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Facing Foreclosure? Consider a Mortgage Loan Modification

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Every year, countless individuals and families face the risk of foreclosure due to delinquent mortgage payments.  A risk of foreclosure does not mean homeowners have to succumb to foreclosure.  Homeowners do have options in the event of foreclosure.  These options are available at different stages after a home mortgage becomes delinquent.  Homeowners should not feel helpless during this time.  In fact, the reason why these options are not frequently utilized is because individuals are not well informed about their availability.  A mortgage loan modification is one available option after mortgage payments become delinquent.  This option is the first line of defense to allow homeowners to continue making affordable and timely payments.

An Overview of Loan Modifications

A mortgage loan modification is a change to the terms of the loan.  The modification function as a loss mitigation mechanism whereby the mortgage loan company agrees to a different payment amount, forgives unpaid amounts, etc.  The modification can reduce monthly payment to an affordable amount for the homeowner.  The loan modification can mitigate the burden of the payment in a few ways.  Modifications may involve extending the number of years in which the loan is repaid, reducing the interest rate, and/or reducing the principal balance.  Individuals who are offered a loan modification are advised to determine how the modification will change their monthly payments.  Homeowners should also determine how much the modification will affect their short and long term payment amounts.

Modification Request Process

The first step in requesting a mortgage loan modification is to contact the lending agency or banking institution that owns the mortgage.  Many banks and lending agencies will inform you of the modification option and offer to assess your eligibility.  Other may not present the option to you until it is requested.  That is why it is helpful to seek advice from a knowledgeable attorney who has your best interest in mind.  After the modification assessment is requested, the loan company will gather information from the homeowner to verify a legitimate financial hardship that impacts the homeowner’s ability to make the loan payments.  Although a homeowner can request a mortgage loan modification when payments become delinquent, a homeowner can make the request even before that time.  If mortgage payments are delinquent, applying for a home loan modification can place a temporary stop on the foreclosure process.

Benefits and Disadvantages

The advantages of a mortgage loan modification are apparent.  With a modification, the homeowner halts the foreclosure process.  They are able to make affordable, timely payments, which can ensure that their credit history is not negatively affected.  As discussed, the bank can agree to alter the mortgage loan term, reduce the principal balance and/or reduce the interest rate.  Whatever the mechanism, it permits the homeowner to keep their home.  Nevertheless, there may be some drawbacks to accepting a loan modification.  The modification could adversely affect the homeowner’s credit depending on how the modification is reported to the credit bureaus.   In addition, debt forgiveness may still be taxable.  Although the principal loan amount has lessened, taxes may apply to the original amount.  Homeowners are wise to inquire about tax implications during this process.

West Palm Beach Real Estate Attorney

We provide legal assistance to homeowners who wish to assess their mortgage loan modification eligibility. We have years of experience in real estate law and mortgage loan modifications. Call the Law Offices of Larry E. Bray, P.A. in West Palm Beach to determine what best fits your mortgage loan needs.

Resource:

consumerfinance.gov/ask-cfpb/what-is-a-mortgage-loan-modification-en-269/

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