Can A Loan Modification Help Save Your Home?
A homeowner who doesn’t want to file Chapter 13 bankruptcy in order to avoid foreclosure can ask the mortgage bank to modify the mortgage to make monthly payments more manageable.
Ambrogio, Pletter & Associates, LLC, has served Connecticut since 1982. We help clients in Stratford, Bridgeport and the surrounding areas find reasonable solutions to personal financial crises. These solutions may include home loan modifications or foreclosure mediation, as well as other options. To schedule an appointment or to learn more about what our past clients say about us, call 203-502-7436. We offer a free consultation.
In general, if you have a steady income, a variable rate or interest-only mortgage, and are behind on your mortgage payments, your bank may offer you a home loan modification. If your bank does agree to modify the terms of your loan, you could be offered a 30-year term or even a 40-year term and a lower fixed rate. This often may reduce the amount of your monthly payments.
Because of the vast numbers of people seeking home loan modifications, you may need a Stratford home loan modification lawyer to get through to your mortgage bank to negotiate a home loan modification.
Different Options For Home Loan Modifications
Simply put, a loan modification can help homeowners avoid foreclosure by changing the financial terms of their current mortgages. Different types of home loan modifications may be available depending on your specific financial circumstances:
- Under the Home Affordable Modification Program (HAMP), also called the Obama Plan, the bank may modify your mortgage if it can decrease your monthly payments to 31 percent of your gross monthly income. To lower your monthly payments, the bank may extend the term of the loan out to 30 or 40 years or may lower the interest rate to as low as 2 percent.
- The Federal Housing Administration (FHA) has its own version of HAMP for borrowers with federal home loans. The FHA also offers a loan modification program called partial claim. In a partial claim, the arrearage — usually up to 12 months’ worth — can be placed into a separate second mortgage with no payments due.
- If a borrower does not qualify for HAMP, the mortgage lender may still agree to modify the home loan. This is often called an internal modification, and the bank can roll the arrearage back into the principal, reduce the interest rate and extend the loan term.
When To Request A Home Loan Modification
The best time to start thinking about foreclosure help is before your bank begins a foreclosure action. If you are falling behind on your mortgage payments, it makes sense to contact the bank before it commences a foreclosure. However, many banks will not offer a loan modification if you are making your payments on time.
In these situations, homeowners must make the difficult decision about whether to intentionally fall behind in their mortgage payments in order to force the bank into foreclosure mediation. Ambrogio, Pletter & Associates, LLC, does not recommend intentionally falling behind on your mortgage payments to induce a loan modification. If a client decides to do so, he or she must understand that he or she risks losing his or her home.