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Loan Modification

A loan modification is an alternative to foreclosure. A modification is an effective way to re-negotiate the terms of a loan and restructure payments so that your payments become more affordable and you are able to make them on time. Once a loan modification is successfully obtained, you are no longer under the threat of foreclosure if you remain current with your mortgage payments. Using a loan modification our team can help you avoid foreclosure. Throughout the process, we will protect your rights, expedite the loan modification process, and above all, look out for your best interests.

With loan modifications, countless clients have told me that the lenders were not really willing to help UNTIL the client obtained legal representation.

If you can prove to your lender that you have a financial hardship, the lender might be willing to reduce the current monthly payment to a more affordable level. Note that this doesn't mean the principal balance will be reduced. While that is possible, banks typically are not that lenient. Typically your interest rate igets reduced to lower your payment.

The federal Home Affordable Modification Program (known as HAMP) offers lenders incentives to reduce the mortgage payments for qualified borrowers. Some lenders also have their own modification programs.

An experienced attorney can often assist you in obtaining better results than you'd be able to obtain yourself. For example, if you receive a 4% loan modification when you COULD have obtained a 2% loan with attorney help, that could cost you dearly. See the below sample figures:

 

Sample figures

     

 $      300,000

First Mortgage

 

 $ 300,000

First Mortgage

8

Months in arrears

 

8

Months in arrears

 $          2,800

Current payment

 

 $     2,800

Current payment

 $        22,400

Arrearage

 

 $   22,400

Arrearage

 $      322,400

Total mortgage & arrearage

 

 $ 322,400

Total mortgage & arrearage

2%

Rate of interest

 

4%

Rate of interest

30

Years of mortgage

 

30

Years of mortgage

12

Periods/year

 

12

Periods/year

 $          1,192

New payment

 

 $     1,539

New payment

 

add property taxes

 

 

add property taxes

 

add property insurance

 

 

add property insurance

 $      428,995

Total paid over 30 years

 

 $ 554,107

Total paid over 30 years

         
     

 $ 125,112

You'd pay this

much  MORE!

 

It is not uncommon to see attorney negotiate much lower rates for homeowners. Graduated payments plans are also popular. This is where a bank will approve a low rate for one year, increase it maybe one percent the second year, and then again for the remaining years. Many times they also agree to forgive overdue interest and penalties.

On June 1, 2012, the Obama Administration launched

new rules for HAMP loan modifications:

  • Rental properties occupied by a tenant or available for rent on a year-round basis.
  • Homeowners who cannot be modified to a fixed 31% debt-to-income ratio.
  • Homeowners who did not successfully complete a prior HAMP trial, or previously failed to maintain a prior HAMP modification, could now have additional eligibility if certain requirement are met.
  • Under the new rules, homeowners will have to prove their income before being put into a trial loan modification.
  • Within 10 business days following receipt of an Initial Package, the loan servicer must acknowledge in writing the borrowers request for HAMP participation.
  • The loan servicer must review the Initial Package within 30 calendar days of receipt to make sure it is complete. If the documentation is incomplete, the servicer is supposed to immediately contact the borrower. But, if the package is complete, then the servicer must either send the borrower a Trial Period Plan Notice, or decide the borrower is not eligible.

If you get put into a Trial Period Plan Notice, under the new rules, the loan servicer is prohibited from initiating a foreclosure action.

Why hire an Attorney for a Loan Modification?:

In the last few years, the number of so-called "loan modification companies" has exploded and many homeowners are using them to get their mortgage modified. Many times this can be a mistake simply because many companies do not know how to properly negotiate with the bank on the homeowners behalf. There have been government "crack downs" on these firms. This is one big reason to consider paying an attorney to help you navigate a loan modification.

Some loan modification companies try to mislead people by saying a loan modification is a sure thing. That is NOT true. Your goal should be to increase the odds that you'll get approved. To do this, consider retaining local counsel in order to ensure you have the best probability of achieving loan modification success.

Many non-attorney debt relief companies are inexperienced. Often, they are needlessly expensive. Such companies can do far more damage than good. Often, they don't know the intricacies of the law applicable to loan modifications. An attorney can represent you in what is largely a legal process. A loan modification may enable the homeowner to reduce their interest rate and lower their mortgage payments. In many cases, it is also possible to actually get the outstanding principal reduced as well. This is especially true when there is a second mortgage involved and when the property is worth less than the outstanding mortgage.

An attorney knows the right way to talk to lenders. When we present your loan modification application, we will be armed with all the documents and the right negotiation techniques. A loan modification attorney will look at your case from a legal point of view. When you present your case, you’ll be armed with all the supporting documents and the right negotiation techniques. Lenders are far more likely to respond fairly and appropriately when a knowledgeable attorney is managing the process.

Lenders will often take you more seriously when you have a loan modification attorney by your side. Because they can use legal information as leverage, law firms often yield better offers than you could get on your own.

An established loan modification attorney has contacts with all of the major lenders. Combined with a good track record, this helps them to make more attractive offers, such as a lower interest rate or even principal balance reductions.

Attorneys can "buy you time" when needed. If you attempt a modification on your own, you might get passed around from representative to representative without really moving forward. And if you’re already facing foreclosure, you can’t afford to waste time. A lawyer can stop closure even while it’s under way, giving you more time to recover your finances while they work on saving your home. If a lender is being difficult, an attorney can help a file a bankruptcy to stop the foreclosure. Also, an attorney can file an order to show cause to stop a foreclosure sale.

