Friday, June 2, 2023

Loan Modification Fact and Fiction – Who Qualifies and What Can Be Modified

  • Do you owe more than your home is worth?
  • Has your rate adjusted so high that you can’t make your monthly payment?
  • Have you received calls or mails offering loan modification services?

This article explains who qualifies for a loan modification. It describes what can be negotiated with the lender and gives advice on how to decide whether to seek loan modification alone or hire an expert.

Should You Hire Someone To Help You With Loan Modification?

The answer is maybe, maybe not. Before you retain a firm to negotiate on your behalf, understand that you may be negotiating on your own. There is no “magic” that a lawyer, mortgage broker or anyone else can bring to loan modification negotiations. Homeowners can take advantage of free information available from HUD and the California Department of Real Estate and attempt to negotiate a loan modification themselves. An attorney or broker can communicate on your behalf and try to negotiate a modification of the loan terms, so you can too. Most recently, California created Senate Bill 94 which prohibits upfront fees for home loan modification services. As a result, most loan modification providers have stopped providing services.

Should a Homeowner Use an Attorney or a Company That ‘Specializes’ in Loan Modification?

Homeowners who are behind on their mortgage payments are often approached by individuals or companies who will offer to help complete a loan modification. But California law now forbids anyone from accepting advance fees. Any person or company that asks for an upfront fee is breaking the law now that SB 94 has been filed. The loan modification industry was riddled with deceptive practices. Several companies in California attempt to take advantage of desperate homeowners by offering to help them save their homes. Over promised and under delivered. Brokers cannot provide legal advice and may not have the same knowledge of real estate law as a homeowner can obtain from HUD and the California Department of Real Estate.

What can a lawyer do that a homeowner can’t do for himself?

The lawyer can review the loan for statutory defects that can be used as bargaining chips with the lender, but the most important thing a lawyer can do is act as a dispassionate lawyer and convince the lender. Attempts to persuade that the loan modification is in the best interest of both parties. In other words, the lender will make more money by agreeing to a loan modification than by foreclosing on the property. Most attorneys prepare a report highlighting the homeowner’s financial situation and describing why a loan modification makes sense to both the homeowner and the lender.

What can be negotiated with the lender?

Reinstatement: Your lender may agree to pay you the total amount in one lump sum and by a specific date. It is often combined with forbearance when you can show that funds from a bonus, tax refund, or other source will become available at a specific time in the future.

Forbearance: Your lender may offer a temporary reduction or suspension of your mortgage payments while you get back on your feet. Forgiveness is often combined with a reinstatement or repayment plan to pay for missed or reduced mortgage payments.

Repayment plan: This is an agreement that gives you a fixed amount of time to repay the amount you owe by adding a portion of the outstanding amount to your regular monthly payments. At the end of the repayment term, you have gradually paid down the amount of your mortgage that was outstanding.

Loan term change: This is a written agreement between you and your mortgage company that permanently changes one or more of the original terms of your note to make payments more affordable. This is the goal of most homeowners in distress on a home loan. A loan modification agreement changes the terms of your loan – a lower interest rate, extension of the loan life, conversion of an adjustable rate loan to a fixed rate loan can be effected.

What are the problems with loan modification?

Many people will not qualify. Good candidates are homeowners who have a clear reason to fall behind, such as a change in their income or loan amount, and can prove that they will be able to make payments if the loan terms are changed. have sufficient income. The mortgage business is a business. A loan holder will not consider modifying a loan unless the homeowner can afford to make the new payments. If the landlord is current, making payments on time, he or she is unlikely to get a modification. Loan servicing companies are less likely to negotiate than banks because they often lack the power to modify loans.

If you’re considering loan modification, check out all the free information available. Think hard about trying to do it yourself. If you decide to seek assistance, a qualified attorney can explain the law, review your situation, and guide you toward the most appropriate options.

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