What is a mortgage loan modification?
A mortgage modification is a change in the terms of an existing mortgage loan. Loan terms include the principal balance, term, and interest rate. If payments have been missed the you have an “arrearage”. Mortgage modification will deal with the arrearage and sometimes lower your monthly payment and interest rate. Most often, the arrearage and other costs will be added to the principal balance. This kind of modification is called “capitalizing and extending” the existing loan.
What happens during the process?
First you contact the “loss mitigation” department of your mortgage company. They will send a thick packet of information for you to complete and return. DO NOT send them back the original documents and be sure to keep a copy of everything you send them. This is necessary because they often lose things you send or ask for documents they have already received from you.
Your situation will be studied to see if you qualify. Don’t let them drive the process or your file may sit on the corner of some desk for weeks. Call them every three or four days, write letters asking for a status check on your application. Heck, bake them cupcakes to make friends. If you do qualify, a trial period is proposed. During the trial period, you will make the new mortgage payment. Unfortunately many are turned away for reasons that are not always clearly stated by the mortgage lender.
If you are approved (it’s about a one in nine chance of success), most often the arrears and costs are put into a “balloon note” which is paid at the end of the mortgage term or when the house is sold or transferred. Other modifications pull in the arrearage and costs and extend the term of the mortgage by about seven years.
What could go wrong?
A big problem is that while you are working out a mortgage modification with the loss mitigation department, the foreclosure department is also working behind the scenes to foreclose on your home! The race is on!
As you might guess, the loss mitigation department is painfully slow and the foreclosure lawyers can complete a foreclosure before the modification comes through! What to do?
Chapter 13 dept repayment plan to the rescue!
Fortunately there is a solution: Chapter 13 bankruptcy debt repayment plan. Our lawyers can work fast to protect your home from foreclosure and force the mortgage lender to go along. You will be in control and your mortgage, car loan, credit cards and medical bills will be protected and paid at a lower interest rate and lower payment.
You can stop the foreclosure and save your home with Chapter 13 and continue to work on the mortgage modification. This keeps the foreclosure wolves at bay while the slow loss mitigation department works through your massive application and endless requests for more documentation.
But I don’t have thousands of dollars to spend on a Chapter 13 lawyer!
In Chapter 13, it costs almost nothing up front to file for protection! Your court costs and lawyer fees are mostly paid along with your other debts over time through the repayment plan. Come see Brent for a free consultation and analysis of your case.