Lenders are difficult to work with for many reasons. Often you get different answers from different service representatives every time you contact your lender and there is often turnover. The lender is not set up to help you unless you already know exactly what they want.

If you're working with a New York attorney, verify their license here:

                        http://iapps.courts.state.ny.us/attorney/AttorneySearch

The benefits of retaining a loan modification attorney:

While you can attempt to negotiate for a loan modification yourself, that is not recommended. There are significant benefits to working with an experienced loan modification attorney to receive a modification of your mortgage.

It is important to understand your rights when applying for a loan modification. Some lenders will attempt to keep you on an adjustable rate mortgage or fool you into signing a predatory loan. Don’t fall for these deceptive practices.

Retaining a lawyer will bolster your negotiation power because lenders take lawyers more seriously than independent home owners. Using our experience with the loan modification process, we will work to get you the best possible deal on your modified loan. It is highly likely that one of our team members has worked with and dealt with your lender previously, therefore, we will know what needs to be done to obtain the right loan modification for you.

After attentively reviewing your case we will formulate the best custom-made goal to help you in your time of need.

Loan modification overview:

Mortgage modification is a process where the terms of a mortgage are modified outside the original terms of the contract agreed to by the lender and borrower. Any change to the mortgage terms is a modification. Mortgages are modified to the benefit of the borrower in one or more of the following ways:

  • A reduction in interest rate, a change from a floating to a fixed rate, or a change in how the floating rate is computed
  • Reduction in principal
  • Reduction in late fees or other penalties
  • Lengthening of the term of the loan
  • Capping the monthly payment to a percentage of household income
  • Mortgage forbearance program

The borrower can be current, late, in default, or in foreclosure at the time the application for modification is made. The programs available will vary accordingly.

Qualifications:

Not everyone facing foreclosure that applies for a loan modification will receive it. There are certain stipulations and qualifications you must fulfill in order to be approved. Although every lender’s qualifications are slightly different, there are several universal criteria to fulfill, some of which are listed below.

  • The property in question must be your primary residence and a single family home. Under Federal law, you cannot modify the mortgage of a rental property.
  • Not vacant or condemned.
  • A lender will not allow you to modify your mortgage without a steady income that guarantees that a default will not occur again; it is not a sound business plan for them.
  • As stated above, there are lender-specific qualifications as well. We can discuss these specific qualifications with you during a free consultation.
  • If your property does not fulfill these specific criteria, do not panic. There are other options besides loan modifications for those that are facing foreclosure. Other options include bankruptcy, deed in lieu of foreclosure, and short sales.

Loan forbearance:

Forbearance literally means "holding back". It is defined as a special agreement between the lender and the borrower to delay a foreclosure. Forbearance is simply short-term relief for the borrower since it delays payments to a later date when the borrower is able to become current with their mortgage. Forbearance does not excuse the homeowner from any debts or unpaid monthly payments.

There is a stark contrast between forbearance and modification. In forbearance, the borrower is simply weathering the storm of a temporary financial hardship until they are able to pay off the interest and principle of the mortgage. In a modification, however, it is understood that the mortgagee will never be able to become current again. We will offer you our best advice when it comes to these options and determine which road is best for you to take given your current situation.

Looking out for bad loan modifications:

Before beginning any legal process, it is important to know the warning signs of scams and fraudulent contracts. Loan modifications are generally known as one of the safest venues for becoming current on your mortgage once again. However, it is of utmost importance to keep an eye out for unethical and illegitimate practices. Our team knows how to detect an illegitimate practice, and will help you avoid it in pursuit of better options.

Frequently asked questions about loan modifications:

Q. What is the basic definition of a loan modification?
A. A loan modification is any change to the original contract that is agreed upon by both the lender and borrower. Generally, loan modifications are used to avoid foreclosure by allowing the borrower to once again become current on their mortgage because of the negotiated modification makes payments easier.

Q. I’ve looked into both forbearance and modification. Are there any significant differences?
A. Forbearance is temporary relief for those struggling with their mortgage. Individuals that are under forbearance are expected to "bounce back" without a modification and become current on their mortgage again after their financial hardship has been straightened out. A modification is similar in that it is used as relief for those that are struggling with their mortgage; however, it is a permanent change.

Q. I don’t have a steady income, and therefore don’t qualify for a modification. What alternatives are there for me?
A. There are other methods for avoiding foreclosure. Options such as, bankruptcy, deed in lieu of foreclosure, and short sales have historically all proved effective in avoiding foreclosure.

Q. A few companies have recently contacted me and offered help for my current mortgage situation, calling themselves either banks or law firms. They seemed legitimate, so what’s different about your law firm?
A. Because of the economy’s current recession, it has become "hunting season" for scammers. Scammers prey on vulnerable homeowners who are looking to do anything to remedy their current situation. These scammers are really just interested in either buying your house at a discount or involving you in a new loan that is actually worse than your current one. This process is called predatory lending.

Q. My friends told me that a bank is not likely to listen to my negotiations even with an attorney working with me. They said the bank would rather foreclose on the property than modify my mortgage. Is this true?
A. No. Foreclosure is a longer, more painstaking process for both lender and borrower. Nine out of ten times, a bank would rather modify a mortgage than foreclose on a property. Having an experienced lawyer to advise you helps facilitate and complete this process.

Q. What does HAMP mean?

A. Home Affordable Modification Program.