A loan modification is one strategy for a homeowner to avoid the foreclosure process. Successfully qualifying for a loan modification can provide a homeowner with the piece of mind and stress relief of keeping the home rather then having the loan foreclosed on. It is essentially a “reset” button in the realm of home mortgages. Not many banks want to pursue foreclosure as their first remedy since the process is very expensive and burdensome for all parties involved, therefore, every homeowner should explore the benefits of a loan modification.
Some of the advantages of mortgage loan modifications include: lower interest rates, extended payback periods and forgiven debt in some situations. The loan is placed back in good standing and the homeowner can resume making payments on better terms. Initially, you may be able to make reduced payments (depending on the terms of your particular modification). Ultimately, the goal of obtaining a loan modification is to make the monthly mortgage payments more affordable over time.
Qualifying for a Loan Modification
There are a few requirements for a loan modification that are common across most banks. First, a homeowner must prove hardship. In other words, the homeowner must prove that they cannot make payments in accordance with the current loan terms. Along with financial hardship, the homeowner must prove that if a new repayment plan is reached, then the homeowner can make the new payments and the parties will not end up in the same foreclosure situation six (6) months down the line. Second, an application must be filed with the bank in order to begin the process of a loan modification. With the application, the homeowner usually must submit various supporting documents including, but not limited to: pay stubs, hardship letter, a proposed budget, as well as any other documents the loan servicer requests. Oftentimes, different banks have additional and/or different requirements. Once a homeowner submits the application, letter and supporting documentation, the lender reviews the submission and makes a decision on whether the homeowner meets the requirements for a loan modification.
If you are in foreclosure, or have defaulted on your mortgage payment, contact the attorneys of The Ticktin Law Group to determine how we can assist you in delaying and/or stopping the foreclosure of your home.