Why is My Temporary Loan Modification Not Permanent?

Borrowers from different parts of the country have been contacting us since we first started reporting on problems with bank loan modification programs. We did not know the true extent of the problem until we listened to the stories of several borrowers.

One of the primary complaints has been the amount of time banks are taking to process loan modifications. In an effort to provide borrowers with an efficient method to stay in their homes, the federal loan modification program (referred to as "HAMP") was established to streamline the process of obtaining a loan modification.  The process under HAMP is supposed to be relatively fast.

However, banks have not implemented procedures and processes to effectively carry out HAMP's mandates.  Nor have they hired enough trained personnel to answer borrower questions and process loan modification requests.  One has to question whether the banks are really interested in modifying loans under the federal program.  It oftentimes taking 6 to 8 months, or even longer, to issue a permanent loan modification approval, if one comes at all.   Borrowers are being left in limbo during this entire time period, foregoing or delaying other potential strategies to save their homes and finances, such as filing for bankruptcy or pursuing a short sale.

We know that banks were telling borrowers not to make payments while borrowers loan modification requests were pending with the bank.  What was the bank reporting to a borrower's credit during the entire time their loan modification agreement was pending?  Borrowers need to start requesting their credit reports early in the loan modification process so that they can monitor the bank's credit reporting activity.  Even though many borrowers may have been in default prior to seeking a loan modification, the banks are still required to make accurate and fair reports to the credit bureaus.