Loan modification is designed to help financially struggled homeowners avoid foreclosure by modifying the existing terms of their mortgage, and recapitalizing their arrears to allow for an affordable alternative over the long term. Loan modification can be generalized into two different forms, HAMP modification, and In-House modification.
HAMP (Home Affordable Modification Program) modification is a program that was started by the federal government to give benefits to lenders who agree to modify existing mortgages to make them feasible for their borrowers. A HAMP modification has specific goals in that there is a target mortgage to gross income ratio of 31%. This is done by reducing the interest rate of your principal loan, to a minimum of 2%. Not every applicant will receive a loan reduction to 2% however; the controlling interest is to reduce your mortgage payment to 31% of your gross income.
A specific application must be filled out with the HAMP modification that will be reviewed by your mortgage company. This application will include a package of documentation that you will need to assemble, including proof of income and tax returns. If you are eligible for the HAMP modification and it is approved by your lender, you will begin a trial period, where you will begin making payments at the new reduced level. Once the trial payments have been made, and all documents have been received and processed, the modification will be finalized and your modification will become permanent. There are guidelines to HAMP modification however, and many different factors could cause you to be deemed ineligible. Contact our skilled team to schedule a free consultation to determine if you are eligible today.
In-House modification refers to your lender agreeing to modify the terms of your loan without referring to the HAMP guidelines. This is done through negotiation with the bank, and generally will not occur unless you have fallen behind on your payments. Some lenders will refuse to modify under all circumstances, and others refuse to work with third parties, such as lawyers. There are no rules or regulations with regards to in-house modifications that can be enforced against lenders, you are at their mercy. They can decide to decline the modification for no other reason other than that they have decided that it is not in their best interest to modify. Contact us today to learn more about what we may be able to do to help with your specific lender.
If you have filed bankruptcy in the past and discharged your personal obligation to the lender, you are still eligible under HAMP to modify your loan. Approval of the modification will NOT make you liable on the mortgage once again.
If you are planning on filing a bankruptcy and have an active HAMP application under review, there could be repercussions upon filing. If you file a Chapter 7 bankruptcy, the HAMP modification review will be closed and you will be forced to reapply with updated financials. You will also be required to obtain a letter of consent from your bankruptcy attorney. If you file a Chapter 13 bankruptcy, you will need to seek court approval for the loan modification. The trial period should be extended by your lender to allow you time to do this, but services are not required to extend the trial period beyond two months.
If you are currently in a Chapter 13 bankruptcy, you may still apply for a HAMP modification. If you are making trial payments, your lender is prohibited from objecting to the confirmation of your plan, moving for the automatic stay to be lifted, of asking for dismissal of your case on the grounds that you paid only the amounts due under the trial period plan. Contact us today to learn more!