As a Massachusetts Short Sale Agent, I have in the past and recently run into home owners who have contacted their bank to do a loan modification. In doing so the bank has told them to be considered they need to stop paying their mortgage to be considered for a loan modification.

The Bank Is Not Your Friend

First and foremost, you must understand the bank is not your friend, they will do anything to collect what you owe. In many cases they will act nice and friendly and tell you that they will help you out in your times of trouble.  Often I find troubled homeowners tell me how nice and understanding the bank is....NOT!!

It is irresponsible of a bank employee in the loan modification department to tell you to stop paying your mortgage.  You will never receive it in writing, so when things go awry it is a tough thing to prove.

Most Loan Modifications Don’t Get Approved

Very few loan modifications actually get approved by the bank. Why?

You must qualify for a loan modification much like you had to for a loan. You still need to show the bank that you can pay back the loan. So, if your income has been drastically reduced there is a good chance you will not get your loan modification approved.

Loan modification approvals also take time. I have seen some take more than a year. Meanwhile you are not paying your mortgage and interest is accruing. The bank is not going to forgive any of the accrued intrest, late fees. etc...  They are going to tack that on to your loan balance.

If you do manage to get approved, make sure you understand the terms. Is it a long term solution or are you temporarily slapping a band aid on the problem.

Stopping Your Mortgage Payment Has Long Reaching Effects

If you follow the banks advice to stop paying your mortgage realize there are long term effects.

It will impact your credit. Your credit score will tumble making securing other lines of credit in the future difficult.

But worse yet….

A few months of not paying your mortgage will leave you thousands of dollars in arrears. If you are already in a precarious position this could be enough to push you over the edge.

Now consider what will happen if you don’t get approved, you still owe all that money.  If you can’t catch up your are probably looking at an foreclosure in the near future.

Not A Panacea

Loan modifications and short sales are not a panacea for all of your financial problems. They are a last ditch effort to avoid foreclosure.

If you are for certain going to be missing mortgage payments or you already have and there is not a chance of recovering than certainly consider a loan mod or a short sale. But whatever you do think twice before stopping your mortgage payments because the bank says it is the only way they will consider a loan modification.

If you don't get approved for your loan modifcation, or worse yet you get approved and the payments are now higher than your original mortgage payment (yes this happens!), where is that going to leave you.

If Told To Stop Making Your Mortgage Payment…

Consult with an attorney or a real estate agent that specializes in short sales. They can explain the ramifications of stopping payments, discuss all of the options you may have in front of you. And will usuallyhelp you seek out help with those options.

Don’t rush into stopping your mortgage payments because the bank told you to do so.

Other Short Sale Resources

• Theresa Cowart  Foreclosure and Short Sale Myths
• Bill Gassett  Short Sale REALTOR Mistakes
• Anita Clark  How to Get A Mortgage After A Short Sale
• Kyle Hiscock  Short Sale Success

This article, Don't Let the Bank Talk You Into Stopping Mortgage Payments- Loan Modifications, has been written by Kevin Vitali.  Kevin has experience helping underwater home owners find solutions financial problems with a short sale or sterring them to other solutions.