struggling homeowners if the banks do not want to.
Q: What was all of that bank bailout money used for then?
A: Nobody really knows what the money was used for. The Congress did not put any restrictions on it, and the banks have not divulged what they used that money for.
Q: Is there any instance where the loan balance is written down?
A: Yes, in certain situations, but those situations are increasingly more and more rare with every passing day. One situation involves the Federal Housing Finance Agency (FHFA) and a program it currently has in place.
Q: What does that federal program entail?
A: To be considered eligible, the homeowner must owe more than the property is worth; there must be an active foreclosure case; the property must be owner-occupied, and the mortgage loan must be no more than $250,000 on a loan that is guaranteed by Fannie Mae or Freddie Mac.
Q: How many people qualify for that principal reduction program?
A: Only about one percent (1%) of people fit in to those requirements, which is so low as to basically be meaningless.
Q: Are there any other situations in what situation will the bank write down a loan balance?
A: Possibly. If you sue your bank for a violation of a state or federal law which governs the mortgage.
Q: What laws apply to mortgages?
A: The Truth In Lending Act and the Real Estate Settlement Procedures Act have certain requirements that a bank must follow with respect to a mortgage. If those requirements are not followed, then a homeowner can sue their lender in either state or federal court. Such a lawsuit can give a homeowner the leverage needed to get the bank to reduce the principal on the loan.
Q: How can I find out if my lender violated the law?
A: You should bring all of your mortgage documents to an experienced attorney who can review those documents. Once those documents are properly reviewed and analyzed then you will know whether or not you have the ability to sue your bank for a violation of the Truth In Lending Act, the Real Estate Settlement Procedures Act, or any other state or federal law. If you do have the ability to sue your bank, then you could use that as leverage to get your bank to drastically reduce the principal balance of your loan.
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