There are all sorts of loans. Car loans, student loans, small business loans…the list goes on. But the one that individuals seek the most assistance with is a home loan. Falling behind on mortgage payments isn’t all that uncommon. Sadly, homeowners still feel a sense of shame when they default on their mortgage and tend to wait until it’s too late to remedy the situation.
If you’re struggling to stay current on your mortgage, or have received a notice of delinquency, a loan modification could help you reduce your payments and possibly avoid foreclosure. It is best to act quickly before the situation becomes dire. Typically, the longer you wait, the less flexibility you will have when negotiating the terms of your mortgage.
It is highly recommended that you seek the assistance of an experienced loan modification attorney before contacting your lender. They will be able to assess the details of your loan and offer invaluable insight.
There are several questions that you’ll want to make sure to ask an attorney before deciding on whether to hire them to negotiate on your behalf. But before we dive into that, let’s quickly go over what a loan modification is and how it can help you.
What Is a Loan Modification & How Can It Help Me?
Simply put, when a borrower falls behind on payments, a loan modification helps to permanently restructure the terms of the loan so the individual can successfully fulfill their financial obligations to the lender. While modifications can be made to any type of loan, secured loans such as mortgages are the most common.
There are a variety of ways a loan modification can alleviate the financial burden so you can get back on track. You don’t have to entirely default on your loan to qualify for a modification program. If handled properly, the lender could agree to do a number of things, including…
- Principal Reduction – With the help of a loan modification lawyer you may be able to convince the lender to eliminate a portion of your debt. As a result, your monthly payments would decrease. This is a best-case scenario. Lenders generally are unwilling to reduce the principal on loans, but if you have a savvy loan modification attorney at your side that can successfully negotiate on your behalf, then you may have a shot. If you somehow finagle this longshot, remember to ask your financial advisor or CPA about the taxes owed on the forgiven debt before moving forward.
- Lower Your Interest Rate – A lender may agree to lower the interest rate on your home loan, which would reduce your monthly payments and offer immediate relief. But be sure to read the fine print before signing off on this arrangement. Some lenders will only lower the interest rate for a temporary window of time. It will be important to plan accordingly, so you are prepared when the payments increase again.
- Extended Term – This is a double-edged sword in some respects. Also known as ‘re-amortization’, getting an extension on your loan comes with its drawbacks. While you’ll have more time to repay your debt, it may come with a higher interest rate that stretches over a longer period of time. This results in higher overall costs and you could wind up paying more than originally agreed upon.
- Convert to a fixed rate – Converting your mortgage is pretty cut and dry. If your adjustable-rate mortgage is getting to be more than you can pay, your lender may agree to convert it to a fixed-rate loan to make it more financially feasible for you.
- Delay or Postpone Payments – Delaying or postponing payments is a great option for individuals that are in between jobs or have fallen on tough financial times as a result of a medical emergency. Also referred to as a ‘forbearance agreement’, this type of modification will let the borrower skip a few loan payments. Keep in mind that you’ll have to fulfill those missed payments at some point, but for the time being you get much-needed relief. Basically, it’s the equivalent of tacking on a few extra months to your loan.
Questions to Ask Your Loan Modification Lawyer
As with most things in life, no two situations are the same. Circumstances vary with each home loan and individual. You can never predict how a lender will react when contacted to negotiate the terms of a loan. Considering that you may be facing foreclosure, it is advised you contact a loan modification attorney to find out how they can help you.
Since the situation is time-sensitive, it is important that you know what questions to ask your loan modification lawyer in the event you decide to move forward. Remember to be selective when choosing an attorney. Make sure they are best suited for your particular set of circumstances. During the screening process be sure to ask them these questions…
How much experience do you have with loan modifications?
It goes without saying that any attorney or law firm that claims to specialize in loan modifications or foreclosure law should be able to adequately answer this question, but it is worth asking all the same. Your home is arguably the largest investment you’ll ever make. Be sure to hire a loan modification attorney that will fight for you, your family and home, to realize the best outcome.
How are you different from other loan modification law firms?
This is a great opportunity to hear their pitch. Give the foreclosure attorney an opportunity to explain why he or she is best suited to represent you.
Have you ever negotiated with my mortgage company in prior cases?
Some mortgage companies are more challenging to negotiate with than others. Ask the loan modification attorney if they have ever successfully negotiated a modification plan with your particular mortgage lender. If they have, then it may be easier for them to get you approved for a modification.
What are your fees?
You certainly don’t want to let this question go unanswered. Attorney’s fees can accumulate quickly. If you are already in a tight financial spot, be sure that hiring them won’t exasperate your already fragile financial state. Most attorneys will agree to work with you to find an agreeable dollar amount. Be sure to ask about any hidden fees like faxing items, writing letters, etc. You don’t want to get surprised by unpaid legal fees down the road.
How long will the process take?
Mortgage lenders can be sharky. They may intentionally prolong the negotiation process in an attempt to run down the clock and foreclose on you. This is rare, however. An experienced loan modification lawyer will ensure this doesn’t happen. They can help you buy more time and delay foreclosure until an agreement has been met.
Are you comfortable using ‘violations of law’ as a negotiating tactic should it come to that?
This is an especially useful line of questioning. When it comes to loan modifications, there is the ‘easy way’ and the ‘hard way’ of negotiating with a mortgage company. The easy way falls in line with everything we discussed above. Your attorney will negotiate the terms of your loan based on the amount owed and discuss the hardships of your particular case to ‘modify’ the loan. The hard way takes some finesse, and is a much more involved process, but could yield the best outcome if done properly. This option involves carefully going through the details of your loan to look for violations of the law and trickery contained in the original contract. If violations are found, it may render your entire mortgage agreement null and void. Your loan will be rescinded and you will no longer owe the mortgage company any money. Simply knowing if your loan modification attorney will consider this as a strategy is a sign they are serious about finding the best possible outcome for you and your family.
If you are researching how to qualify for a loan modification and are thinking about going it alone, please take pause. Lenders can be extremely difficult to work with. Negotiations can quickly become unfriendly and very stressful. When in doubt, contact a reputable and experienced loan modification attorney so you can ensure a victorious outcome.
Ready for new beginnings? If you are staring down debt or need guidance with a delicate financial matter, don’t hesitate to contact the foreclosure and loan modification attorneys at OakTree Law: 562.219.2979 – or – submit a request for a free evaluation.