It is not unusual for an individual buying a new home to get a loan that they would have trouble paying off. This is the main idea behind the Making Home Affordable Program – Home Affordable Modification Program (HAMP), which gave eligible homeowners the chance to lower their monthly mortgage payments. This was especially useful in foreclosure prevention.
At present, many mortgage modification programs are available for delinquent borrowers or those with unpaid monthly mortgage payments. If you are struggling to pay your mortgage, consult with reliable Monroe bankruptcy attorneys to know the most appropriate way to avoid foreclosure, given your circumstances.
Overview of Home Loan Modification Programs
There are several loss mitigation laws and foreclosure laws that homeowners must be familiar with. New rules came about as a result of the loan servicing problems that arose during The Great Recession. In 2014, federal mortgage servicing laws went into effect to protect borrowers during the loss mitigation process. Additionally, some states (like California, Minnesota, Colorado, and Nevada) passed a Homeowner Bill of Rights or other state laws regulating how modification applications are to be processed by a mortgage company or servicer.
There are various ways for individuals with unpaid monthly payments to successfully find an alternative to foreclosure. However, before learning how to get a mortgage loan modification, it would be helpful to know what this written agreement entails.
In general, modifications extend the loan and lower the interest rate by permanently changing the original terms of the promissory note. Given certain instances, those behind in payments might add the overdue amount to the balance of the loan. Investors and lenders, however, will rarely approve principal reductions.
A government modification program may be available to specific borrowers, depending on the type of mortgage. In the case of Fannie Mae and Freddie Mac or USDA mortgages, or mortgages that are FHA-insured or VA-guaranteed, a homeowner may qualify for government mortgage modification programs. Additionally, there are several investors offering in-house ‘proprietary’ modification options, which may or may not meet your specific needs.
Proceeding with a Loan Modification Program to Stop Foreclosure
To be eligible for a mortgage modification, you will likely take the following guidelines several investors are offering into account:
- showing that the property in question is your primary residence
- there is a financial hardship aspect, such as a divorce, loss of household income, and having to take a lower-paying job
- showing that your income is steady and sufficient to make regular payments under the modified terms
The first step that you must take is to ask for a loss mitigation application from your mortgage servicer (home retention or loss mitigation department). Details about your income, expenses, and current financial situation, must be provided, together with the following supporting documents:
- a filled-out questionnaire including your personal information, property information, and mortgage information
- an income and expense financial sheet
- documentation of profit from a business or recent pay stubs
- tax returns and bank statements
- an affidavit of hardship
If you are looking for foreclosure alternatives, well-trained and dedicated, Monroe bankruptcy lawyers can help you look at the pros and cons of loan modifications and bankruptcy filings.
Taking the Proper Steps to Avoid Foreclosure Successfully
In general, an application for a loan modification will be approved once guidelines set by the U.S. Department of Housing and Urban Development and the investor or lender have been met. This means that some loan modification companies claim that haggling and negotiating are not necessary for the loan modification process.
Aside from the fact that the services of a loan modification company are rarely necessary, you are in the best position to answer inquiries related to your situation. You are in the best place to respond to any clarifications or requests for additional paperwork. Additionally, instead of paying a loan modification company to do things that you can do by yourself, you need a legal professional who can help you decide on the path you will take.
Loss mitigation is a complex process in the mortgage-servicing business. It is highly beneficial for borrowers since they can work with their loan servicer on behalf of the lender or investor to prevent foreclosure. While deeds in lieu of foreclosure, repayment plans, short sales, and forbearance agreements are open options, loan modification is preferred by many financially struggling borrowers. It is, however, not for everyone. In some instances, it is better for the borrower who cannot repay their loan to file for bankruptcy.
Talk to a Monroe Loan Modification Attorney!
A credible and hands-on Monroe bankruptcy attorney can answer your questions related to a home mortgage, such as the difference between a first mortgage and a second mortgage. They can also explain the disadvantages of a deed in lieu of foreclosure, when a loan modification is ideal, and if you are better off filing at the bankruptcy court. Contact us at E Orum Young and consult with a knowledgeable legal professional from our Monroe bankruptcy law firm.