Be aware that some banks are offering a temporary loan modification. This means a bank will not agree to make a permanent loan modification but may instead offer the following conditions:
• The principal balance remains the same.
• Homeowners are asked to make a new reduced payment.
• The term for the new payment is set for 3 to 6 months.
• The implication is if the homeowner makes the new payments on time during the temporary loan modification term limit, the bank may grant a permanent loan modification.
However, at the end of the term, the bank is also free to say: “Thank you, very much, for giving us some money, but your loan is now in default.” And the bank could proceed to foreclose. The author has heard this story from several Sacramento clients who were forced into a short sale by this maneuver.