Mortgage Modifications are the most frequently pursued means of saving a home in serious mortgage arrears from foreclosure and a strong concentration of our office. Because most individuals undergoing serious hardships with their mortgages are seeking “Retention Options”, options that allow a a resolution of their mortgage issues that allow them to keep, rather than lose their homes, Mortgage Modification, specifically, and other potential Retention Options, are the potential goals of most Homeowners in foreclosure. Mortgage Modifications are intended to prevent foreclosures by absorbing our clients’ mortgage arrears into the remaining mortgage principal balance and thereby eliminating the amount in default by making the principal of the loan larger. While the restructured loan is larger, the goal in Mortgage Modification is to allow for affordable new monthly mortgage payments by: a) reducing the interest rate of the loan, if possible; b) extending the duration of the loan, if possible; c) deferring, in some cases, part of the interest arrears to the end of the loan; and/or d) in some cases forgiving part of the arrears. The goal for Borrowers in a Loan Modification is to seek an agreement that would restructure the mortgage to BOTH:
1) Cure the Default – solve the immediate problem of the mortgage default by absorbing the mortgage’s arrears and making the Homeowner current with their loan; AND,
2) Affordable Payments – allow for a viable solution for the future in allowing an affordable monthly mortgage payment which would hopefully avoid the Homeowner from defaulting going forward.
The mortgage loan modification currently is the most frequently used and successful option for homeowners seeking to cure mortgage arrears, resolve foreclosure litigation and save their homes. However, if a Mortgage Modification is not possible or not wanted by the Borrower, this section discusses other “Retention Options” for property where the mortgage is in default. If none of the Retention Options are possible or wanted, in the “Debt Negotiations and Settlements” Section we discuss “Non-Retention Options” or options for borrowers not seeking to keep their distressed property. Because of our law firm’s long experience with with Mortgage Loan Modifications, our talented staff will enhance your ability to obtain approval for a Mortgage Loan Modification. If a Mortgage Modification is not possible we will assess and pursue other Retention Options.
For the Homeowners seeking “Retention Options”, which are options to save their distressed home, or other real estate, from foreclosure, there are several options that we will discuss in this section and which we typically assess for Homeowners seeking to save their properties. Only after assessing these Retention Options, if we determine that a Homeowner is incapable or uninterested in saving their property, do we can also assess “”Non-Retention” options, or how to negotiate with the Lender to best leverage an eventual surrender the property. Non-Retention options will be explored in more detail in the separate “Debt Negotiation and Settlements” Section. Retention options for the property, especially Mortgage Modification, will be discussed in this Section and enumerated below. Retention Options include the following:
Although the negotiations can be prolonged and difficult, Mortgage Modifications can help homeowners to make their mortgages more affordable.
Mortgage modification agreements are currently a strong option for many of our clients are undergoing financial difficulty due to mortgage arrears. In the current economic climate many of our clients have fallen behind on their regular monthly mortgage payments. To qualify for a mortgage modification agreement, a client needs to show “hardship,” but at the same time the client also needs to show financial strength sufficient to stay current with the mortgage once they do obtain a potential modification. Many factors are influential in helping a client obtain such a resolution including: their debt to income ratio; their housing payment vs. total expenses ratio; the amount of their mortgage arrears; whether they have been offered or received a modification in the past; how many times they have applied for loan modification; their past monthly mortgage payment and if it was possible through a modification to give them a lower payment; the value of their home compared to the mortgage balance; and the amount of the interest rate under the loan and whether the rate and terms of the loan are high or low compared to the currently available rates given the current market conditions.
Mortgage modification have been especially sought after and increasingly obtainable since the previous recession of 2008-2014 which was started due to overly aggressive mortgage lending and borrowing. The effects of the previous recession are still with us in the form of many foreclosures and mortgage problems which are not yet resolved. While the economy since then has improved greatly, it went into a severe downturn due to the Covid-19 lockdowns, furloughs and layoffs. In this turmoil many homeowners to their dismay have found themselves in arrears on their mortgages and in foreclosure or threatened by foreclosure. While this crisis has created much financial difficulty for many homeowners, it has also created pressure on mortgage lenders and federal and state governments to find better solutions to this problem. A large part of such solution is the potential to seek a mortgage modification or other negotiated solution with one’s mortgage lender.
Under legislation passed during February of 2009, the Federal government had enacted a voluntary program to encourage mortgage lenders to modify mortgages for “at risk homeowners”. The Home Affordable Modification Program (“HAMP”) allowed homeowners to apply to their mortgage lender to renegotiate the terms of their loan under the program. The monthly payment was able to be lowered by lowering interest and extending the loan term; mortgage lenders were not required to reduce the principal of the loan. Part of the original proposals for this legislation, that did not pass the Senate, was proposed legislation to allow bankruptcy judges to require a mortgage modification if a mortgage lender refused reasonable proposals to do so. At present loan modifications are strictly voluntary and a mortgage lender can reject, deny or fail to respond to a borrower.
