Loan modifications help borrowers when a payment for the maintenance on the loan for their home is no longer affordable or the loan is off track due to a disruption in the borrower’s life or income. The first step is understand how your mortgage and loan work with your lender. During the initial purchase of your home, you signed two main documents, the promissory note and mortgage. The promissory note is a signed promise to pay back a sum of money base on an agreement between the parties. In this particular case, the money the borrower is paying back is the money that was used to purchase a home. Based on the promissory note being for such a large amount, the lender wanted collateral attached to the loan, namely your home. In order to attach the borrower’s promise to pay to your home, a mortgage was executed. This mortgage allows the lender to foreclose on the home as its collateral should there be a default on the promissory, the promise to pay.
A loan modification acts to modify the promissory note to get the borrower back on track with payments. Depending on the lender, the modification could be temporary, such as an interest rate reduction for several years to give a temporary reduction in the payment amount, or it could be a total overhaul of the maturity date and interest such as in a HAMP (Home Affordable Modification Program) modification.
There are two important parts of a loan modification, qualification and paperwork. The lender will have certain programs and guidelines for what borrowers get modifications. A lawyer who is familiar with these guidelines and programs will be able to identify for you whether you are a good candidate for a loan modification and what a home run would look like. This is an important step to having realistic expectations about the success and possibilities of saving your home.
The second part is the paperwork. The lender has a checklist for what documents need to be reviewed before a modification offer can be made. It is important to be able to identify the items and know how to present the borrower’s application to get the best chance at an offer from the bank.
If the loan modification is coming on the eve of a foreclosure sale or in the middle of the foreclosure lawsuit, then a loan modification inside of a bankruptcy may be the most effective way of allowing the borrower the peace of mind that the lender will not move forward with foreclosure while the loan modification is being reviewed and provides the best opportunity available for the review of package. The bankruptcy court’s mortgage modification mediation program, implemented in April 2013 and recently updated in 2015, is a court supervised program that structures the review of loan modification review and uses cloud technology to alleviate the communication and document delivery issues that result in what should be a loan modification for the borrower into a denial for lack of documents.
Call today for a free consultation to see if you qualify for a loan modification to help you stay in your home!