Modifying First Mortgages Outside of Bankruptcy

Mortgage Loan Modification – Mortgage Note Modification

Are you overwhelmed by your mortgage payments? Has a major hardship or life event changed your ability to pay your mortgage? This can be a depressing and helpless feeling, but hope is not as far away as you may think.

Due to the struggling economy, more and more people are falling behind on their mortgage payments. If you are one of those people, you shouldn’t feel ashamed or embarrassed. Instead, you should strongly consider speaking with an experienced New York loan modification attorney about your financial situation. There are many viable tools and resources available to people facing foreclosure. A knowledgeable lawyer can assess your situation, propose the best options available and assist you apply for a loan modification.

If you are at risk of losing your home due to foreclosure, a loan modification may be the best solution. A loan modification is a change to any of the original terms of your mortgage loan to prevent foreclosure. After a successful loan modification, you will no longer be under the threat of foreclosure as long as you continue to pay your mortgage payments based on the terms of the new, modified loan.

Loan modification programs are just becoming mainstream and therefore there is little standardization. You need the assistance of an experienced professional that can guide you through this process. We have over 30 years of combined experience in dealing with homeowners in your situation. We will take the time to get to know you and your financial situation, as well as what you hope to achieve through modifying your loan. During a time when foreclosure relief scams are being reported on almost a daily basis, you can trust that we will not take advantage of you or lead you astray, but rather help you reach decisions that will best serve the needs of you and your family. If a loan modification isn’t right for you, there are other ways in which we can help you avoid foreclosure, such as a short sale or bankruptcy.

Frequently Asked Questions:

What is a Loan Modification?

A loan modification is much like a mortgage refinance in that the objective is to find you a more affordable mortgage payment for your financial situation. In fact, it is often called a modified refinance. The primary difference is that instead of looking for a “new” loan you will just simply “modify” the terms of you existing mortgage.

Why a Loan Modification vs Refinancing My Mortgage?

Refinancing your existing mortgage to obtain a more affordable mortgage payment could still be an option. Unfortunately, for an increasing percentage of homeowners it is not. That is precisely what loan modifications are for, the homeowner that has incurred a financial hardship that prevents other mortgage financing or payment options.

In most cases, a loan modification is recommended to homeowners that have a financial hardship that is preventing them from making their monthly mortgage payments. Most how are eligible for these types of mortgage modification programs have already missed one or more payments.

Am I Eligible for a Mortgage Loan Modification?

This will vary depending on who services (i.e., who you send your mortgage payment to each month) your mortgage. However, most follow very similar qualification criteria.

These are the most common loan modification qualification standards:

  • Experienced a documented hardship or change in financial circumstances
  • Missed three payment (90 days delinquent) or more
  • Owns and occupies the property as a primary residence

Other important factors that can effect your eligibility:

  • Do not purposely default to get a loan modification.
  • Make sure you are responsive in working with your lender.

Since many of the programs vary in how they work, you need to work with an experienced professional. Our firm offers mortgage loan modification services
in the counties of Kings (Brooklyn), Queens, Nassau and Suffolk in the State of New York.

Where Do I Get a Loan Modification?

Ultimately, the only place where you can get a loan modification is with the lender or servicer that current holds your mortgage. Confused as to who this might be? In this mortgage market, where mortgages are bought, sold, and packaged up into securities for Wall Street, this part can be the hardest step in the loan modification process.

The best place to start is your mortgage coupon book or statement–who do you send your mortgage payment to each month?

Each mortgage lender or servicer will have different loan modification programs and processes. In addition, often the staff at these companies have little training to handle a loan modification inquiry.

This is where getting a loan modification can become very challenging. Seeking a firm experienced in dealing with lenders and servicers on a day to day basis can streamline your loan modification process can often save you a lot of frustration and money.

What Do I Need to Show the Bank?

The bank ultimately is in the business to return a profit to their shareholders, just like any other business. Consequently, your objective in presenting your loan modification request is to show that it is in the best interest of the bank to modify your loan.

What might support your modification request? Here are the points that you should be able to show your bank:

  • You have had a material change in your financial circumstances
  • You have made every effort to make your mortgage payments
  • You have been cooperative and responsive in working with them
  • You are not in any way purposefully defaulting to get a loan modification
  • You are willing to be open, honest, and provide all necessary documentation
  • Remember your bank is essentially making a new loan to you after taking a loss on the first one. You need to demonstrate to the bank that you are able to pay on the new modified loan terms.

What Documents Will I Need?

Your loan modification package is going to be the most important part of your mortgage modification efforts. Again, the contents and process for packaging the information for your lender’s consideration will vary, but the critical elements are typically the same.

Here is an example of the documents you will probably require:

  • A letter documenting and explaining your hardship
  • Proof of current income and capability to make modified loan payment
  • Detailed monthly expense report or budget

The principal purpose of the loan modification package is to provide your lender with sufficient documentation to evaluate the risk in modifying your mortgage. The main question your lender is trying to answer is can you pay the new modified mortgage payment, and will you.

Why Would a Bank Modify My Mortgage Loan?

Simply because it is in the best interest of the bank. As you attempt to inquire about a loan modification do not confuse this transaction with an altruistic act of kindness. It is fundamentally a transaction that makes more business sense than the alternative–you defaulting on the entire mortgage and costly foreclosure proceedings.

It is also a product of the current economic conditions. There are so many homeowners that have been pinched by the simultaneous collapse of the housing market and the economy. This creates a unique circumstance–modifying your mortgage, to keep you in your home, benefits the bigger economic picture.

What is a Settlement Conference?

On August 5, 2008, NYS Governor David A. Patterson signed into law a reform which has created a process by which lenders, in certain circumstances involving sub-prime mortgages, shall be required to meet “face to face” with homeowners to provide those homeowners with an opportunity to work out repayment terms without the necessity of the prolonged frustration of the present loss mitigation process.  This law was expanded to all pending foreclosure matters as of January 30, 2010

The law essentially has two prongs. The first is the requirement that lenders provide a 90 day notice of their intent to commence foreclosure proceedings. This can be both a blessing and a curse. The hope of the Governor and the Legislature is to have homeowners who are in distress to meet with a professional to review their situation in order to avert foreclosure before the process is commenced. The curse is that, unfortunately, the vast majority of homeowners with past due mortgage either owe substantially more than their property is worth in today’s market or do not have the financial resources to formulate a viable repayment plan. The second prong establishes mandatory settlement conferences in all foreclosure proceedings involving homeowners.  It is strongly advisable to retain an experienced firm to accompany you to the initial conference even if only to open discussions with your lender.

 What If My Lender Does Not Agree to Modify My Mortgage Loan?

Unfortunately, Mortgage Loan Modification is not guaranteed. If an adequate arrangement cannot be worked out with your lender, you may have to seek other alternatives to avoid foreclosure, such as a short sale or bankruptcy.

I am a real estate and bankruptcy attorney with over 20 years experience in providing guidance to homeowners in your situation. I have worked with numerous homeowners through the economic crises in the early 1990’s as well as after the dot-com bust in 2001. The most important thing for you to do right now is to explore all of your options, including the possibility of filing for bankruptcy. In a free, no obligation consultation we can review your overall financial situation and outline various options that meet your specific needs.