How does a loan modification work?
The theory behind a home loan modification is quite simple. Also referred to as a loan workout, it is when your current lender agrees to modify (change the terms) of your mortgage in order for you to afford your monthly payments and help avoid foreclosure.
Often, homeowners find our law firm after they have attempted to obtain a loan modification on their own and or were unsuccessful in working with a non-profit. If this is you, the Fransen and Molinaro Law Firm is the perfect solution to help you make your case with your mortgage servicer.
OK, back to the lesson…..
When you are first applying for a loan modification, make sure that you have a game plan on how exactly you are going to approach your lender. Their reps are trained in minimizing loss for their company, and they get paid by getting the most amount of money out of you as possible. This is how mortgage servicers mitigate loss, everything can and will be used against you.
Lenders may lower the interest rate, change adjustable-rate loans to fixed-rate terms, or even extend the term of a loan. In some cases they may even increase the principal balance of your loan by adding delinquent amounts to the back. But if you are just looking to knock your $600,000 mortgage down to $450,000 because that is all your home is worth, it probably is not going to happen.
Determining if you can afford your home and just not the loan is key. If you have no source of income at this time then you need to request from your lender a forbearance agreement before attempting a modification. A forbearance agreement may allow you up to 3-6 months of no payments. But not always will they approve you for one and they may end up suggesting you short sale the property.
You need to also determine where you are in the foreclosure process. Are you only a week away from a notice of trustee’s sale or have you missed only one payment at this time? You will need to quickly determine how much time you have to process your paperwork. It can easily take anywhere form 30 to 90 days.
Determining Factors your Mortgage Servicer is Looking for:
Nature of Hardship Causing Mortgage Problems
Ability to pay
Amount Owed
Equity in the property
Future financial situation
What is better for them? To foreclose or pursue a loan workout with you and or modify your loan. Meaning which approach will best benefit the lender in the long run.
If during the modification process it seems financial future looks bleak for the homeowner, or it doesn’t seem they would be able to afford even with the new terms, then they will most likely be denied for a workout solution.
Since our country is in such a serious mortgage crisis, you would think that lenders are now willing to negotiate when borrowers are facing financial difficulties, but that is simply not true. The facts are that thousands of people are not getting the mortgage assistance they need when the reach out to their lender and cannot afford their monthly payments. Thousands of homeowners are having problems trying to accomplish modifications on their own and just can’t seem to make it work.
If this is you, please call our law firm for a free consultation and we will give you an honest opinion on what we can do to help. (888) 756-2652
