As the economy struggles to get back on its feet, many homeowners are seeking loan modifications from banks to ease their financial struggles. But borrowers are experiencing, what I fondly refer to as, the “Sike Phenomenon” from banking institutions, where loan modifications are being approved for “trial periods” that linger indefinitely, but only to be denied at the final modification stage.
Borrowers are confused and angered by these denials because they have complied with all terms of the modifications and made their payments in a timely manner. Yet banks yanked their preliminary approvals anyway.
The Sike Phenomenon has now come to a head. Borrowers who have finally had enough of this game initiated lawsuits against Wells Fargo Bank. The cases were brought before the 9th Circuit Court of Appeals (California), which ruled that borrowers who comply with all bank requirements for loan modifications, are offered trial periods, and then denied, have standing to sue the lenders in question.
What does this all mean in the general scope of things? Hopefully, it means the Sike Phenomenon will die down and trial period loan modification approvals will actually translate to approvals of final loan modifications if all bank requirements are met.
Will homeowner associations reap any benefits? One might opine if owners can more easily restructure their home loans, this will allow for a better cash flow and they will be better able to pay assessments in a timely manner. Another thought might be that restructuring of home loans will lessen the number of foreclosures, bankruptcies, and possibly short sales in communities and provide associations greater latitude with their collections. What do you think?