Mortgage Modifications – How It Works
Unexpected circumstances can befall a homeowner that creates havoc on their financial wellbeing. In no time, the mortgage payments fall behind, and it’s impossible to find a way to catch up. With foreclosure looming around the corner, it’s time to take some proactive steps to save the home. When a homeowner finds themselves in this dire situation, he has several options, but he must act early before the letter of intent arrives. For instance, a mortgage modification arrangement with the lender is one possibility.
If you are struggling to bring your mortgage current, talk to the lender to determine what your options are. Some lenders are willing to work with homeowners, but the terms of the agreement can be difficult to understand. As a result, many homeowners find that they are in worse shape than they were before. To avoid this outcome, it’s best to have professional mortgage assistance on your side. You need someone who understands the complexities of a mortgage contract and loan modification agreement.
How Does a Mortgage Modification Work?
A mortgage modification agreement works by changing the terms of the original loan. This arrangement can include lowering the interest rate and possibly lowering the monthly payment amount. It can also include spreading the past due payments out over a specified time period. Many of the loan modification plans extend the repayment plan, allowing the homeowner to make lower payments. This extension means it will take longer to pay off the loan, and could result in costing more in the long run. But, the upside is, the homeowner gets to keep their home.
What’s the Difference Between Loan Modification and Refinance?
The main difference between a loan modification and refinance is that one is temporary and the other is a more permanent solution. With a modification plan, the lender offers a temporary arrangement to bring the account current. However, if a homeowner refinances, the terms are permanent over the life of the loan.
A refinance option also allows the homeowner to choose a different lender to service his loan. One drawback to being approved for refinancing is the person’s credit score. The previous late payment history can affect the credit score and prevent refinancing. If this is the case, then a loan modification is the best option.
What are the Risks of a Loan Modification?
A loan modification is a fairly straightforward arrangement. However, some lenders don’t play by the rules. They often fail to suggest this option to a homeowner. Or, they will only consider homeowners who are two to three months behind on their payments. Some lenders have even claimed to have lost the paperwork, or claim that the homeowner didn’t send the requested documents.
Another risk involves what is known as dual-tracking, This is a lenders way of pursuing foreclosure while they claim to be considering the loan modification application. This is not uncommon, especially with the large banks or loan companies. Their mortgage department may not be aware of what the foreclosure department is doing.
Although banks have the legal right to proceed with some aspects of the foreclosure process, they cannot sell the home before making a decision on the loan modification request. Banks are required to allow 30 days after sending a written denial before selling the house.
How to Protect Yourself and Your Home from Unethical Lenders
The process of mortgage modification is intended to allow a homeowner time to bring his account current and maintain ownership of the home. But, some lenders go out of their way to make the process as difficult as possible.
To avoid becoming a victim of unethical lenders, you need an experienced mortgage lawyer. Please talk to us at Bartifay Law Offices, P.C. We have been helping Pittsburgh area homeowners avoid losing their homes since 1993. Call today for your free consultation.