Under HAMP the homeowner needed to be considered to be “at risk” with serious hardship involving either loss of income, increase in expenses or “payment shock” (due to significant increases in their mortgage payments). Although initially the HAMP program required that the loan must be a 1st lien and the home must be owner occupied, as of June 2012, such requirements had been modified for many loans. Borrowers with equity loans and second mortgages were not disqualified. The loan needed to be in default or in imminent default. Borrowers could have qualified whether delinquent or not, but must have had enough income to handle modified payments. Lenders would have lowered mortgage payments exceeding 31% of gross income by dropping interest rates to as low as 2%, and if necessary, extending the loan term up to 40 years. Servicers of mortgages who lowered mortgage payments would get a financial incentive from the Federal government for modifying a loan.
The HAMP program expired on December 31, 2016, but it inspired lenders to expand their similar “in-house” modification programs which were more within their control and less subject to government regulation. Under HAMP and the “in-house” Modification programs the arrears on a mortgage would be combined with the remaining principal balance, with the interest reduced and the loan term extended, effectively creating a larger loan where the monthly payments are less. Because the HAMP program had expired at the end of 2016, and has has been largely replaced by the system of non-HAMP private bank modifications that almost every major lending institution offers, borrowers no longer need to first be screened for a potential HAMP modification and only if they did not qualify for HAMP would the in-house modification be considered. Now the “in-house” options offered by the particular lender are the only modification options available.
While the HAMP program provided advantages of government oversight and financial subsidies, and while it started at low rates of interest 2-3% with stepped up interest over time, they where mired in more regulations and paperwork and layers of administration. In many ways the present non-HAMP, private “in-house” modifications are more direct and quicker in some instances, but lack the federal government over sight that was helpful in some cases with the HAMP process. However, just as the HAMP program was ended at the end of 2016, the bankruptcy courts were seeing a surge of Chapter 13 and 11 cases featuring “loss mitigation” plans as central to their reorganizations; these “loss mitigation” bankruptcy cases provided judicial oversight to the modification process. Given the new circumstances due to the Covid-19 economic downturn, many more homeowners are expected to fall behind with their mortgages, and new, additional government and private efforts may be needed to address a potential new foreclosure crisis that may need new solutions.
Many homeowners in Suffolk and Nassau Counties, Long Island experiencing financial difficulty with their mortgage payments are obtaining representation in seeking a mortgage modification and/or other retention option, and are retaining mortgage modification attorneys such as the Law Office of Ronald D. Weiss, P.C. to handle what has become a complex and often difficult negotiation process. While the ultimate goal of negotiations for mortgage modifications and/or other retention options is very worthwhile, such negotiations can be difficult and uncertain because many mortgage holders and their attorneys are not sufficiently responsive to negotiated offers thereby requiring a significant and persistent effort that involves careful strategy and planning. Because we are always considering more than one foreclosure solution, we are not solely dependent on mortgage modifications and use a broader approach to mortgage and foreclosure solutions to help our clients. Although this process is usually time consuming and often has many challenges, the goal of resolving mortgage difficulties and obtaining better mortgage terms is very worthwhile. Therefore, the client should maximize their negotiating advantages by having our office represent them for the following reasons:
If you are overwhelmed with a problematic mortgage, the Law Firm of Ronald D. Weiss, P.C. can represent you in seeking a mortgage modification and/or other retention options.
For more specific information about Mortgage Modifications, click here.
Successful modifications and/or other retention options usually involve the client retaining a qualified professional working on their behalf and a concerted and persistent campaign to urge the lender through an application, letters, calls and supportive documents, to modify a particular mortgage loan.
The Law Firm of Ronald D. Weiss, P.C. has negotiated thousands of agreements giving its clients the opportunity to resolve their mortgage arrears. We have negotiated many mortgage modification agreements, forbearance agreements, payment plans, short sales, deed in lieu agreements and other settlements, which have resolved the foreclosure process and have allowed our clients to save their homes. Allowing us to represent and negotiate terms for you ensures a prompt resolution of the foreclosure process. Also, it is critical to have the settlement terms agreed to in a legally binding written stipulation of settlement while making sure that your rights are protected at all times.
Our consultations are free, the advice may be invaluable.
Please call us at (631) 271-3737, or e-mail us at [email protected] for a free consultation to discuss such modification and negotiation options in greater detail.