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Loan Modification: How to Avoid Mortgage Foreclosure

loan modification
  • Blog
  • Jill
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  • March 13, 2020

Loan Modification: How to Avoid Mortgage Foreclosure

Since 2007, almost 4.2 million people have lost their homes to foreclosure. Financial hardships can strike when we least expect it and can lead to foreclosure or worse. Fortunately, a loan modification can lower your monthly mortgage payments and make managing debt a little easier. 

What Is a Loan Modification?

A loan modification is a change that is made to the former terms of your mortgage. This change is typically made due to financial hardship and may involve a different type of loan, reduction in interest rate, and/or an extension of the length of time for repayment. These three terms can be combined in a variety of ways. The aim of a loan modification is to reduce the monthly payments you make to an affordable amount. 

Avoid Mortgage Foreclosure 

If you are having problems managing debt and are facing foreclosure, a mortgage loan modification might help. A mortgage loan modification is one of the most common types of loss mitigation. Loss mitigation is the process in which borrowers and their servicers work on preventing foreclosure. 

How Does a Mortgage Loan Modification Work? 

To understand how a mortgage loan modification works, you must understand what a modification is. A modification is a written agreement that will permanently change the original terms of a promissory note (a signed document that promises to pay a specific sum to a specific person) to make the borrower’s mortgage payments more affordable. In order to reduce the monthly payments a borrower needs to make, the lender can eliminate a portion of your debt, lower your interest rates, extend the amount of time you have to repay your debt, switch to a fixed-rate loan, or temporarily pause payments. Typically, a modification will also add any late amounts to the unpaid principal balance. 

How to Qualify 

To get a modification, it’s helpful to have someone who can help you deal with your bank. You will have to explain why you are unable to make your mortgage payments to your lender, as well as the adjustments you want to be made to the mortgage. Your lender will most likely require details about your financial situation and a loss mitigation application. Having an experienced attorney at your side can be helpful during this process. 

Before starting a mortgage loan modification, you should gather certain documents. These documents include a hardship letter (a letter explaining why you cannot make your mortgage payments and how you would like to fix that), proof of your financial situation, proof of income, tax returns, loan statements, an IRS form 4506-T, and a detailed list of your monthly expenses. If you are struggling with this process, businesses like Bartifay Law Offices can provide assistance. 

You should expect to hear back from your lender within 30 days of sending them your completed application. You will either receive a notice of denial from your lender or an offer. It is a good idea to seek counsel about what you should do during your wait. It might be recommended that you resume making payments during your wait. This will impress your lender and prove that you are managing debt. 

Mortgage Loan Modification Assistance 

It is common to seek out assistance when handling a mortgage loan modification. Bartifay Law Offices has been in practice for over 30 years and specializes in mortgage modifications for Pennsylvanian residents. We understand that every financial situation is unique and will help you choose the best option to help you become debt-free. To schedule a free consultation call, you can reach us at (412) 824-4011. 

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