A modification to an existing loan made by a lender in response to a borrower’s long-term inability to repay the loan.
Loan Modifications typically involve a reduction in the interest rate on the loan, an extension of the length of the term of the loan, a different type of loan or any combination of the three.
Why would someone need a loan modification?
If you have fallen behind on mortgage payments because of a change in your income, your budget or hardship you could be a candidate for a modification.
Many times a hardship can and will be defined by a period of job loss, an illness or medical condition that leaves you and the borrower unable to make your mortgage payments regularly.
Other examples could include a loss of overtime, a separation or divorce that reduces household income or unanticipated changes to your budget such as medical or unusual transportation expenses for an illness.
Why do banks offer loan modifications?
Banks have certain remedies available to them when you fall behind. They can foreclose on your note and attempt to take back their collateral the home.
In many cases there are governmental and business incentives for mortgage companies to try alternatives to foreclosure first, such the loan modification option
What paperwork will I need to have loan modification processed
You improve your chances of success with a modification if you are organized. You should work to have ready:
- Monthly income, and detail of where it comes from
- Monthly expenses, broken down by category (mortgage, food, transportation, etc.)
- Pay stubs
- Bank statements
- Loan statements and agreements
What happens if I receive a foreclosure notice can I still submit a modification package to my lender?
There are strict time limits to answer a foreclosure complaint and consequences for not responding. If you fail to answer your foreclosure complaint timely you could be facing a default judgment, which accelerates the foreclosure process. In many cases it could make sense to hire a lawyer to review your options and foreclosure defenses. Sometimes if your loan modification package is submitted early enough in the process the lender will halt the foreclosure while the modification is being considered.
What are some defenses to a foreclosure?
Defenses could include misapplied payments, suing the wrong party or filing paperwork incorrectly. In many cases it could make sense to have a lawyer review your foreclosure and evaluate your options. Lawyers can assist with submission process, mandatory hardship letter and in some cases stopping a sheriff sale. Remember that a judgment can be entered against you while you are seeking a modification.
Many lawyers offer a free confidential complimentary consultation.
Should I get a lawyer to help me?
The loan modification process can be stressful, time consuming and daunting. Lawyers who regularly process modifications can understand your defenses and the how the foreclosure process works. Be cautious about a mortgage telling you they will halt the foreclosure process, in many cases the lawyers hired by your mortgage company and your lender march to a different beat, do not rely on what you are told on the phone. Lawyers who handle these cases routinely know what to ask for and look for from your lender. Do your research and read reviews of what lawyer you select and remember to be an educated consumer, if it appears to good to be true many times it is!
Lee M. Perlman, Esq.
We aim to get our clients immediate relief from their financial distress through several bankruptcy and non-bankruptcy options. We are equipped to help individuals and small businesses handle issues with foreclosure, loan modifications, credit cards, and collection agencies. We regularly pursue claims against overly-aggressive creditors and collectors who break the law, including claims under the Bankruptcy Code, FDCPA, FCRA, and TILA. We help clients reduce their mortgage obligations through foreclosure alternatives whenever possible.Our clients come to us when they are struggling with debt, stressed by harassing collections calls, or worried about foreclosure.