Modify Shannon

Hi Paul:

I have a 2 part question and I hope you can help. 

In 2004 I unfortunatley got divorced from my husband and we had a condo in FL in which I moved into after the divorce.  I took out a HELOC and consolidated a good bit of debt in 2004.  In 2005, I refinanced the HELOC in a fixed rate 2nd mortgage balloon with the same company. 

The bank did not treat this as a normal refinance, they did a modification from a variable rate mortgage and converted to a fixed rate 2nd and the term was changed. 

My balloon is about to be due and I have asked the bank if they would refinance to a fixed rate term loan and they are refusing.  I have always paid on time, but their reasoning is they are no longer interested in holding FL properties on their books.  I will not qualify for a new mortgage under today’s guidelines due to my Debt to Income ratio. 

My question is, when I consolidated in 05 to a fixed rate, it changed my rate and term, but I was never given a right to cancel to sign.  The bank stated that due to it being a modification from the variable rate, the right to cancel was given on the original HELOC back in 2004.  I didn’t receive new money, however my term did change. 

I’m not looking to get any money, but I was hoping I could bring this back on the bank as a goof up on their part in hopes they will refinance my mortgage.  I certainly don’t have 75K to payoff my mortgage. 

The 2nd part to my question is can you actually do a modification from going to a variable to a fixed rate mortgage on just a modification? Do you have any suggestions?

Shannon

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Hi Shannon,

A modification permanently modifies the note (reduces the rate, extends the term, etc.) and to answer your second question first – yes, a modification can convert an adjustable rate to a fixed rate.

It sounds like they provided a loan modification in 2005.  Did you check public records to see if they recorded a modification agreement in your county?  In any regard, if it was a refinance then the TILA wouldn’t provide much benefit because the extended rescission right wouldn’t apply unless there were new advances made and then only to the new advances because you refinanced with the same lender.  Also, three years has passed and the extended right to rescind expires at the end of 36 months.

I know nothing about your financial situation and I would never advise anyone to stop making their mortgage payments; however, you mentioned it was a second mortgage on a Florida condo and I would guess that the second mortgage is underwater; if it were me and I had a second mortgage with a balloon coming due and the lender refused to modify the loan terms to extend the balloon (end what if here…).  The answer is obvious.  They must modify the loan again.

Thanks for the questions and no worries, the bank is in more trouble than you.  I’d send a Qualified Written Requests or two every month until the loan was modified.

Paul

This author is not an attorney and this information should not be considered legal advice.  Please consult an attorney for legal advice.