Ten Steps to a Loan Modification, Part 1 of 2
For many homeowners living in a house with a mortgage that they cannot afford, there appear to be few options. However, a loan modification is possible. There are a series of steps that a homeowner should follow in order to optimize the chance of obtaining a loan modification. These loan modifications are negotiated with the lender and may include a reduction of the loan interest rate or a lengthening of the period of time over which the loan will be repaid. Under certain limited circumstances, there might be a reduction in the amount of principal that is due and owing.
To increase the chances of getting a loan modification, a homeowner should:
1. Start the process as soon as possible. Many homeowners struggle to meet their house payments long after it is realistic. Often, this leads to skipping other bills and expenses in order to make house payments. These missed payments lead to problems with other creditors and seriously hurt a homeowner’s credit rating. It is important to get started as soon as a homeowner realizes that he no longer can make payments. This may be before a homeowner has gone into default.
2. Decide whether you need an attorney to assist with the process. There are options other than an attorney, including nonprofit groups. However, an attorney understands the negotiation process and how to work out the best resolution with the lender. In addition, there are many different scams out there to which a homeowner may fall victim without the right legal guidance.
3. Determine who ultimately holds the mortgage note. This is more difficult than it sounds. Often, the original mortgage loan is sold several times and it is difficult for the homeowner to know who holds the note at the time when negotiating a modification becomes necessary. It is possible that the mortgage has been broken up into smaller pieces as a mortgage backed security and there will be several individuals or businesses involved in the negotiation. In order to determine the interested parties, go to the mortgage servicer and ask who are the owners of the loan. This is something with which a skilled attorney can assist a homeowner.
4. As part of the loan modification process, there are many documents that will need to be provided to the mortgage holder(s), including: proof of income for everyone in the household (including pay stubs); tax returns; savings and assets; mortgage statements; information about a second mortgage or home equity line of credit; credit card statements; other debts; and a hardship letter that describes the circumstances that led to being unable to satisfy the terms of the mortgage note.
5. The drafting of a compelling hardship letter is critical to the negotiation process. It is necessary to include the specifics of what led to being unable to make the monthly mortgage payments. This could be health issues, loss of income, or predatory lending processes that led to a loan term that never should have been approved. The hardship letter should be specific, with a timeline that makes sense for when the homeowner first began to fall behind on the loan or sacrifice other expenses in order to make loan payments. Keeping the letter as concise as possible is important.
There are other issues that the homeowner should keep in mind about the loan modification process, which will be discussed in the second part of this article.
At the Law Offices of Georgette Miller &Associates, P.C., the skilled and dedicated attorneys with offices in New York, New Jersey, Pennsylvania, Delaware, Maryland, and the Metro Washington, D.C. area are committed to helping homeowners who need to modify their mortgage loans in order to afford the monthly payments. In order to schedule an appointment to discuss your mortgage loan and what can be done to reduce the payments, please call us at 1-866-964-6529 ((866) 964-6529).