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To obtain a modification a homeowner needs to apply to their lender who will send them an application. The homeowner needs to fill out the application and send it with many documents to their lender. While this process theoretically sounds simple enough, in reality the modification process can be lengthy and frustrating in that lenders often give inconsistent information, lose documents, and are slow to respond. Many borrowers seeking a modification give up given the many possible delay tactics adopted by many of the mortgage lenders. To maximize your chances of getting a modification you should consider retaining law office such as ours with experience in the mortgage modification area.
Mortgage modification agreements are currently a strong option for many of our clients are undergoing financial difficulty. In the current economic climate many of our clients are having difficulty affording the amount of their regular monthly mortgage payments. To qualify for a mortgage modification agreement, a client needs to show “hardship,” but at the same time the client also needs to show financial strength sufficient to stay current with the mortgage once they do obtain a potential modification. Many factors are influential in helping a client obtain such a resolution including the value of their home compared to the mortgage balance and the amount of the interest rate under the loan and whether the rate and terms of the loan are high and excessive compared to the currently available rates given the current market conditions.
There are two main types of modifications, a “HAMP” modification and an “In-House” or non-HAMP Modification. A HAMP modification is per the Making Homes Affordable Program sponsored by the federal government where financial incentive is given to lenders to modify mortgages according to certain criteria. An “in-house” modification is usually directly from the lender according to their modification programs. A HAMP modification is usually more aggressive and can go down to a rate of 2% interest for the initial years of the modification. However, a HAMP modification also has more restrictions, because the program may not be available in certain situations. Both types of modification, however, are similar is seeking to make payments more affordable for struggling homeowners.
Under HAMP there are more requirements to obtain a modification, while with the “in-house” modifications there is greater flexibility, depending on the particular bank and program. To qualify for a modification the homeowner must be considered to be “at risk” with serious hardship involving either loss of income, increase in expenses or “payment shock” (due to significant increases in their mortgage payments). The loan must be a 1st lien (although a second mortgage or equity loan can be modified, if the first mortgage was successfully modified) and the home must be owner occupied (although as of June 2012 rental properties can also qualify). Borrowers with equity loans and second mortgages are not disqualified. The loan must be in default or in imminent default. Borrowers can qualify whether delinquent or not, but must have enough income to handle modified payments. Lenders would lower mortgage payments exceeding 31% of gross income by dropping interest rates to as low as 2%, and if necessary, extending the loan term up to 40 years. The loan interest rate is usually the lowest initially and gradually increases to approximately 4% interest interest over several years. The amount of the mortgage can not exceed $729,750. for a single unit home and the loan must have been created before January 1, 2009. Mortgage holders who lower mortgage payments would get a financial incentive from the Federal government for modifying a loan.
Please call us at (631) 271-3737, or e-mail us at weiss@ny-bankruptcy.com for a free consultation to further inquire about our representing you in negotiating for a loan modification.