Loan Modification Information
With the recent decline in the real estate market and homeowners stuck in adjustable rate mortgages, many people are struggling with the decision of whether or not to keep their homes. A loan modification is sometimes the determining factor in this decision.
What is Loan Modification?
A loan modification is when your lender agrees to change the terms of your home mortgage so that they are more favorable to you. Your mortgage can be modified in a variety of ways, including: interest rate reduction, adding additional time to the length of your loan (i.e. going from a 30 to a 40 year loan), or principal reduction. The idea behind loan modification is that it reduces the monthly payment so that the house is more affordable to you.
The Loan Modification Process Explained
Loan modifications are a privilege, not a right. Just because you want a loan modification, does not mean that you are going to get one. You are under contract to pay your current loan as it stands, and when you request a loan modification, you are asking the lender to make a concession that costs them money. Although the government has set up guidelines for who qualifies for a loan modification, the government has not yet enacted any law that forces banks to modify your loan.
To get the bank to modify your loan, you have to prove that there would be a hardship to you if the loan stayed at its current rate. When you submit this “hardship package” the lender can take many months (even more than a year sometimes) to review the package and determine your qualifications. Every month you must update the lender with your financial information until you have a final determination. Because the government has not made loan modifications mandatory, and because there is not specific time requirement for when a lender must make a decision on your qualifications, loan modifications can be frustrating and time consuming to undergo.
How Do I Know If I am Qualified for a Loan Modification?
Since individual circumstances vary, it is best to contact a professional or your lender to determine if you are qualified for a home loan modification. However, certain circumstances are helpful in qualifying homeowners for modification.
- You must have some provable income. (This can include contribution from friends and family).
- Your house should be worth less than what you owe on it.
- You must have some hardship that makes the current loan very difficult to pay.
- It must make sense to you to keep the home. If you are so upside-down on the value of your home that you think it will never be worth what you owe, short sale may be a better option.
Do I Have to hire an Attorney to assist with my Loan Modification?
No. You can apply for a loan modification on your own directly through the lender. However, do to the difficulty in determining qualifications and the long term nature of the loan modification process, many homeowners prefer working with an attorney. The Law Office of Kristy Hernandez has helped hundreds of clients modify their home loans. Although it costs more than modifying on your own, the results speak for themselves.
Here is why you may want to consider using an attorney:
- A loan modification attorney looks at your case from a legal point of view. They know how to approach your lender and will prepare your application using the best negotiation techniques on your behalf.
- They have long-term relationships. A good loan modification attorney has established contacts with many of the major lenders. When the law firm calls the lender, they often speak with the same people time and again. We use these relationships to your advantage.
- Know who you are hiring. You can look up an attorney on the California Bar website to check their status. They are also regulated by the State to insure good conduct. There are a lot of scammers in the loan modification field. Don’t give your money to someone you can’t verify.
- We provide several options. If a loan modification is not right for you we’ll tell you. We will present you with many different debt relief options and you can decide what is right for you.
We track our success! Come in to our office and review the loan modifications that we have recently gotten for homeowners with your same lender. We also offer free consultations for all new clients, and have two convenient office locations.