The Court Approved My Request to Mediate; can the Bank still Refuse to Modify My Loan?

Yes. Getting the court to agree to mediate your case does not always mean that the bank will modify your mortgage note. Even if court approves your request to mediate, the bank will still want to verify through financial documents that you can afford your loan.

There are Federal programs which may assist a homeowner to qualify for a loan modification. For example, there is the HAMP program, or Obama Plan, where the bank will try to lower ones mortgage payments to 31% of his gross income. However, a person may still not qualify under this if his total debt to income ratio is beyond 55%. There is also a new program called “Hardest Hit” whereby an individual hardest hit by this economy may qualify for government subsidization of his mortgage payment; however as of the writing of this pamphlet, the terms for qualification of the program have not yet been determined.

If a person’s income is high enough that he does not qualify for one of the above Federal Programs, he may still qualify for an “in house (bank)” modification; however the bank may still deny the loan modification if the payoff of the home far exceeds the appraised value.

If the bank does not approve your loan modification, your case will go back onto the Court’s foreclosure docket and your home may be sold at a sheriff sale.  If you cannot keep your home should still consider doing a short sale or deed in lieu to try to avoid  liability on the note.  Because of the various obstacles involved with mortgage modification, it is important to seek the advice of an attorney with strong experience in these matters.


When determining if a homeowner qualifies for a loan modification, there are various questions and issues that arise, namely, first, whether a person qualifies under a Federal program; if a person does not because his income is too high, then he may qualify for an “in house” modification; but the bank may still deny the modification if the payoff of the home is well above its appraised value.

Attorney Eli Tamkin is a Cleveland bankruptcy Lawyer.  He has been practicing law since 1989 and in Cleveland Ohio since 1994. Since then, he has dealt with a variety of legal issues, including bankruptcy, real estate, divorce, personal injury, and probate. Many times, answering questions on bankruptcy draws on knowledge of other legal areas as well. His experience in these other areas, as well as in bankruptcy enables him to address your particular needs and to offer you advice that is applicable to your situation.


  1. Hello, I am very confused. Forgive my ignorance, but I have been told recently that especially the big banks are slapping deficiency judgments on homeowners who do short sales and deed in lieu. Or better yet, they will also owe taxes for the amount that is not satisfied. I am having a very hard time deciding the best route to go, because it seems no matter which way a consumer goes, there are major consequences. The amount of time of the bad credit report, seems to be the same for which ever way a person goes, and if your credit report is already ruined from this whole mortgage meltdown mess, it just doesn’t seem to make any difference. Also, you say that if a person is foreclosed upon, you are liable for the whole loan balance owed. The bank takes your house from you , doesn’t that satisfy the amount when they sell it? And I am also told that they are insured on these defaulted loans and receiving up to 30 times the loss anyway from the insurance that they hold on them.

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