Home Retention Laws in Pennsylvania You Need to Know
Burdensome mortgage payments cause great stress to homeowners and wreak havoc on their finances. Some homeowners will pretend that nothing is happening, ignoring mortgage due notices and late payment warnings. Others will do almost anything to hang on to their homes, even if it means skipping payments on other bills. But skipping mortgage payments or ignoring other bills just makes the situation worse. Both result in late fees, added interest, and other penalties. Skipping payments does not address the root of the problem: a mortgage payment that is too high. Many homeowners are unaware that there are programs available to help retain their homes while making their payments more manageable. One option for homeowners with financial difficulties is mortgage modification.
What Is Mortgage Modification?
A mortgage loan modification changes the terms of your loan to make your monthly payments more affordable. This allows you to retain ownership of your home. There are several ways in which the lender can modify your mortgage. Options include:
- Changing the interest rate on your loan
- Extending the life of the loan
- Reducing the amount of principal paid with each payment
- Temporarily suspending or lowering the amount of each loan payment
- Adding missed payments to the balance
- Forgiving a portion of the loan
Any of these options can help homeowners by lowering their monthly payment. Lower monthly payments allow the homeowner to stay in their home, which is obviously good for the homeowner. It is also beneficial to the lender because it saves them the hassle and potential financial loss of a foreclosure. However, lenders make less money from a modified mortgage than they would with the original mortgage. For this reason, lenders are reluctant to help people take advantage of mortgage modification programs.
Home Retention Laws and Mortgage Modification
Certain laws protect homeowners facing foreclosure:
- In Pennsylvania, lenders must give the homeowner a 30-day notice of intent to foreclose. They must also give the borrower 30 days to meet with a local consumer credit counseling agency.
- Pennsylvania law allows borrowers to repay the mortgage up to one hour before a foreclosure sale.
- Section 6 of the federal Real Estate Settlement and Procedures Act (RESPA) requires that lenders respond to a Qualified Written Request from a borrower within 20 days. They have 60 days to respond to the request with a plan of action. So if you are facing foreclosure, do not ignore those late notices. Respond with a Qualified Written Request and guarantee yourself 20 to 60 days in your home while the lender figures out what to do.
- The federal Mortgage Forgiveness Debt Relief Act of 2007 helps homeowners when the lender chooses to forgive part of the debt. Under normal circumstances, forgiven debt is considered income and you must pay income tax on it. This act makes any forgiven debt exempt from taxes as long as it is the primary residence of the borrower. This makes sense–if you don’t have the money to pay the mortgage, how can you pay additional income tax?
While these laws do not guarantee that you will retain your home, they protect your interests while you and the lender agree on a course of action.
Applying for mortgage modification can be a lengthy and difficult process that may require a lawyer’s assistance. If you are overwhelmed by mortgage payments and think mortgage modification might help you hang on to your home, reach out the attorneys at Bartifay Law Offices. We have years of experience helping homeowners navigate the mortgage modification process. Let us put that experience to work for you.