Is it a good idea to hire a mortgage loan modification attorney?
Dealing with a mortgage can be overwhelming and stressful, particularly when you find yourself at risk of foreclosure Trying to figure out all of the paperwork, regulations and deadlines involved can seem insurmountable, especially if you're trying to modify your current loan.
This is where hiring an attorney comes in handy. They can guide you through the process, helping you understand the details, and making sure that your rights are protected throughout. However, before you attempt to have your mortgage modified, you should consider partnering with a skilled bankruptcy attorney instead.
The Foundation of Mortgage Loan Modifications
Mortgage modifications are designed to help financially struggling homeowners stay in their homes. This process involves renegotiating the terms of existing home loans and usually includes reducing the interest rate, extending the timeline of the loan, and/or modifying other aspects of the agreement to achieve a more affordable monthly payment.
While this can offer some welcome relief for those having difficulty making payments, it is important to understand that a mortgage modification attorney cannot address the underlying financial issues that caused you to fall behind. It only reduces the mortgage payment.
How Can a Mortgage Loan Modification Lawyer Help?
A loan modification attorney can provide assistance to borrowers who are struggling with mortgage payments. By working with lenders, an attorney can help borrowers reach more favorable terms on their loans, such as lower interest rates, longer terms, regular monthly payments that are more affordable, and a reduced principal balance.
However, it’s important to explore all of your options before attempting to modify your loan, with or without an attorney. While a mortgage modification attorney can help you restructure your loan in some instances, you should also consider consulting with a bankruptcy lawyer about your financial situation.
If you are seeking a lower payment due to serious financial troubles, bankruptcy will likely be a more effective and comprehensive solution to your problems. Likewise, because modifications can take months to process, Chapter 13 bankruptcy may be the only way to keep your house if foreclosure proceedings have been initiated and your sale date is approaching, as a modification will not stop the sale like bankruptcy does.
What Do Banks Consider When You Are Applying For a Mortgage Loan Modification?
When evaluating a homeowner for a mortgage modification, banks take many factors into consideration. A primary consideration is the hardship statement, which outlines why the homeowner needs an adjusted payment plan in the first place. Banks will also request account information, tax returns, and profit and loss statements from self-employed borrowers.
Additionally, a bank may ask a modification applicant to submit a financial worksheet that outlines monthly income totals and debt obligations. This allows the bank to accurately assess the homeowner’s ability to make payments.
What To Do After an Approval of Loan Modification
Although these applications are rarely approved, it is possible to have your payments modified. After approval, lenders typically require borrowers to complete Trial Payment Plans (TPPs) before going through with the modification. With a TPP, the borrower must make their new payment on time for a certain number of months before the loan is fully modified.
What To Do After a Denial of Loan Modification
If your application is denied, you typically have the right to appeal. However, it’s important to keep in mind that, even when a mortgage modification is approved, it often will not be enough to address the homeowner’s underlying financial issues.
In fact, many people find themselves falling behind on payments again shortly after receiving a modification. This is often because the homeowner has a substantial amount of other debts that were not reduced by the process.
Bankruptcy, on the other hand, allows homeowners to reduce or eliminate most of their debts. And contrary to popular belief, people who file for bankruptcy can usually keep most of their property.
Before you hire a mortgage modification attorney, schedule a free debt analysis with one of our knowledgeable DebtStoppers lawyers. Discussing your situation with a bankruptcy attorney will help you understand all of your options so you can make an informed decision that will actually solve your financial problems.