Mortgage Modification: When Mistakes are Made by Mortgage Companies What Are Your Rights in PA
No one wants to lose their home when mortgage modification could help. In fact, most homeowners will go to great lengths to keep up with their mortgage payments, even if it means skipping payments on other bills or paying just the minimum on credit cards in order to scrape up enough money for the mortgage. But in spite of these efforts, some people fall behind on their mortgage and risk losing their homes. Sometimes this situation arises because the mortgage was too high to begin with. Other times, unforeseen hardships such as job loss, divorce, or unexpected medical bills make the payments impossible. One potential solution to these difficulties is a mortgage modification.
What Is A Mortgage Modification?
A mortgage loan modification is an arrangement with the bank which helps homeowners who cannot afford to refinance their mortgages in order to avoid foreclosure. This typically involves changing some of the terms of the original mortgage loan. For example, the lender may:
- Reduce the interest rate
- Change the mortgage from a variable interest rate to a fixed interest rate
- Forbear part of the principal
- Extend the length of the overall loan
Any of these changes will reduce the monthly payment to a level that the homeowner can afford. While this benefits both the lender and the homeowner by avoiding foreclosure, banks may try to prevent mortgage modifications. For this reason, it is important for homeowners to retain legal services to improve their chances of restructuring the mortgage.
Mistakes Mortgage Companies Make
The first step in modifying a mortgage is for the homeowner to complete a loss mitigation application. This application includes pay stubs, bank statements, and a worksheet detailing income and expenses. During this process, mortgage companies sometimes make errors that reduce the homeowner’s chances of restructuring their loan and end up increasing the likelihood of foreclosure. Some such mistakes include:
- Failing to notify the homeowner if the application is incomplete
- Failing to review the application in a timely fashion
- Calculation errors
- Losing documentation and asking the homeowner to resubmit
- Failing to convert a trial payment plan into a permanent payment plan
- Problems when a loan transfers from one servicer to another during the modification application process
Other problems arise during routine payment of the mortgage, such as:
- Misapplication of payments
- Charging exorbitant fees
- Failing to pay taxes or insurance from an escrow account
- Improperly beginning mortgage proceedings
Homeowner’s Rights in Pennsylvania
In some of these scenarios, the homeowner has specific rights under federal law:
- The lender must notify the homeowner within 5 days after receipt if the application is incomplete or received more than 45 days before a foreclosure
- The lender must review complete applications within 30 days if received more than 37 days before a foreclosure
- If a loan is transferred during an application for a mortgage modification, the new lender must either:
- Accept a previously offered mortgage mitigation
- Evaluate a completed application within 30 days of the transfer
- Acknowledge receipt of a new application within 10 days of receipt AND not initiate foreclosure during this time
If you are struggling to make your mortgage payments but want to keep your home, a mortgage modification might be the right choice for you. Bartifay Law Offices has years of experience in helping people to keep their homes with a payment plan that they can afford. The application process for a mortgage modification can be lengthy. Let us guide you through the process to ensure that you have the best chance of staying in, and paying for, your home.