When you are facing potential default on your mortgage or already have done so, loss mitigation can help you avoid foreclosure. Several methods fall under this category:
- Loan modifications
- Forbearance agreements
- Repayment plans
- Short sales, and
- Deeds in lieu of foreclosure
A loan modification is probably the most popular since it gets the borrower a clean slate with more affordable terms.
What Is a Mortgage Loan Modification?
The basic definition of a loan modification is a written agreement that permanently modifies the provisions of your promissory note to help you better afford your mortgage payments. Usually, a homeowner will get a lower interest rate by extending the term of their home loan from 30 years to 40. It’s also possible that your bank might agree to put your overdue payments at the end of your loan, bringing you to current. This means you would have to either pay the past due amount in a lump sum at the end of your mortgage or pay additional tacked-on payments, extending how long your loan lasts.
Getting approved for a loan modification will require careful negotiation with your lender. You will need to fill out an application explaining your current financial situation, expenses, and income. There’s no guarantee you will get approved, though. While the bank would prefer that you keep your house and pay them back the loan they gave you, if they don’t believe you can afford the payments even with a modification, you likely won’t get approved.
The Benefits of Mortgage Modification
Some homeowners may qualify for a government-backed loan modification program. In addition, depending on your lender, Fannie Mae, Freddie Mac, VA, or FHA, the servicer may have options available to you specifically designed for their customers.
Keep in mind that there are companies out there that specialize in mortgage loan modifications. They may make the process sound super easy and helpful, but they actually will cost you more in the long run. Here’s why:
Loan modification companies are out to make money. They aren’t non-profit organizations that will provide you with free or low-cost housing counselors like the Department of Housing and Urban Development (HUD). These services will cost you a lot of money in fees, all of which could be put toward the mortgage payments you are still owing. They essentially provide the same service at a premium price that you can get from a lawyer for less.
Scammers Posing as Loan Modification Companies
What can make an already stressful situation worse when trying to save your home from foreclosure? How about being scammed! That’s right. Many loan modification companies out there are simply scamming desperate families for what little money they have left. These fraudsters will even have you sign a document giving them the authority to represent you, but you could be signing over your title rights. When this happens, you’ll be paying them money each month at a higher rate than your mortgage, plus you’ll never own your home. Instead, you’ll be a renter.
Don’t Try to Get a Loan Modification on Your Own
While the application process may seem straightforward, reviewing the tons of paperwork generated by a loan modification takes time and knowledge of the law. A seasoned real estate lawyer is your best resource during this process. Not only will they ensure that you don’t agree to terms you can’t possibly meet, but they will make sure you are being treated fairly. If you can’t afford legal counsel, at the very least, contact HUD to find out what you can do to qualify for a free or low-cost housing counselor to help you with getting a loan modification.
Explore All Your Options to Avoid Foreclosure in South Florida
Getting your home mortgage modified is a great solution to avoid defaulting on your loan and potentially losing it to foreclosure. However, to ensure you have explored all possible options for your situation, you need to consult with a qualified South Florida foreclosure defense lawyer as soon as possible. Not only will you gain a better understanding of what your rights are should you not be able to afford your monthly obligations, despite the modification, but what other options are available to you.
Trust Attorney Marc Brown to provide you with over a decade of experience in foreclosure defense. His years representing South Florida lenders make him the smartest choice when seeking aggressive legal representation to protect your home. To schedule a no-cost legal consultation regarding foreclosures and deficiency judgments, get in touch with the law offices of Marc Brown today.