People get sick. People lose their jobs or clients or business accounts. Whatever the reason for these financial woes, those who find themselves struggling to make mortgage payments for their property, either residential or commercial, may consider a mortgage modification. This may involve negotiating a new rate or payment plan with the lender to help get the property owner back on track with their payments.
In some cases, these modification negotiations are successful. In others, lenders may make promises only to change their minds at the last minute and leave the borrower in a worse position than when the negotiations started. They may state the property owner should pay “x” amount for “x” period of time to qualify for the modifications only to deny the modification application after the property owner meets the negotiated terms.
Is this legal? Does the property owner have any recourse? In a recent case involving the Bank of America, a property owner applied for a loan modification. Multiple banks and loan servicing companies claimed to have lost or never received these documents. Repeatedly. The financial institutions misled the property owner, stating he would qualify for a modification plan that was well below what he requested.
He did not receive the modification he needed and faced serious financial hardship along with the threat of losing his home. He sued the bank in an attempt to hold them accountable for their games during the loan modification process. The judge sided with the property owners, stating the records of the negotiations created a “special relationship” that the lender was required not only to hold up their end of the bargain, but also to pay damages to the property owner.
Hopefully, this case will serve as a warning to lenders throughout the country to better ensure they hold up their end of a loan modification agreement. If not, it will serve as precedent in many courts, allowing property owners to better hold these lenders accountable for mistreatment during the loan modification process.