The Principal Fork
Do You Want to Keep the Property?
This is the principal fork in the decision tree. If a financially sustainable solution existed, would you genuinely want to keep this property — or are you willing to leave? Your answer changes everything that follows.
Before you answer, be honest with yourself. A loan modification is principally for someone who genuinely wants to keep the property. If you are only pursuing a modification to buy time — or because the bank suggested it — you may be sacrificing leverage and credit for an outcome you never really wanted.
Yes, I want to keep it
You genuinely want to stay. The next question is whether keeping the property is financially sustainable — not just today, but long-term.
No, I want to leave
You are willing to leave. The next step is comparing every exit option against your foreclosure baseline.
I'm unsure
You need to compare both. Start with the keep-versus-leave comparison below, then decide.
If You Want to Keep the Property
Before pursuing retention, these questions must be answered honestly:
- •Is the present payment actually affordable?
- •Would a realistic modified payment be affordable?
- •Is the income disruption temporary or permanent?
- •How long might the property remain underwater?
- •Are taxes, insurance, HOA, maintenance, and deferred repairs sustainable?
- •Have you previously applied for or failed a modification?
- •Is the loan owned by Fannie Mae, Freddie Mac, FHA, VA, or another investor?
Possible Retention Paths
Important Warning About Loan Modifications
Applying for a loan modification may consume valuable time while the servicer reviews the application. We see a pattern of banks taking in loan mods and then denying homeowners who had little chance of qualifying for a good one from the start.
If you do not genuinely want to keep the property, compare your exit options before beginning that process. The servicer gets paid while your loan is in default review — your interests and theirs may not be aligned.
If you are going to miss payments to qualify, you are sacrificing very important leverage. Understand the trade-off before you act.
If You Are Willing to Leave
The first question is simple: can an ordinary sale pay the mortgages and selling expenses?
Yes — a conventional sale may work. Loans are paid at closing and you keep your credit intact.
Almost — a reduced-cost sale, cash contribution, or negotiated lien resolution may close the gap.
No — compare short sale, deed in lieu, continued payment / waiting, and strategic default / foreclosure. This is where the exit comparison on the next page matters most.
The next page compares every exit option against your foreclosure baseline — deficiency, taxes, credit, timing, and control — so you can see the trade-offs clearly before you commit.
Want This Reviewed for Your Situation?
Every situation is different. Get a free, no-obligation review with John McConnin, California Attorney & Broker.
(858) 324-8855